There are strict laws and regulations governing physician and other health care provider or company investments in health care business ventures. The government is regulating this area based on the observation that health care providers who invest in health care business ventures with outside parties (e.g., imaging centers, labs, equipment vendors, or physical therapy clinics) refer more patients for the services provided by those parties than physicians who do not invest.
Maybe this disproportionate utilization partly reflects the physicians' belief in the value of the services or technology, prompting the investments in the first place. However, there also is a risk that the physicians' belief in the value of the services or technology is less a cause than an effect of the investment interest.
The health care providers' disproportionate utilization may be motivated partly by their ability to profit from the use of the ancillary services. These business relationships can sometimes unduly influence or distort medical decision making and result in the improper steering of a patient to a particular therapy or source of services in which a health care provider has a financial interest.
The Government's view is that excessive and medically unnecessary referrals waste Government and beneficiary money and can expose beneficiaries to harm from unnecessary services. Many of these investment relationships have serious legal risks under the AKS (Anti-Kickback Statute) and Stark law. In addition, there are state laws governing workers' compensation and insurance billing.
If you are invited to invest in a health care business whose products you might order or to which you might refer your patients, you should ask the following questions.
If the answer is “yes” to any of them, you should consider carefully whether you are investing for legitimate reasons.
Question: Are you being offered an investment interest for a nominal capital contribution?
Question: Will your ownership share be larger than your share of the aggregate capital contributions made to the venture?
Question: Is the venture promising you high rates of return for little or no financial risk?
Question: Is the venture or any potential business partner offering to loan you the money to make your capital contribution?
Question: Are you being asked to promise or guarantee that you will refer patients or order items or services from the venture?
Question: Do you believe you will be more likely to refer more patients for the items and services provided by the venture if you make the investment?
Question: Do you believe you will be more likely to refer to the venture just because you made the investment?
Question: Will the venture have sufficient capital from other sources to fund its ongoing operations?
Question: Are there any red flags in that the venture is to be placed in a relative or close friend's name as a "shell?"
For more information on physician investments, review the Office of Inspector General pushed materials on these issues to help educate yourself:
OIG's Special Fraud Alert entitled “Joint Venture Arrangements” available at
OIG's Special Advisory Bulletin on contractual joint ventures available at
OIG's “Supplemental Compliance Program Guidance for Hospitals”
This is a starting ground and helps give a general background so the issues can be understood.