> ## Documentation Index
> Fetch the complete documentation index at: https://mso.getlemma.com/llms.txt
> Use this file to discover all available pages before exploring further.

# Draft a medical director agreement

> How to pay a clinician for non-patient-facing work (medical direction, clinical oversight, protocol development, supervision, chart review) with a stipend that survives Stark, the Anti-Kickback Statute, corporate-practice scrutiny, and wage-and-hour law.

A clinician who does not see patients (a medical director, a supervising physician for NPs and PAs, a protocol author, a quality reviewer, the "friendly" owner in their governance role) is paid for **identifiable services at fair market value for documented time**, in a written agreement, by the entity for which the services are actually performed. A monthly stipend is fine. A monthly stipend for being listed is the fact pattern in every enforcement action about medical directors.

## Prerequisites

* A written description of what the clinician will actually do, and roughly how many hours it takes
* A decision on which entity engages them (below)
* A fair-market-value reference for the role: a compensation survey, a valuation, or a documented internal benchmark
* Counsel's view on whether the clinician refers Medicare designated health services to the paying entity (this decides whether Stark applies at all)

## Who engages a non-patient-facing clinician

| Role                                                                                                             | Engaged by                                                         | Why                                                                                                                                                                                                                                                                                                                         |
| ---------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------ | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| Medical director of the practice; clinical oversight; protocols; peer review; supervision of NPs, PAs, injectors | **The PC**                                                         | These are the practice of medicine's governance. In a CPOM state the MSO cannot buy them by contract any more than it can employ a treating physician. The Medical Board of California lists "a physician acting as 'medical director' when the physician does not own the practice" as a prohibited structure.<sup>1</sup> |
| ACCESS medical director; payer-facing quality officer                                                            | **The PC** (the participant TIN)                                   | The model requires a Medicare-enrolled physician employed by or under contract with the participant.<sup>2</sup>                                                                                                                                                                                                            |
| Product clinical advisor to the technology company; content review for marketing; advisory board                 | **The MSO** may engage a clinician for genuinely non-clinical work | Reviewing product copy is not practicing medicine. But the agreement must not make them responsible for the care the PCs deliver: that is the PC medical director's job, and paying an MSO advisor for it is the MSO controlling clinical judgment.                                                                         |
| The friendly owner's governance duties                                                                           | **The PC**, as an officer's salary or director's fee               | See [Structure friendly-owner compensation](/guides/formation/structure-friendly-owner-compensation)                                                                                                                                                                                                                        |

**Do not let the MSO pay for PC medical direction to keep the PC's books thin.** The service is rendered to the PC; the PC pays; the MSO's management fee is sized to leave the PC able to pay it.

## The federal frame

Two statutes, different scope, both satisfied by the same discipline.

**Stark** applies only if the clinician refers Medicare **designated health services** (labs, imaging, PT/OT, DME, outpatient drugs, hospital services) to the entity paying them.<sup>3</sup> A cash-pay practice, a behavioral health group with no DHS, or a telehealth PC that orders nothing from itself is often outside Stark entirely. When it applies, Stark is strict liability, and a stipend has to fit an exception:

| Exception                                    | Fits                       | Key conditions                                                                                                                                                                    |
| -------------------------------------------- | -------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| Bona fide employment, 42 C.F.R. § 411.357(c) | W-2 medical director       | "Identifiable services"; FMV; not determined by volume or value of referrals; "commercially reasonable even if no referrals were made." No writing required, but write it anyway. |
| Personal service arrangements, § 411.357(d)  | 1099 medical director      | Signed writing specifying the services; covers all services between the parties; term **at least one year**; compensation set in advance, FMV, no volume/value linkage.           |
| Fair market value compensation, § 411.357(l) | Short or trial engagements | Signed writing for identifiable services; any duration; may not enter more than one arrangement for the same services in a year; FMV; commercially reasonable without referrals.  |
| Limited remuneration, § 411.357(z)           | Very small roles           | Aggregate under **\$6,237 for calendar year 2026** (CPI-adjusted annually); FMV; no volume/value; no writing needed.<sup>4</sup>                                                  |

The **Anti-Kickback Statute** applies to any federal health care program business, whatever the service. A W-2 employee's pay is protected by the statutory employment exception and the safe harbor at 42 C.F.R. § 1001.952(i), which defines "employee" by the common-law test in 26 U.S.C. § 3121(d)(2). A contractor needs the personal services and management contracts safe harbor, § 1001.952(d): signed writing covering all services; term at least one year; a **methodology** for compensation "set in advance, … consistent with fair market value in arm's-length transactions, and … not determined in a manner that takes into account the volume or value of any referrals"; and aggregate services that "do not exceed those which are reasonably necessary."<sup>5</sup> The 2020 revision dropped the old requirement to state the exact schedule and charge for each part-time interval, which is what made periodic medical-director stipends awkward to paper.

