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Physician Compensation Fraud Alert

By:  Wyn Staheli, Director of Research
Published:  February 23rd, 2017

In June 2015, the Office of Inspector General (OIG) issued a Fraud Alert focused on physicians and compensation arrangements. Providers need to ensure that these arrangements do not violate the Anti-Kickback Statute. Healthcare providers found to have committed fraud are subject to possible criminal, civil and administrative sanctions. 

In this alert it states that the "OIG encourages physicians to carefully consider the terms and conditions of medical directorships and other compensation arrangements before entering into them."

The key thing to remember is "fair-market value" for services rendered by the provider. Several recent settlements demonstrate what the OIG considers to be inappropriate arrangements:

  • an affiliated health care entity paid the salaries of the physicians’ front office staff
  • payments took into account the physicians’ volume or value of referrals

The OIG has also issued a "Roadmap to Avoiding Medicare Fraud and Abuse" to help providers discover other potential problems. This document includes the following Stark violation settlements:

  • A group of cardiologists received salaries under clinical faculty services agreements with a hospital under which, the Government alleged, they did not provide some or any of the services. In exchange, the cardiologists referred their patients to the hospital for cardiology services.
  • A physician routinely referred Medicare patients to an oxygen supply company he owned.


Before entering into any arrangement, ask the following questions to avoid potential pit-falls. If you answer yes to any of them, it is potentially fraudulent:

  • Are you being offered an investment interest for a nominal capital contribution?
  • Will your ownership share be larger than your share of the aggregate capital contributions made to the venture?
  • Is the venture promising you high rates of return for little or no financial risk?
  • Is the venture or any potential business partner offering to loan you the money to make your capital contribution?
  • Are you being asked to promise or guarantee that you will refer patients or order items or services from the venture?
  • 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?
  • Do you believe you will be more likely to refer to the venture just because you made the investment?
  • Will the venture have sufficient capital from other sources to fund its ongoing operations?



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