top of page

Navigating the Complex Landscape of Healthcare Provider Compensation

man throwing out hundred dollar bills, making it rain money

Navigating the Complex Landscape of Healthcare Provider Compensation

In the intricate world of healthcare, compensation for physicians and other healthcare providers is often structured under the "eat what you kill" principle. This means that a provider's income is directly linked to the services they personally perform, as well as the items or services they order, prescribe, refer, or sell. While this approach can be advantageous, it must be approached with caution and meticulous attention to compliance with federal fraud and abuse laws. Specifically, three key federal laws come into play: Stark, the Anti-Kickback Statute (AKS), and the Eliminating Kickbacks in Recovery Act (EKRA).

**Stark: The Ethics in Patient Referrals Act**

Under the Stark law, physicians with financial arrangements with other entities are prohibited from referring certain designated health services (DHS) payable by Medicare or Medicaid to those entities. Unless the arrangement falls within a regulatory safe harbor, these referrals are impermissible. It's important to note that Stark is a strict liability statute, meaning there's no room for "good faith" compliance; it's a pass or fail scenario.

There are various safe harbors within Stark, depending on the provider's status:

1. **Employees**: Physicians who are employees can fall under the bona fide employee safe harbor. However, their compensation cannot consider the volume or value of DHS they refer.

2. **Independent Contractors**: Independent contractors can structure arrangements under the personal services or fair market value safe harbor, with similar restrictions on volume or value.

3. **Rural Providers**: Physicians who own a qualifying "rural provider" entity have more flexibility in their compensation arrangements.

4. **Group Practices**: Physician groups providing DHS must adhere to specific safe harbors and "group practice" requirements.

While Stark is a critical consideration for physicians, it's worth mentioning that other providers don't fall under its purview but must still adhere to AKS.

**AKS: The Anti-Kickback Statute**

The Anti-Kickback Statute is a broader concern, encompassing all providers participating in federal healthcare programs. It prohibits remuneration offered, paid, solicited, or received to induce referrals for items or services payable by federal healthcare programs unless exceptions are met. Unlike Stark, the AKS is intent-based, making compliance more complex.

Providers can structure compensation under AKS in a few ways:

1. **Employees**: AKS contains an exception for bona fide employment contracts, allowing compensation based on referrals.

2. **Independent Contractors**: Similar to Stark, the AKS safe harbor for contractors prohibits compensation based on referrals or business generated.

3. **Group Practices**: Group practices must meet specific criteria, including centralized decision-making and a compensation system not based on referrals, to comply with AKS.

**EKRA: The Eliminating Kickbacks in Recovery Act**

EKRA was introduced in response to the opioid epidemic. It mirrors AKS but applies to referrals involving recovery homes, clinical treatment facilities, and laboratories. Unlike AKS, EKRA applies to private pay business as well as federal programs.

EKRA includes safe harbors for employees and contractors, but there isn't a specific safe harbor for group owners at this time.


Navigating the intricacies of compensation arrangements in healthcare, especially under an "eat what you kill" model, requires a deep understanding of Stark, AKS, and EKRA compliance. Physicians must ensure their compensation structures align with Stark when dealing with DHS. Meanwhile, all providers, physicians included, need to adhere to AKS when participating in federal healthcare programs. EKRA adds another layer of complexity, especially for those involved in laboratory services.

Keep in mind that state laws may impose additional requirements, making it essential to consult with legal experts well-versed in healthcare regulations. Noncompliance with these laws can lead to severe financial and criminal penalties. In the ever-evolving healthcare landscape, staying informed and compliant is crucial for providers and their organizations.

18 views1 comment

1 Comment

Rated 0 out of 5 stars.
No ratings yet

Add a rating
Oct 04, 2023
Rated 5 out of 5 stars.

I like this article. Very complex subject that can never be over stated. So important!!

bottom of page