Are you a medical director or does your practice, hospital, or facility have medical directors? Medical directorships are common and necessary in many health care settings, but these compensation arrangements should be regularly reviewed.

The OIG is on the lookout for “sham” arrangements, where the medical director position is just a cover to disguise otherwise illegal payments for referrals. In 2015, the Office of Inspector General (OIG) issued a special fraud alert regarding medical directorship compensation. The OIG reached a settlement with twelve physicians who had entered into questionable medical directorship and office staff arrangements. The special fraud alert is a reminder that medical director compensation must reflect fair market value for bona fide services that physicians actually provide. Even though this alert was issued in 2015, it is still a good reminder to check your compliance with the relevant Stark Law exception and Anti-Kickback Statute safe harbor for medical director arrangements.

Here are key questions for evaluating your medical directorships:

1. Does the compensation match the services provided?

Medical director compensation must be paid fair market value, meaning the compensation must be reasonable for the services actually provided. This is where many medical directorships go awry - see the next question.

2. Are the services necessary and legitimate?

The services must be actual services required by the entity employing the medical director, not duplicative or unnecessary work. An arrangement where an entity pays a physician for services that the physician does not provide or are not actually needed is likely an illegal arrangement, often because the arrangement is a disguise to compensate the physician for his or her referrals to the entity.

3. Are the services documented by the medical director?

The key to a good medical directorship is robust documentation of services actually performed. Time sheets should be submitted as a condition of payment, and there are many options for documentation, including apps and other electronic time tracking mechanisms.

4. Is there a written agreement between the entity and the medical director?

The employer must execute a written contract with the medical director for a minimum of one year, and both parties must sign the agreement. The agreement should cover all the services that the medical director will perform and set the aggregate compensation for the services to be performed.

Periodically review your medical director agreements to ensure that you have compliant arrangements, whether you are a medical director or employ medical directors.