Medical Directorships: A Hidden Compliance Risk Waiting to Surface

Healthcare leaders know that medical directorships are essential, but many don’t realize just how exposed these arrangements can leave their organizations. Between regulatory complexity, fragmented oversight, and inconsistent documentation practices, medical directorships are an audit risk hiding in plain sight.

Here’s what’s putting organizations on edge, and what can be done about it.

Stark Law & Anti-Kickback Statute: The Regulatory Tightrope

Medical directorships can quickly cross into dangerous territory under the Stark Law (Physician Self-Referral Law) and the Anti-Kickback Statute (AKS). Even arrangements made in good faith can trigger federal scrutiny if certain requirements aren’t met.

Red flags auditors watch for:

• Payments not meeting fair market value (FMV) or lacking commercial reasonableness
• Missing or unsigned contracts
• Duties not clearly separated between administrative and clinical work
• Failure to meet bona fide services exceptions under Stark
• Compensation tied to patient referrals – directly or indirectly

Regulators are less interested in intent and more focused on what they can prove on paper. That’s where most organizations fall short.

Documentation: The Weakest Link

Even if the arrangement is sound, poor documentation can sink it. Time logs, service descriptions, and deliverables are often vague, inconsistent, or missing entirely.

What we often see:

• “Cut-and-paste” activity logs reused month after month
• No contemporaneous tracking of tasks performed
• Excel sheets floating between departments with no audit trail
• Lack of clear deliverables tied to payments, making it difficult to prove compensation was earned

The end result? Payments that can’t be substantiated. And in the eyes of regulators, unjustified payments = potential kickbacks.

Grab your copy of our downloadable Medical Director Administrative Activity Log to help organizations reinforce transparency and accountability, especially when audit risk is high.

Fragmented Oversight = Compliance Blind Spots

In many organizations, responsibility for medical directorships is split across HR, Compliance, Legal, Finance, and Operations with no single owner. That lack of centralized oversight makes it easy for contracts to go unsigned, logs to go unreviewed, or agreements to auto-renew without updated scopes.

When the Office of Inspector General (OIG) comes knocking, they’re not just looking at paperwork. They’re looking for a systemic failure in governance. And fragmented processes make their job easy.

What’s Getting Flagged in OIG Settlements?

The OIG has a long track record of enforcement in this area. Common settlement themes include:

• Sham arrangements where physicians are paid but perform little or no work
• Overlapping services already provided by others
• Compensation that aligns too neatly with referral patterns

In some cases, these have led to multi-million dollar penalties and exclusion from federal programs.

So What Can Be Done? Hint: It’s Not More Spreadsheets

Everyone knows what “compliant” should look like: signed contracts, FMV support, logs of services rendered, etc. The challenge is operationalizing that vision across dozens (or hundreds) of agreements without burying teams in admin work.

That’s where some organizations are turning to purpose-built compliance platforms to streamline documentation, automate time tracking, and create real audit trails.

TimeSmart: Simplifying Compliance Without the Headache

TimeSmart is designed for healthcare leaders who need to reduce risk without adding more manual steps. It helps ensure:

• Physician activities are logged in real-time, with supporting context
• Compensation aligns with FMV and documented services
• Agreements, amendments, and renewals stay consistent and on track
• Teams have centralized visibility, reducing silos and surprises

In short: compliance by design, not by spreadsheet.

Final Thoughts

Medical directorships are necessary. But without the right guardrails, they’re a recurring liability. By reinforcing compliance with the right tools and workflows, organizations can protect themselves, not just during audits, but every day.

Want to learn how TimeSmart helps you stay audit-ready? Contact us today and get ahead of audit risks.