OIG Greenlights Partnership’s Physician Buyout Retirement Deal
- January 12, 2024
The Department of Health and Human Services Office of Inspector General (OIG) blessed a proposal by a limited liability partnership that owns or operates two hospitals to offer to repurchase the units of physician partners when they turn 67 if they voluntarily agree to retire from practicing medicine.
The partnership agreement permits the redemption of physician partner units upon a physician’s voluntary retirement from the practice of medicine but lacks a mandatory retirement provision, which creates economic uncertainty for the partnership. The partnership certified that the proposal is aimed at managing that economic uncertainty without mandating a retirement age for physician partners.
Under the proposal, the partnership would offer physician partners the option at age 67 to have their units redeemed in three equal increments over two years if they agree to retire from practicing medicine within six months of the first redemption payment. For the initial year of the arrangement, the voluntary offer would be extended to all physician partners who are 67 or older as of December 31, 2023.
OIG said the proposal implicated the Anti-Kickback Statute because the partnership would be offering remuneration—the redemption offer—to a referral source—the physician partners who may refer patients, including federal health care program beneficiaries, to other physician partners and the hospitals for up to six months after the first redemption payment. However, finding the risk of fraud and abuse sufficiently low, OIG ruled out sanctions.
OIG based its favorable advisory opinion on two factors: (1) the redemption offer would be made on an independent basis (age) that is unrelated to the volume or value of referrals or other business generated by the physician partners, reducing the risk of improper patient steering or overutilization; and (2) remuneration paid pursuant to the redemption offer was unlikely to result in unfair competition.
As to the second factor, OIG noted that the period between the first payment under the redemption offer agreement and retirement would be time-limited to six months and, as the partnership certified, is necessary to allow the physician partners to wind down their medical practices consistent with state law requirements.
Advisory Opinion No. 23-12 (Dep’t of Health and Human Servs. Office of Inspector Gen. Dec. 28, 2023).