That's the subject of Monday's blog post, What's a Medical Group Really Worth? You can follow the link to read the post online, or just keep reading.

You're undoubtedly familiar with the concept of surprise medical billing, the situation in which an out-of-network, hospital-based group, say an anesthesia group or radiology group, is working at a hospital that is in-network. Forget about freedom to contract: the law essentially pressures an out-of-network group to accept in-network, or worse, levels of payment.

Well, surprise! The concept of a surprise bill has spread. In early July 2023, the Biden administration proposed that there should be restrictions on hospital surprise billing.

But what’s a hospital surprise bill? Well, it’s something slightly different from the concept applied to physicians.

Apparently, it's the situation in which, for example, a patient, we'll call her Ms. Smith, goes to her cardiologist in January of some year for some test. The cardiologist bills Ms. Smith $300 for the test at the office. Ms. Smith comes back six months later, gets the same test, in the same office but now gets billed a few hundred dollars for the physician’s services and $1,000 by the hospital as a facility fee.

What! What facility and why a fee?

The answer lies in the fact that in the interim between Ms. Smith’s two visits, the cardiologist sold his practice to the hospital and the former medical office became a hospital outpatient clinic, i.e., part of the hospital facility. What do you know, “Suite 201” is now a “facility” and there’s now a facility fee.

Stories abound about these sorts of “surprises”. [The darkly funniest one that I heard concerned a patient who was billed a facility fee for a telehealth visit because the doctor connected to the call from a hospital.]

Before you start snickering or delighting in the schadenfreude of hospitals getting whacked with surprise billing prohibitions in the same manner as physicians, what’s sauce for the goose is not always sauce for the gander. 

That's because the Biden administration is not proposing a policy that would prohibit or put caps on these fees, but instead is proposing that hospitals should be required to disclose facility fees up front. I suppose that disclosure is better than no disclosure, but it’s not exactly the same "solution" imposed on supposed physician surprise medical billing. 

That bread's been buttered only on one side, and that side isn't yours.

Sometimes, I think it’s Groundhog Day. No, not the Punxsutawney Phil kind, but the Bill Murray movie kind, you know, when things keep repeating themselves over and over and over again. Like stupid kickback schemes.

Even so, I'm not tired writing about them because, obviously, if physicians keep doing this crap, there's a real need for what really amounts to a public service announcement.

So, let's start with my recommendation that you keep two things in mind:

First is a shorthand definition of the federal Anti-Kickback Statute (“AKS”), a criminal law. It prohibits offering, paying, soliciting, or receiving remuneration to induce referrals of items or services covered by Medicare and other federally funded programs. Remuneration is a broad concept – it can be made directly or indirectly, overtly or covertly, in cash or in kind.

Second, are a few lines from the epic poem Marmion by Sir Walter Scott:


In fact, if every physician simply remembered those two points, the Department of Justice would probably have to lay off a few hundred lawyers. (Just think of the joy that would bring you.)

Let’s illustrate the importance of those two points by way of the story of New York physician, Klaus Peter Rentrop, M.D., who perhaps didn’t read about the AKS and who perhaps skipped taking an English literature class.

In mid-September 2023, the U.S. Attorney’s Office for the Southern District of New York announced that it settled a civil fraud lawsuit against Dr. Rentrop. and his medical practice Gramercy Cardiac Diagnostic Services P.C. (“Gramercy Cardiac”) for paying millions of dollars in kickbacks to physicians and their practices for patient referrals.

