Management Service Agreements.
Managed service agreements (MSAs), also known as management services organization (MSO) agreements, are arrangements in which a healthcare provider outsources certain administrative or management services to an external organization. These agreements can potentially trigger Stark Law and Anti-Kickback Statute concerns if they involve financial relationships between referring physicians and entities providing designated health services (DHS).
To avoid potential violations, MSAs should comply with specific exceptions under Stark Law and safe harbors under the Anti-Kickback Statute.
Stark Law (42 U.S.C. § 1395nn), also known as the Physician Self-Referral Law, prohibits physicians from referring Medicare or Medicaid patients to entities for designated health services (DHS) if the physician or an immediate family member has a financial relationship with the entity.
The Anti-Kickback Statute (42 U.S.C. § 1320a-7b(b)) makes it illegal for anyone to knowingly and willfully solicit, receive, offer, or pay any remuneration in exchange for referrals of patients for services or goods reimbursed by federal healthcare programs, including Medicare and Medicaid.
Florida has its own healthcare regulations, including the Florida Patient Brokering Act (FPBA) under Florida Statutes Section 817.505, which prohibits healthcare providers from offering or paying any commission, bonus, rebate, or kickback, directly or indirectly, in cash or in-kind, to induce the referral of patients or patronage.
Stark Law Exception- Personal Service Agreements.
Stark Law Exception: The Stark Law exception for personal service arrangements can be found at 42 CFR § 411.357(d). This exception allows for certain financial relationships between physicians and DHS entities if the following requirements are met:
The arrangement is in writing and is signed by the parties.
The arrangement specifies the services covered.
The services do not involve the counseling or promotion of an illegal business arrangement.
The term of the arrangement is at least one year.
The compensation is set in advance, does not exceed fair market value, and is not determined in a manner that takes into account the volume or value of any referrals.
The services provided under the arrangement do not exceed those that are reasonable and necessary for the legitimate business purposes of the arrangement.
Anti-Kickback Statute Safe Harbor- Personal Services and Management Contracts.
Anti-Kickback Statute Safe Harbor: The Anti-Kickback Statute safe harbor for personal services and management contracts is outlined in 42 CFR § 1001.952(d). To qualify for this safe harbor, an MSA must meet the following criteria:
The agreement is in writing and signed by the parties.
The agreement covers all the services to be provided and specifies the services in detail.
The term of the agreement is for at least one year.
The aggregate compensation is set in advance, consistent with fair market value, and not determined in a manner that takes into account the volume or value of any referrals or business generated between the parties.
The services provided under the agreement do not exceed those that are reasonably necessary to accomplish the commercially reasonable business purpose of the services.
By structuring MSAs to comply with the personal service arrangement exception under Stark Law and the personal services and management contracts safe harbor under the Anti-Kickback Statute, healthcare providers can reduce the risk of violations and ensure compliance with federal healthcare regulations. It is essential to consult with legal counsel to ensure that all requirements are met and to address any specific concerns related to the arrangement.
Compliance Program Best Practices.
To ensure compliance with these laws, the HHS Office of Inspector General (OIG) recommends the following best practices for healthcare organizations:
Implement written policies and procedures: Develop, distribute, and enforce written compliance policies that clearly describe prohibited practices, reporting mechanisms, and disciplinary actions for non-compliance.
Designate a compliance officer and committee: Appoint a compliance officer responsible for overseeing the compliance program and a committee to advise and support the officer.
Conduct effective training and education: Provide regular training and education for all employees, including executives, managers, and physicians, on relevant laws, regulations, and compliance policies.
Develop open lines of communication: Encourage employees to report potential violations or concerns without fear of retaliation. Establish anonymous reporting mechanisms, such as hotlines or online portals.
Conduct internal monitoring and auditing: Regularly assess the effectiveness of the compliance program, including auditing and monitoring of financial relationships, referral patterns, and billing practices.
Enforce standards through well-publicized disciplinary guidelines: Implement clear and consistent disciplinary measures for individuals who violate compliance policies or federal and state laws.
Respond promptly to detected offenses and undertake corrective action: Investigate reports of potential violations, take appropriate corrective actions, and, if necessary, disclose violations to the appropriate government agencies.
OIG Advisory Opinions on Management Service Agreements.
The Office of Inspector General (OIG) issues advisory opinions to provide guidance on the application of the Anti-Kickback Statute (AKS) to specific arrangements. It is important to note that these opinions are limited to the specific facts and circumstances presented by the requesting parties and do not have the force of law. However, they can offer valuable insights into the OIG’s interpretation of the AKS and its safe harbors, as well as related Stark Law exceptions, in the context of management service agreements (MSAs) or management services organizations (MSOs).
Although there may be other relevant opinions, the following two OIG advisory opinions provide guidance on AKS safe harbors and Stark Law exceptions in the context of MSAs:
OIG Advisory Opinion No. 11-18 (2011): This opinion addresses a proposed MSA between a hospital and a physician group for the provision of administrative services. The OIG concluded that the proposed arrangement did not meet all the requirements of the personal services and management contracts safe harbor under the AKS because some of the payments were based on a percentage of the hospital’s cost savings rather than being set in advance. However, the OIG determined that the proposed arrangement posed a low risk under the AKS, given the safeguards in place to prevent abuse.
OIG Advisory Opinion No. 12-22 (2012): In this opinion, the OIG reviewed a proposed arrangement involving a hospital, a physician group, and a management company that would provide administrative and management services to the hospital’s outpatient wound care center. The OIG concluded that the proposed arrangement did not qualify for the AKS safe harbor for personal services and management contracts because some of the payments were based on a percentage of net revenue. However, the OIG found that the arrangement posed a low risk under the AKS due to a variety of factors, including that the parties certified the compensation was fair market value and the arrangement would not involve marketing or referral generation activities.
OIG Advisory Opinion 98-10: (1998) This opinion addresses a proposed arrangement in which a hospital contracted with an MSO to provide management and administrative services. The OIG concluded that the proposed arrangement met the safe harbor requirements for personal services and management contracts (42 CFR § 1001.952(d)) and would not result in sanctions under the AKS.
OIG Advisory Opinion 10-23: (2010) This opinion examines an arrangement involving an MSO providing non-clinical, administrative services to a group of affiliated physicians. The OIG determined that while the arrangement did not fit squarely within the personal services and management contracts safe harbor, it presented a low risk of fraud and abuse under the AKS. Key factors in this decision included the absence of any volume-based compensation and the belief that the arrangement would not influence referrals.
OIG Advisory Opinion 12-06: (2012) In this opinion, the OIG analyzes an MSA between a physician-owned hospital and a management company owned by some of the hospital’s physician owners. The OIG concluded that the proposed arrangement would not fit within the safe harbor for personal services and management contracts, primarily because the management company’s compensation would take into account the volume of business generated between the parties. However, the OIG also concluded that it would not impose sanctions based on the specific facts presented.