Medical directors face novel legal risks for professional liability, regulatory compliance, licensure board complaints, and careless communication habits. A more thoughtful understanding of the distinct obligations and potential medical director legal risks may help medical directors and their employers avoid unnecessary stress and minimize the chances of legal entanglements.

John Fisher, JD, CHC, (health care and compliance attorney) with the law firm, Ruder Ware, introduced some interesting points in a piece for (a legal services web resource). Mr. Fisher advises healthcare providers nationwide on the regulatory and business aspects of health care.

Medical Director Legal Risks

Physician compensation is changing along with the reconfiguration of payment incentives within the health care industry. Physician compensation issues may be one of the biggest issues affecting the relationship between health care systems and physicians as these changes continue. These changes are reflected in a number of recent decisions that provide some guidance on the legal topics that affect physician compensation.

Stark Law

One of the most important law, according to Ruder Ware, is the Federal Stark Law. Stark Law is a set of United States federal laws, actually three separate provisions, that prohibit physician self-referral, specifically a referral by a physician of a Medicare or Medicaid patient to an entity providing designated health services (“DHS”) if the physician (or an 
immediate family member) has a financial relationship with that entity. These govern physician self-referral for Medicare and Medicaid patients. The law is named for United States Congressman Pete Stark, who sponsored the initial bill.

Stark Law guidelines can be found Here and FAQs Here.

A case under the Anti-kickback Statute provides another illustration of the risks associated with medical director agreements that are not properly monitored or, in extreme cases are entered for improper purposes.

United States v. Borrasi

The criminal case of United States v. Borrasi further reinforces there are cases where medical director payments can lead to criminal liability under the federal anti-kickback statute. In Borrasi, a physician was convicted criminally under the Anti-kickback Statute for conspiring to receive bribes from a nursing home for referring patients to the facility.

medical director risksThe jury convicted the doctor of conspiring to defraud the government and Medicare fraud (42 U.S.C. 1320a) for accepting a salary from the hospital in return for referring patients and sentenced to 72 months imprisonment followed by two years of supervision and to payment of $497,204 in restitution. The Seventh Circuit affirmed. The court did not err in refusing to admit substantive reports from meetings or the minutes of the meetings, although it allowed the government to use the minutes to establish the doctor’s non-attendance at meetings.

The doctor was allowed to argue that certain reports concerning his services were made and tendered during the meetings. Upholding a jury instruction, the court stated that nothing in the Medicare fraud statute implies that only the primary motivation for remuneration is to be considered and that the conviction is valid even if the payments were, in part, compensation for services. Findings concerning the level of loss supported the sentence.

The jury found that the physician and others were placed on the organization’s payroll as “service medical directors.” The “medical directors” were rarely seen around the facility and time reports had been falsified in order to make it appear they performed services at the facility. Full case Here.

From the published case, it appears that the facts in this case were extreme. However, the case holds value because it further indicates the risks involved with medical director contracts.