Fitting the AKS employee safe harbor does not satisfy Stark. OIG has said so directly: that compensation fits the employee safe harbor "is neither dispositive nor probative of compliance under the physician self-referral law."<sup>6</sup>

**What the enforcement record actually punishes** is the same thing every time. OIG's 2015 fraud alert on physician compensation settled with twelve physicians whose medical directorships paid above FMV, "took into account the physicians' volume or value of referrals," and covered services the physicians "did not actually provide."<sup>7</sup> In 2025 a hospice paid \$9.2 million over medical-director stipends that "increased when the medical director referred more patients and decreased when the medical director failed to make referrals."<sup>8</sup> In 2026 a mobile PET provider paid \$8.3 million over "excessive fees to supervise PET scans" paid to referring cardiologists.<sup>9</sup> OIG's 2023 general compliance guidance uses as its illustration a physician paid "a monthly stipend of \$500" who "performs no specific service for the stipend."<sup>10</sup>

## Steps

<Steps>
  <Step title="Write the duties before the number">
    List the services concretely: approve and periodically review clinical protocols; supervise named NPs and PAs under the state's collaborative-practice rules, including chart-review percentages; conduct peer review and quality meetings; serve as the point of contact for the medical board and payers; oversee the good-faith-exam process; act as ACCESS medical director. Attach the list as an exhibit. "Serve as medical director" is not a service description.
  </Step>

  <Step title="Estimate the hours honestly">
    Twenty hours a month is a real number if the duty list takes twenty hours. Compare the duties to the hours: supervising six NPs across three states with 10% chart review does not fit in twenty hours, and a reviewer will do that arithmetic. If the hours are variable, set a monthly base for a stated minimum and an hourly rate for documented time above it.
  </Step>

  <Step title="Price it at fair market value and keep the evidence">
    Benchmark the hourly or monthly figure against a published administrative-compensation survey for the specialty, or commission a valuation for larger roles. Record the source and the date. Stark defines FMV as the price from "bona fide bargaining between well-informed parties that are not otherwise in a position to generate business for each other": the benchmark is what an unrelated physician with no referrals would be paid for the same hours.<sup>11</sup> This wiki does not publish rate ranges; they move and they vary by specialty and market.
  </Step>

  <Step title="Choose employee or contractor, and follow through">
    A part-time medical director who works set hours under the PC's direction, on its systems, is usually a common-law employee; a physician with an independent practice who consults a few hours a month is usually a contractor. The choice sets the safe harbor (§ 1001.952(i) or (d)), the Stark exception, the tax form (W-2 wages under 26 U.S.C. § 3401 or Form 1099-NEC), and the state classification test. In California, physicians, dentists, podiatrists, psychologists, and veterinarians are exempt from the ABC test and judged under *Borello* (Labor Code § 2783(b)); **NPs, PAs, and RNs are not**, and a "contractor" NP medical director in California is a misclassification risk.<sup>12</sup>
  </Step>

  <Step title="Write it, sign it, date it, one year minimum for contractors">
    Term of at least one year; the services exhibit; the compensation and its methodology set in advance; a statement that compensation does not vary with referrals or business generated; a clause that the arrangement is commercially reasonable absent referrals; termination provisions that do not let the parties re-paper a substantially similar deal within the first year. If the clinician has other arrangements with the entity, cross-reference them: both § 411.357(d) and § 1001.952(d) require the agreement to cover all services between the parties.
  </Step>

  <Step title="Require time logs, and read them">
    A monthly log of dates, hours, and activities, signed by the clinician, reviewed by someone at the PC. This is what proves services were "actually rendered." It is also what a reviewer will ask for first. OIG's compliance guidance recommends an arrangements-tracking system with "service and activity logs."<sup>10</sup>
  </Step>

  <Step title="Check the wage-and-hour position for a part-time employee">
    The FLSA's professional exemption for physicians "actually engaged in the practice" of medicine carries no salary-basis or salary-level test (29 C.F.R. § 541.304). Whether a physician doing **purely administrative** medical direction is "engaged in the practice" is not settled by regulation or a DOL opinion letter; the conservative course is to pay a salary that satisfies the standard exemption tests (\$684 per week, not prorated for part-time) or to pay hourly and treat the role as non-exempt.<sup>13</sup> Ask employment counsel; this is a payroll question, not a fraud-and-abuse one.
  </Step>

