PART 3 OF 4: The Compliance Rules That Govern the Arrangement

The fraud-and-abuse framework every medical director agreement must satisfy.

Medical director agreements operate under a framework of fraud-and-abuse laws that exist precisely because of the referral-and-payment overlap these arrangements involve. Understanding that framework is essential to structuring an agreement that complies. This part addresses the compliance rules that govern medical director arrangements.

The Anti-Kickback Statute

The federal Anti-Kickback Statute prohibits paying or receiving anything of value to induce referrals of items or services covered by federal healthcare programs. A medical director fee that is, in substance, payment for referrals can violate it. The statute includes safe harbors, including one for personal services arrangements, that a well-structured agreement aims to fit within.

The Stark Law

The federal Stark Law restricts a physician from referring certain services to an entity with which the physician has a financial relationship, unless an exception applies. A medical director agreement creates such a financial relationship, so it must be structured to fit a Stark exception, such as the personal services exception, to permit the referrals that may follow.

What the exceptions and safe harbors require

Fitting within these protections generally requires that the arrangement meet specific conditions, which commonly include:

• A written, signed agreement covering the services.
• A term of at least a defined minimum, often one year.
• Compensation set in advance, at fair market value, not tied to referrals.
• Services that are legitimate and actually needed.

California's own rules

Beyond the federal laws, California has its own prohibitions on referrals and fee-splitting that apply to medical director arrangements. A compliant agreement must satisfy state law as well as federal, and California's rules can reach arrangements that federal law might not. Both layers must be considered together.

Substance over form

A central principle runs through all of these rules: what matters is the substance of the arrangement, not merely its paperwork. An agreement that recites the right terms but operates as disguised payment for referrals will not be saved by its language. Genuine duties, genuine fair-market pay, and genuine performance are what satisfy the law.

How West Coast Health Law Can Help

We structure medical director agreements to fit the applicable Anti-Kickback safe harbors and Stark exceptions and to comply with California's referral and fee-splitting rules.

West Coast Health Law offers a FREE consultation which you may schedule by clicking the button on our website.

This article is provided for general informational purposes only and does not constitute legal advice or create an attorney-client relationship. Laws change and every arrangement is different; consult a qualified attorney about your specific situation.