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Lori Laubach, Principal, Health Care Practice, Moss Adams LLP

Avoid Overpayments and Penalties by Auditing Physician Payments and Arrangements

By Lori Laubach
Principal, Health Care Practice
Moss Adams LLP

See all this Month's Articles

Original Publish Date: July 11, 2017

Health care entities are at risk of noncompliance with Stark Law and the federal Anti-Kickback Statute when they provide remuneration for referring a patient.

The Office of Inspector General (OIG) and law enforcement agencies continue to focus on identifying improper physician arrangements and payments, which have resulted in the US Department of Justice recovering over $17.1 billion since 2009 from fraud and false claims against federal health care programs.

This continued focus means health care organizations will need to stay extra vigilant to help ensure future compliance, prevent fraud, and avoid steep federal penalties.

Stark Law and the Anti-Kickback Statute

The two most problematic regulations for health care organizations in terms of penalties are Stark Law and the federal Anti-Kickback Statute. Civil monetary penalties may be levied for violations of Stark Law or the Anti-Kickback Statute, and entities that violate either may be excluded from participation in federal health care programs. The Anti-Kickback Statute is also punishable by up to five years of imprisonment and a $25,000 fine.

Best Practices to Avoid Improper Physician Arrangements

“An ounce of prevention is worth a pound of cure.” Truer words were never spoken as it relates to health care entities protecting themselves against any potential Stark Law or Anti-Kickback Statute violation. Fortunately, there are some best practices to prevent inadvertent violations.

An Easy Culprit: Lacking Physician Arrangement Policies and Procedures

Organizations often have incomplete policies, procedures, and standards related to physician arrangements—making them susceptible to penalties under the above-mentioned regulations. In some instances, we’ve observed that the internal controls related to the initiation, approval, and implementation of a physician arrangement are lacking and payments are made without sufficient support.

Key Questions to Ask

There are some questions an organization should ask about physician payments and contracts as it considers its risk for overpayments and penalties:

Health care organizations that can’t answer these questions or that have misgivings about their information might want to consider having a compliance audit or internal audit performed.

Regulatory-Compliance Monitoring and Internal Audits

An internal audit or regulatory-compliance monitoring provides a comprehensive evaluation of an organization’s regulatory environment to confirm it’s adherence to the rules and regulations outlined by external agencies and authorities.

An internal audit is the examination, monitoring, and analysis of activities related to an organization’s operations. It tests:

An internal audit also confirms an organization is managing physician arrangements in accordance with policies and legal and regulatory requirements that control financial arrangements.

Recommended Audit Approach

The steps taken during an audit include:

We’re Here to Help

For questions about how to identify improprieties and misconduct regarding physician arrangements and payments and to determine the best internal controls to address these risks and prevent future fraud, contact your Moss Adams health care professional.

Lori Laubach has practiced public accounting for more than 22 years. She helps health care organizations with regulatory compliance, revenue cycle assessments, forensic and operational reviews, and risk assessments. Lori can be reached at (253) 284-5256 or