Improper Medical Director Payments Alleged at SNF Chain

On June 15, 2021, the United States filed a complaint under the False Claims Act against a California skilled nursing facility chain and its owner. According to the complaint, the Defendants entered into dozens of sham medical director and associate medical director agreements with area physicians. The complaint alleges that these contracts were not used to pay for legitimate administrative services but were instead used to pay physicians to refer hospital patients to the Defendants’ seven skilled nursing facilities (SNFs).

The complaint points out specific risk areas for SNFs and other facilities to avoid when contracting with medical directors. Following are a few of the government findings and allegations that led to the filing of the complaint.

1. The Defendants sought out physicians with large patient bases and active practices at local acute care hospitals because those physicians were in a position to refer patients to the SNFs.

2. According to the Complaint, medical director contracts commonly provide for an hourly compensation rate to be paid to physicians based on submission of monthly invoices; however, the Defendants’ physician contracts were fixed monthly stipends, regardless of the amount or type of services actually provided in any given month.

3. While Defendants’ contracts included requirements for physicians to submit documentation of services provided, this requirement was not enforced.

4. Defendants terminated physicians when they did not refer enough patients to the facilities.

5. Contracts included a list of services for the physicians to provide, but the lists were boilerplate — the Defendants and physicians never intended for the physicians to provide the listed services.

6. Defendants contracted with more physicians than necessary for the performance of legitimate services.

7. The contracts did not specify the physicians’ work schedules, their precise duration of work, or the exact charge for such intervals; furthermore, aggregate compensation paid to the physicians was not consistent with fair market value in arms-length transactions.

Many of these alleged problem areas are compensation related. Please contact ddevine@buckheadfmv.com for assistance with developing a compensation methodology and determining fair market value for your medical director arrangements.