Health Law Highlights

Advisory Opinion 23-7 OIG Issues Favorable Opinion Regarding Proposal to Pay Bonuses to Its Employed Physicians Based on Net Profits

From Health Law Diagnosis, by Nathaniel Arden & Michael Lisitano:

  • On October 13, 2023, the Office of Inspector General (OIG) published Advisory Opinion 23-07, in which the OIG issued a favorable opinion regarding a physician group employer’s proposal to pay bonuses to its employed physicians based on net profits derived from certain procedures performed by the physicians at ambulatory surgery centers.
  • Under the proposed arrangement, the Group would pay its physician employees a bonus in addition to the physicians’ base compensation. The bonus would be equal to 30% of the Group’s net profits derived from two ambulatory surgical centers’ facility fee collections attributable to that physician’s procedures.
  • The two ambulatory surgical centers in question would be operated as “divisions” of the Group and not as separate legal entities.
  • The OIG determined that the proposed bonus arrangement is protected by the bona fide employee statutory exception and regulatory safe harbor of the Anti-Kickback Statute and would therefore, not generate prohibited remuneration.
  • The OIG differentiated similar arrangements where the ACS is owned by a separate entity. In those cases, the bona fide employee exception and safe harbor would likely not apply.
  • OIG’s analysis in the Advisory Opinion demonstrates that when properly structured to comply with statutory exceptions and regulatory safe harbors, certain bonus compensation arrangements of this sort may be permissible.