Physician Contract Compliance: How To Avoid Stark Law and Anti-Kickback Violations in Complex Arrangements

Author: Andrew Krechmer, Business Development Representative

A $31.5M Wake-Up Call for Healthcare Compliance

In May 2025, a Tennessee-based health system and its physician network agreed to pay $31.5 million to resolve allegations under the False Claims Act. Prosecutors argued that the organizations provided bonuses, perks, and indirect payments to physicians in exchange for patient referrals – the kind of conduct targeted by the Stark Law and the Anti-Kickback Statute (AKS).

This case of physician contract compliance is not an outlier. It reflects a broader enforcement trend: even well-intentioned health systems risk significant financial and reputational damage if they do not have airtight controls over how physician contracts are structured, documented, and monitored.

The lesson is clear: compliance gaps are expensive. And most of them are preventable.

Why Stark and AKS Trip Up Even Well-Intentioned Organizations

Stark and AKS exist to prevent financial incentives from distorting clinical decision-making. But because many physician arrangements blend legitimate compensation with potential referral influence, even small administrative oversights can look like unlawful inducements.

Common high-risk arrangements flagged by the Office of Inspector General (OIG) include:

• Medical Directorships
• On-Call Coverage Agreements
• Consulting Contracts
• Space or Equipment Leases
• Joint Ventures

What Regulators Expect: OIG and DOJ Perspectives

The OIG’s Compliance Program Guidance for hospitals and physicians stresses three pillars for mitigating risk:

1. Contract specificity: Define terms, duties, and expectations in writing.
2. Ongoing documentation: Maintain contemporaneous records of services performed.
3. Active monitoring: Review and update contracts regularly to ensure compliance.

Meanwhile, the Department of Justice’s Evaluation of Corporate Compliance Programs outlines how prosecutors assess enforcement actions:

• Is the program well-designed? (Are risks identified and contracts structured properly?)
• Is it being applied earnestly and in good faith? (Does management allocate resources and oversight?)
• Does it work in practice? (Is there evidence of detection, remediation, and a defensible audit trail?)

Three Blind Spots That Create Compliance Risk

1. Weak or Expired Contracts

The contract itself is your first safeguard for achieving physician contract compliance. Any payment without a written agreement – or under one that has lapsed – is a clear violation of Stark and AKS. Regulators have repeatedly penalized organizations for “sham arrangements” where physicians were paid for services never performed.

A strong contract should:

• Clearly outline duties and tie them to organizational needs
• Mandate real-time documentation of services
• Include pre-set, fair market value (FMV) compensation rates
• Define duration (at least one year for most arrangements under Stark)
• Set caps (e.g., maximum hours per month) to prevent gradual overpayment

2. Poor Invoice and Documentation Oversight

Even strong contracts fail without proper invoice review. Over time, compliance gaps often emerge not from malice but from routine errors, especially in multi-year arrangements.

Reviewers should consistently verify that:

• Activities logged match those listed in the contract
• Payment calculations (hours × rate) are accurate and within contract limits
• Supporting documentation is consistent and complete

3. Gaps in Process, Training, and Technology

Even sophisticated organizations miss amendments, overpay, or double-bill when processes are manual and staff lack compliance training. Many frontline employees do not fully understand FMV standards, and physicians themselves often have limited visibility into their contract terms.

Culture helps, but it is not enough. The organizations that fare best in audits reinforce good practices with technology.

How to Strengthen Your Compliance Posture

Build Stronger Contracts

Treat contracts as living documents, revisit and update them as regulations evolve. Include language that explicitly links duties to clinical or operational outcomes and require regular documentation of completed work to ensure physician contract compliance.

Tighten Invoice Reviews

Cross-check contracts, invoices, and logs at every step. Consider adding a secondary review layer for high-risk arrangements. The more robust your documentation trail, the easier it is to defend decisions if regulators investigate.

Use Technology to Catch Risks Early

Digital tools do more than streamline workflows, they demonstrate proactive compliance. Examples include:

• Contract management systems that trigger alerts before agreements expire
• Invoice review tools that cross-check submissions against contract terms and flag overages
• Digital time-tracking platforms that tie physician hours directly to approved activities

These technologies not only reduce workload for lean teams but also strengthen your defensibility if CMS or DOJ comes knocking.

What You Can Do Today

Compliance is not about perfection. It is about building systems that catch issues before they become violations. Start here:

• Review your existing physician contracts against a compliance checklist.
• Implement a physician timekeeping policy and standardized activity log.
• Train reviewers on how to cross-check documentation rigorously.

And consider how a platform like TimeSmart.AI can help. TimeSmart automates contract tracking, flags risks before payments are made, and generates the audit-ready documentation regulators expect reducing Stark and AKS risk while protecting both revenue and relationships.

Not sure where your gaps are? Let’s talk. We’ll walk through a quick discovery to help you assess where you stand and how we can help.

With the right foundation, proactive monitoring, and the right tools, healthcare organizations can achieve physician contract compliance, stay ahead of regulators, and out of the headlines.

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