  <Step title="Give the role its regulatory teeth">
    If the medical director supervises incident-to services billed to Medicare, only "the supervising physician (or other practitioner) may bill Medicare for incident to services," and direct supervision (including, since January 1, 2026, permanent virtual direct supervision by real-time audio-video for non-global-surgery services) must actually be furnished (42 C.F.R. § 410.26; § 410.32(b)(3)).<sup>14</sup> A medical director who is not enrolled and not present, virtually or otherwise, cannot be the supervising practitioner on a claim.
  </Step>

  <Step title="Revisit annually">
    Re-benchmark FMV, compare logged hours to the estimate, and amend if the role has changed. A stipend fixed in 2023 for a practice three times the size is not FMV for the current duties in either direction.
  </Step>
</Steps>

## Verify it worked

* [ ] The PC, not the MSO, is the counterparty for anything that oversees care
* [ ] Duties exhibit lists concrete services and states expected hours
* [ ] Compensation benchmarked; the source and date are in the file
* [ ] Nothing in the compensation varies with referrals, orders, admissions, or revenue
* [ ] Signed writing; one-year minimum term for contractors
* [ ] Employee/contractor classification decided and consistent with how the role runs
* [ ] Monthly time logs collected and reviewed
* [ ] The clinician can describe, unprompted, what they do for the money
* [ ] For supervising roles: the state collaborative-practice requirements are met and documented
* [ ] Annual review calendared

## Common failure modes

| Failure                                                         | Consequence                                                                                                                                                         |
| --------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| Stipend to be "listed" as medical director; no duties performed | AKS remuneration (OIG's own example); board discipline for aiding unlicensed practice; in a med spa, the *rent-a-medical-director* enforcement pattern<sup>15</sup> |
| Fee tied to admissions, orders, or revenue                      | The *Beck* / *Creative Hospice* pattern: void under state fee-splitting law; AKS and False Claims Act exposure                                                      |
| Paid per chart reviewed by a telehealth company                 | Characteristic 3 in OIG's telemedicine fraud alert                                                                                                                  |
| MSO pays for PC clinical oversight                              | CPOM: the MSO is buying control of clinical judgment                                                                                                                |
| No time logs                                                    | Cannot prove services rendered; FMV becomes unprovable                                                                                                              |
| Contractor agreement under one year, then renewed on new terms  | Fails § 411.357(d) and § 1001.952(d)                                                                                                                                |
| Supervising physician not enrolled or never present             | Incident-to claims unsupported; NP/PA practice unsupervised under state law                                                                                         |

