Jeff Cohen
Contractual Joint Ventures (CJVs), often referred to as “plug and play” arrangements, are becoming increasingly popular in the medical practice world. They provide a tempting proposition for practices looking to introduce new services and revenue streams without the need to staff up, buy equipment, or undergo training. Essentially, the service is “plugged” in, and the billing begins. However, these arrangements come with inherent risks, primarily related to kickbacks and regulatory scrutiny.
What is a Contractual Joint Venture?
A CJV involves a provider “partnering” with a medical practice to integrate a new service. The allure is clear—minimal effort for potentially significant financial gain. The term “plug and play” reflects the simplicity with which these services can be implemented, but it also highlights a critical concern. Regulators are wary of practices that add services without substantial business risk or investment, often perceiving such ventures as attempts to defraud government programs like Medicare.
The core issue with CJVs is the potential for fraud, particularly when there’s little documented medical necessity for the services rendered. Regulators assume that practices engaging in these ventures may prioritize financial gain over patient care. This assumption leads to heightened scrutiny and the risk of audits, especially when services show a sudden increase in utilization. Such spikes are red flags for payers, prompting them to investigate whether the underlying motive is financial greed.
A noteworthy example is a Florida ophthalmology practice involved in a CJV with a mobile transcranial doppler ultrasound (TCD) provider. The arrangement resulted in numerous patients receiving TCDs with little medical necessity, leading to a Medicare payout of approximately $1.3 million. This case underscores the potential financial and legal consequences of poorly managed CJVs.
For medical practices considering a CJV, understanding the legal implications is paramount. Even when there is documented medical necessity, the risk of legal repercussions remains if the practice doesn’t adhere to regulations. This risk extends beyond Medicare to include commercial insurers, who also track utilization closely.
To mitigate these risks, practices should:
- Thoroughly document clinical necessity for all services provided under a CJV.
- Stay informed about relevant laws and regulations.
- Consider obtaining legal advice in writing to understand the options and associated risks.
- Implement a low-risk strategy when adding a line of service with an external provider by ensuring transparency and compliance with all legal requirements.
While Contractual Joint Ventures offer an attractive means of expanding medical services and revenue, they come with significant regulatory risks. Practices must be proactive in understanding these risks and take steps to ensure compliance and transparency in their operations. By doing so, they can avoid the pitfalls of being perceived as engaging in fraudulent activities and protect their financial and professional integrity.
