Prerequisites
- The clinician’s actual role defined: will they practice, and how much?
- A written description of the governance duties
- Market compensation data for the specialty and geography
- Counsel engaged
The two streams
Keep them in separate agreements or clearly separate sections, with separate documentation. Blending them makes it impossible to show that either is FMV for what it covers.
The three guardrails
Every compensation arrangement here must satisfy all three. They come from the Anti-Kickback Statute’s personal services safe harbor and the general shape of Stark’s compensation exceptions.11. Fair market value
What an unrelated party would pay for the same services in the same market. How to support it:- Published compensation surveys for the specialty and region (MGMA, SullivanCotter, and similar)
- For medical director roles, published medical director hourly rate benchmarks
- A formal FMV opinion for larger or unusual arrangements
- Documented reasoning, retained
2. Commercially reasonable
The arrangement makes business sense even absent any referrals. You need the services; the hours are plausible; the person is qualified. A medical director stipend for 20 hours a month at a practice with three clinicians invites the question of what those 20 hours consist of. Have an answer, and have time records.3. Not varying with the volume or value of referrals
The compensation does not increase because the clinician refers more, orders more, or generates more downstream business.Steps
1
Define the governance duties in writing
Be specific. Generic “medical oversight” is not documentable. A real list:
- Chair or participate in clinical quality review
- Approve and periodically review clinical protocols and policies
- Supervise and evaluate clinical staff
- Make clinical hiring and termination decisions
- Approve clinical equipment and supply specifications
- Serve as the PC’s officer and director; attend board meetings
- Sign payer contracts and provider agreements
- Own and oversee medical records governance
- Serve as the PC’s point of contact for regulatory and licensing matters
- Participate in incident review and patient complaint resolution
2
Benchmark both streams
Clinical compensation against specialty survey data for the market. The medical director stipend against published medical director rate benchmarks, multiplied by documented hours.
3
Choose the stipend structure
Flat monthly with contemporaneous time records is the common middle ground.
4
Set it in advance, in writing, for at least a year
The AKS personal services safe harbor’s shape: written, signed, at least a one-year term, specifying the services, with aggregate compensation set in advance and not varying with referrals. Design to it even if you don’t need to fit it exactly.
5
Require time records
For the governance role, contemporaneous records of hours and activities. This is the single best evidence that the arrangement is commercially reasonable and that the services were actually rendered.
6
Document the FMV analysis and retain it
The benchmarks used, the hours estimated, the conclusion, and the date. Refresh annually.
7
Have the clinician's own counsel review it
Their exposure, their lawyer.
What the clinician-owner typically does not get
Distributions of PC profit. By design, a well-run PC ends up near break-even after clinical compensation and the management fee, because the management fee is where the investable earnings sit. This should be explained to the clinician up front, not discovered by them in year two. A clinician who believes they own a profitable business and finds it runs at break-even has a grievance, and a grievance held by the person who owns your professional entity is a genuine risk. See Where the profit lives.Verify it worked
- Two separate compensation streams, separately documented
- Governance duties listed specifically, with estimated hours
- Both streams benchmarked against market data
- Written agreement, signed, term of at least one year
- Aggregate compensation set in advance
- Nothing varies with referral volume or value
- Time records required and actually kept
- FMV analysis documented and dated
- Clinician’s own counsel reviewed
- Annual review calendared
Common failure modes
Sources
- Anti-Kickback Statute, 42 U.S.C. § 1320a-7b(b); personal services and management contracts safe harbor at 42 C.F.R. § 1001.952(d). OIG, Fraud & Abuse Laws.