By: Cristina N. Hyde, JD

Last year the United States Department of Justice (DOJ) reported recovering more than $5.6 billion in settlements and judgments related to cases involving fraud and false claims against the government.  The majority of the cases involved the healthcare industry and included situations wherein actors were found to have entered into unlawful arrangements that compromised good medical care for profit.

In the last four months, several more of these cases have come to light and the DOJ has filed complaints accordingly.  Most recently, it was alleged that a group of  business owners and medical professionals out of Texas violated several federal laws through the vehicle of a Management Service Organization (MSO).  According to the DOJ Press Release, several physicians, laboratories, and hospitals conspired to induce referrals to hospitals for laboratory testing.  MSOs were used to make payments to referring doctors; disguising them as investment returns when they were actually compensation in exchange for referrals.  As a result, the DOJ alleged that the named individuals have violated the False Claims Act (FCA), the Anti-Kickback Statute (AKS), and the Federal Physician Self Referral Law known colloquially as the Stark Law.

This recent filing, along with a history of similar events, is a reminder to all healthcare practitioners that there are both state and federal regulations that must be considered before entering into MSO relationships.  While such a relationship often provides valuable non-clinical services and administrative support to medical practices, unless structured carefully, such an arrangement can trigger Corporate Practice of Medicine prohibitions.  If a MSO relationship appears to be affecting the provision of good medical care, healthcare professionals could find themselves embroiled with a number of serious consequences.

If you have questions about whether to use a MSO to achieve your business goals, or if you existing relationship with a MSO is compliant with current state and federal law, Contact Us.