OIG Special Fraud Alert Expresses Concerns about Physician-Owned Distributorships

The U.S. Department of Health and Human Services’ Office of Inspector General (OIG) is concerned about the proliferation of physician-owned distributorships and views them as inherently suspect under the antikickback statute, states a March 26, 2013, OIG special fraud alert. The special fraud alert emphasizes that the opportunity for a referring physician to earn a profit, including through an investment in an entity for which he or she generates business, could constitute illegal remuneration and focuses on the specific attributes and practices of physician-owned distributorships that OIG believes produce substantial fraud and abuse risk and pose dangers to patient safety. OIG expresses concerns about arrangements that exhibit questionable features with regard to the selection and retention of investors, the solicitation of capital contributions, and the distribution of profits. Such questionable features may include selecting investors because they are in a position to generate substantial business for the entity, requiring investors who cease practicing in the service area to divest their ownership interests, and distributing extraordinary returns on investment compared with the level of risk involved.