## Sources

1. Medical Board of California, [Practice Information: Corporate Practice of Medicine](https://www.mbc.ca.gov/Licensing/Physicians-and-Surgeons/Practice-Information/). Checked August 2026.
2. CMS Innovation Center, [ACCESS Model Request for Applications](https://www.cms.gov/priorities/innovation/files/access-rfa.pdf) v1.1 (Feb. 12, 2026), at 13–14, 22.
3. 42 U.S.C. [§ 1395nn(a)(1)](https://www.law.cornell.edu/uscode/text/42/1395nn); designated health services defined at 42 C.F.R. [§ 411.351](https://www.law.cornell.edu/cfr/text/42/411.351).
4. 42 C.F.R. [§ 411.357(c), (d), (l), (z)](https://www.law.cornell.edu/cfr/text/42/411.357); CMS, [CPI-U Updates](https://www.cms.gov/medicare/regulations-guidance/physician-self-referral/cpi-u-updates) (limited remuneration cap: \$5,913 for 2024, \$6,055 for 2025, \$6,237 for 2026). Volume-or-value test at [§ 411.354(d)(5)](https://www.law.cornell.edu/cfr/text/42/411.354); 90-day signature grace at § 411.354(e)(4). Modernizing and Clarifying the Physician Self-Referral Regulations, [85 Fed. Reg. 77492](https://www.govinfo.gov/content/pkg/FR-2020-12-02/pdf/2020-26140.pdf) (Dec. 2, 2020).
5. 42 U.S.C. [§ 1320a-7b(b)(3)(B)](https://www.law.cornell.edu/uscode/text/42/1320a-7b); 42 C.F.R. [§ 1001.952(d), (i)](https://www.law.cornell.edu/cfr/text/42/1001.952); Revisions to Safe Harbors Under the Anti-Kickback Statute, [85 Fed. Reg. 77684](https://www.govinfo.gov/content/pkg/FR-2020-12-02/pdf/2020-26072.pdf) (Dec. 2, 2020).
6. HHS OIG, [Advisory Opinion 08-22](https://oig.hhs.gov/documents/advisory-opinions/570/AO-08-22.pdf) (Dec. 8, 2008), n.2.
7. HHS OIG, [Fraud Alert: Physician Compensation Arrangements May Result in Significant Liability](https://oig.hhs.gov/compliance/alerts/guidance/Fraud_Alert_Physician_Compensation_06092015.pdf) (June 9, 2015).
8. HHS OIG enforcement summary, [Mahlega Abdsharafat and Creative Hospice Settle Health Care Kickback Claims for \$9.2 Million](https://oig.hhs.gov/fraud/enforcement/mahlega-abdsharafat-and-creative-hospice-settle-health-care-kickback-claims-for-92-million) (June 11, 2025).
9. HHS OIG enforcement summary, [Mobile PET Scan Provider to Pay \$8.33 Million](https://oig.hhs.gov/fraud/enforcement/mobile-pet-scan-provider-to-pay-833-million-to-resolve-allegations-of-false-claims-act-violations-based-on-unlawful-kickbacks-to-medical-practices/) (May 1, 2026).
10. HHS OIG, [General Compliance Program Guidance](https://oig.hhs.gov/documents/compliance-guidance/1135/HHS-OIG-GCPG-2023.pdf) (Nov. 2023). See also OIG, Compliance Program Guidance for Individual and Small Group Physician Practices, [65 Fed. Reg. 59434](https://oig.hhs.gov/documents/compliance-guidance/801/physician.pdf) (Oct. 5, 2000).
11. 42 C.F.R. [§ 411.351](https://www.law.cornell.edu/cfr/text/42/411.351) (definitions of "fair market value," "general market value," and "commercially reasonable").
12. 26 U.S.C. [§ 3121(d)(2)](https://www.law.cornell.edu/uscode/text/26/3121); [§ 3401](https://www.law.cornell.edu/uscode/text/26/3401); IRS, [Independent Contractor or Employee](https://www.irs.gov/businesses/small-businesses-self-employed/independent-contractor-self-employed-or-employee) and [Publication 15-A](https://www.irs.gov/publications/p15a); Cal. Labor Code [§ 2783](https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=LAB\&sectionNum=2783).
13. 29 C.F.R. [§ 541.304](https://www.law.cornell.edu/cfr/text/29/541.304); [§ 541.600](https://www.law.cornell.edu/cfr/text/29/541.600); [§ 541.602](https://www.law.cornell.edu/cfr/text/29/541.602). The 2024 salary-threshold rule was vacated in *State of Texas v. U.S. Department of Labor* (E.D. Tex. Nov. 15, 2024) and formally rescinded by DOL at 91 Fed. Reg. 27833 (May 15, 2026); the level remains \$684 per week. Checked August 2026.
14. 42 C.F.R. [§ 410.26](https://www.law.cornell.edu/cfr/text/42/410.26); [§ 410.32(b)(3)](https://www.law.cornell.edu/cfr/text/42/410.32); CMS, [CY 2026 Physician Fee Schedule final rule](https://www.cms.gov/newsroom/fact-sheets/calendar-year-cy-2026-medicare-physician-fee-schedule-final-rule-cms-1832-f) (Nov. 5, 2025) (virtual direct supervision made permanent).
15. North Carolina Medical Board, [Lessons from NCMB's Disciplinary Committee: Are you aiding the unlicensed practice of medicine?](https://www.ncmedboard.org/resources-information/professional-resources/publications/forum-newsletter/articles/lessons-from-ncmbs-disciplinary-committee-are-you-aiding-the-unlicensed-practice-of-medicine) (Aug. 30, 2024) (physician paid \$2,000 a month as med-spa medical director, never on site, listed as supervising physician for four APPs he had never met); HHS OIG, [Special Fraud Alert on telemedicine companies](https://oig.hhs.gov/documents/root/1045/sfa-telefraud.pdf) (July 20, 2022).


## Related topics

- [Draft clinician employment agreements](/guides/agreements/draft-clinician-employment-agreements.md)
- [Structure friendly-owner compensation](/guides/formation/structure-friendly-owner-compensation.md)
- [Vet and select a friendly clinician-owner](/guides/formation/vet-a-friendly-clinician.md)
- [Get a health technology company into Medicare Part B for ACCESS](/guides/enrollment/participate-in-cms-access.md)
- [Stark, AKS, and why comp design is constrained](/concepts/compliance/stark-and-anti-kickback.md)
- [The friendly PC, explained](/concepts/model/the-friendly-pc.md)
- [Med spas and aesthetics](/concepts/industries/med-spas.md)
- [The complete agreement stack (checklist)](/reference/legal/agreement-stack-checklist.md)