In connection with the settlement, Dr. Rentrop and Gramercy Cardiac admitted:

• From 2010 through 2021, Gramercy Cardiac, at Dr. Rentrop’s direction, entered into rental agreements (the “Rental Agreements”) with more than 130 physicians and medical practices (the “Rental Practices”) under which Gramercy Cardiac leased a portion of the other practice’s office space, usually one or two exam rooms for certain days or hours each month. Gramercy Cardiac paid a total of more than $11 million to the Rental Practices pursuant to the Rental Agreements.
• From 2010 through 2021, Gramercy Cardiac, at Dr. Rentrop’s direction, entered into independent contractor agreements (the “Independent Contractor Agreements”) with more than 50 cardiologists (the “Gramercy-Contracted Cardiologists”) or their medical practices.
• Gramercy Cardiac sent the Gramercy-Contracted Cardiologists to the rented office space one or more times each month to see patients who were referred for an assessment by the healthcare providers at the Rental Practice. The Gramercy-Contracted Cardiologists in turn referred these patients to Gramercy Cardiac to undergo diagnostic tests and procedures, such as PET and SPECT scans.
• Gramercy Cardiac paid many of the Gramercy-Contracted Cardiologists a flat fee for each diagnostic test or procedure which the cardiologist referred to Gramercy Cardiac provided that the patient received the test or procedure at a Gramercy Cardiac location. These “per procedure” fees were the only compensation Gramercy Cardiac provided to the Gramercy-Contracted Cardiologists.
• Certain versions of Independent Contractor Agreements stated that the Gramercy-Contracted Cardiologist was to be paid not for the referrals to Gramercy Cardiac, but rather for the “[a]dministration and supervision” of the PET and SPECT scans to be performed at Gramercy Cardiac. However, in many cases, the Gramercy-Contracted Cardiologists did not, in fact, administer and supervise the PET and SPECT scans and were nonetheless paid by Gramercy Cardiac based solely on the number of tests and procedures referred.
  
• At the time the Rental Agreements were executed, it was understood that the Rental Practices would refer their patients to the Gramercy-Contracted Cardiologists. Indeed, Gramercy Cardiac calculated the number of hours per month that Gramercy Cardiac leased the office space based on the volume of expected patient referrals.
  
• Gramercy Cardiac calculated its return on investment from its Rental Agreements — which it internally referred to as the “efficiency” of the Rental Agreements — by comparing the revenue Gramercy Cardiac generated from the patient referrals to the payments it made to the Rental Practice.
  
• When a Rental Agreement’s return on investment fell below the minimum threshold, Gramercy Cardiac, at Dr. Rentrop’s direction, would often refuse to pay the Rental Practice the amounts due under the Rental Agreement. In addition, at Dr. Rentrop’s direction, Gramercy Cardiac physician liaisons advised Rental Practice physicians that if the volume of referrals to Gramercy-Contracted Cardiologists did not increase, rent would be decreased, or the Rental Agreement would be terminated. Gramercy Cardiac terminated a number of Rental Agreements because the return on investment through patient referrals was too low.
  
• When negotiating or re-negotiating the monthly rental payment to be made under a Rental Agreement, Gramercy Cardiac took into account the expected or historic return on investment based on the volume of patient referrals generated from the Rental Practice.
  
• The rental fees paid by Gramercy Cardiac under the Rental Agreements were in excess of fair market value for at least some Rental Agreements.

And what will the settlement cost Dr. Rentrop and his practice?

1. They’ll pay $4,510,678 to the United States government and, in regard to state claims, $1,989,362 to the State of New York, for a total of $6.5 million.
2. As a form of security for the payments, Dr. Rentrop and Gramercy Cardiac entered into a Consent Judgment in the amount of $64,416,515, which may be enforced if they do not pay the required $6.5 million.
   
3. Dr. Rentrop agreed to relinquish his ownership and control over Gramercy Cardiac by the end of 2023, and will pay a portion of the proceeds of any sale of the practice to the United States.
   
4. He’s also indefinitely barred from working for any entity that bills federal healthcare programs, and has entered into a Voluntary Exclusion Agreement with HHS-OIG which prohibits him from, among other things, participating in Medicare, Medicaid, or other federal healthcare programs for five years.

Here’s an easy way of remembering what it appears Dr. Rentrop didn’t get. Don’t wait! Print out the following in credit card size and keep it in your wallet for frequent and easy reference: