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Does Fraud Alert Put Health Franchises on Notice?


Physician-owned entities are a new, special target for investigation by the Office of Inspector General, a just-published Gray Plant Mooty health law alert says.

That sounds like important news for one of the hottest segments in franchising: health care franchises with a medical practitioner as an integral part of the model, and in many cases owned by same. 

New weight-loss franchises like Dr. G’s and Red Light, Green Light, Eat Right include medical doctors in the model. Chiropractors that administer neuropathy, dentists that provide dental implants, and other systems are getting in the act.

But a “Special Fraud Alert” by the OIG focuses on physician-owned entities that derive revenue from the sale of devices ordered by their physician-owners for use in procedures the physician-owners perform on their own patients.

Can you see the potential for conflict here? The OIG does, calling the situation “inherently suspect under the anti-kickback statute.”  Physicians may be induced “both to perform more procedures than are medically necessary,” and to use the devices sold by their own system “in lieu of other potentially more clinically appropriate” devices.

Physicians and others involved in these relationships  “should pay close attention to the guidance set forth by the OIG,” write Gray Plant attorneys Jesse Berg and Jeremy Johnson. But Jesse Berg said in an interview the alert doesn't apply to the health care franchisee, which is akin to any doctor-owned medical practice. Special rules allow such people to, for example, have an X-ray machine on site and use it to treat patients.

Rather, Berg said, the people to be aware are the doctors asked to invest in a company that makes medical devices, and then recommend such devices at hospitals or clinics where they provide services.  That crosses off one worry on the list.

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The latest news, opinions and commentary on what's happening in the franchise arena that could affect your business.

Laura MichaelsLaura Michaels is editor of Franchise Times. She can be reached at 612.767.3210, or send story ideas to lmichaels@franchisetimes.com.
Beth EwenBeth Ewen is senior editor of Franchise Times. She can be reached at 612.767.3212, or send story ideas to bewen@franchisetimes.com.
Nicholas UptonNicholas Upton is restaurants editor at Franchise Times. He can be reached at 612.767.3226, or send story ideas to nupton@franchisetimes.com.
Mary Jo LarsonMary Jo Larson is the publisher of Franchise Times Magazine and the Restaurant Finance Monitor.  You can find her on Twitter at




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