The federal government collected over $200 million from three settlements based on health care fraud and abuse allegations this past September. This staggering amount excludes fees paid to attorneys, consultants and expert witnesses, and the value of lost executive and staff time spent investigating and defending these claims. To avoid becoming the next target, hospitals and health systems should consider developing best practices regarding physician compensation.

Develop a Risk Profile. Fraud and abuse laws comprise a dull rainbow of some black, much gray, and a little white. Providers should always avoid the black: Never base physician compensation on the volume or value of referrals. Risk tolerance factors into the gray area. Providers should develop a policy for physician compensation setting forth the acceptable compensation range and outlining factors to consider when setting physician compensation.

Assemble a Trusted Physician Compensation Team. This should include staff members and outside professionals. The chief medical officer, a medical staff representative, and a human resource officer know the market and can help determine need and comparable compensation packages in your area. Round out the team with an experienced health care attorney and a valuation expert. Together, the team can craft physician recruitment strategies, physician employment and recruitment agreements, and medical director agreements, and test all arrangements for fair market value.

Use Attorneys and Consultants Thoughtfully. Providers asking an attorney for a legal opinion should be prepared to accept the attorney’s conclusion and act accordingly. Obtaining a second opinion after receiving an unfavorable one creates an easy-to-follow paper trail for whistleblowers and regulators. Conflicting legal opinions may confirm suspicions that an organization knew the risks but proceeded anyway.

Empower the Corporate Compliance Team. Complaints regarding physician arrangements should be taken seriously by investigating and then by engaging the physician compensation team. As recent settlements show, nearly anyone can be a whistleblower and there are significant financial rewards for those who succeed. See Record Mega-Settlements May Attract More Whistleblowers” in this issue of Expect Focus.

Compliance with the myriad laws, rules, and regulations regarding physician compensation has never been more difficult. As the government’s focus on health care becomes sharper, the potential for astronomical penalties to providers continues to grow, as does the temptation for potential whistleblowers. Hospital and health systems should consider what physician compensation best practices to employ to minimize the risk of finding themselves in the bull’s-eye.