10/26/2023

Bonuses for Employees

Guest Article: Elizabeth E. Hogue, Esq.

The Office of Inspector General (OIG) of the U.S. Department of Health and Human Services (HHS) issued Advisory Opinion No. 23-07 on October 10, 2023, which reiterates that providers may pay bonuses to bona fide employees. This Opinion is based on a request from a multi-specialty physician practice that employs eleven physicians. The practice implemented an employment compensation bonus methodology for physicians in addition to their base compensation.

Specifically, when a physician performed outpatient surgical procedures at either of two ambulatory surgical centers (ASCs) operated by the practice in a calendar quarter, physicians received bonuses in the form of 30% of the practice’s net profits from the ASC facility fees collections attributable to that physician’s procedures performed at the ASC for that quarter. All of the physicians were bona fide employees of the practice.

In response to the request, the OIG addresses the issue of whether the arrangement violated the Federal anti-kickback statute. First, Congress established a statutory exception to the anti-kickback statute for bona fide employees. The statutory exception protects “any amount paid by an employer to an employee (who has a bona fide employment relationship with such employer) for employment in the provision of covered items or services.”

In addition, HHS adopted safe harbor regulations that exempt certain practices from violation of the anti-kickback statute. Safe harbor regulations include an exception for bona fide employees. It is important to note, however, that safe harbor protection is available only for arrangements that meet all of the requirements of the safe harbor. Arrangements that do not comply with a safe harbor are evaluated by the OIG on a case-by-case basis. The safe harbor regulations provide that the term “remuneration” as used in the federal anti-kickback statute does not include any amount paid by employers to employees who have bona fide employment relationships with employers for employment in the furnishing of items or services for which payment may be made in whole or in part by Medicare, Medicaid and other health care programs.

Based upon the above, the OIG concluded that bonus compensation was protected by the statutory exception and regulatory safe harbor for employees because:

• The practice certified that physicians were bona fide employees of the practice.
• Bonus compensation constituted an amount paid by an employer to an employee for employment in the furnishing of items or services for which payment may be made in whole or in part under Medicare, Medicaid or other health care programs.

The OIG noted, however, that similar arrangements involving bonus payments to providers who are independent contractors or owners of the ASCs may raise fraud and abuse concerns under the federal antikickback statute. Payment structures that tie compensation to profits generated from services furnished to patients referred by compensated parties are suspect under the anti-kickback statute. The key in this instance is, of course, that the physicians are bona fide employees of the practice.

So, the OIG reminds providers that they may pay bonus compensation based on services provided as long as recipients are bona fide employees.

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