Avoid Healthcare Contracting Compliance Risks

Monitor and report on provider total compensation, time/activities, and potential conflicts of interest.

Monitor and report on provider total compensation, time/activities, and potential conflicts of interest.

Healthcare contracting is risky business. Contracts must comply with state, federal, and accrediting body regulations to prevent costly penalties. Provider compensation is closely regulated by federal fraud and abuse laws, including the Anti-Kickback Statute (AKS) and Stark Law.

The Anti-Kickback Statute (AKS) is a criminal law that prohibits the knowing and willful payment of remuneration to induce or reward patient referrals or the generation of business for any item or service payable by Federal healthcare programs.

The Physician Self-Referral Law, aka the Stark Law, prohibits physicians from referring patients to receive designated health services payable by Medicare or Medicaid from entities with which the physician or an immediate family member has a financial relationship, unless an exception applies.

Centers for Medicare and Medicaid Services (CMS) requires that participating health systems’ physicians submit, attest to, and certify the amount of time and effort they’ve expended, as well as report their compensation for services provided. In extreme cases of non-compliance, health systems could lose their accreditation from The Joint Commission and no longer be certified to provide Medicare and Medicaid services.

Penalties for noncompliance are steep, in terms of fines, prison time, and reputational damage. A West Virginia hospital recently paid $50M for violating the Stark Law and Anti-Kickback Statute by knowingly paying improper compensation to physicians based on the physicians’ referrals.

RELATED WHITE PAPER: The Process Revolution: Advancements in Healthcare Contracting

To avoid potential compliance risks in your healthcare contracts:

Monitor provider compensation arrangements. To comply with the AKS and Stark Law, provider compensation for clinical and administrative activities must be consistent with Fair Market Value and not take into consideration the value or volume of referrals the provider brings to the healthcare organization. Examine medical directorships to be sure providers are delivering actual, legitimate services under the medical directorship—not just being paid for a sham directorship to incentivize referrals. Include medical directorship arrangements in the provider contract, outlining the specific services the provider is to perform and the compensation for those services. Then compare providers’ timesheet to their contracts to confirm they are providing the services and time specified in their contracts.

Use a provider time tracking app. Handwritten, paper timesheets are often incomplete and/or illegible, creating compliance issues. Your compliance team may miss potential compliance violations if they’re relying on paper spreadsheets or outdated software to track hundreds of providers performing dozens of services. A time-tracking app automates the tracking of provider time and activities, simplifying reporting and creating an electronic audit trail that promotes regulatory compliance.

Track and report gifts and other non-monetary compensation. Healthcare organizations are required to report all non-monetary compensation given to providers. Gifts are legal as long as they follow organizational regulations and aren’t accepted in exchange for referrals to the gift giver (violating the AKS). To comply with the AKS, you need to record the dollar amount of each gift received by each provider, and address gifts that exceed the thresholds established by CMS and your organization. To comply with the Physician Payments Sunshine Act, physicians must reconcile monetary and non-monetary payments from pharmaceutical and medical device companies with CMS Open Payments data.

Identify and report potential conflicts of interest. To remain certified as a nonprofit entity, health systems must establish a process for identifying and reporting all potential conflicts of interest. For example, if contracted physicians or Board Members hold financial interests in, or ownership of, goods and services provided, you must disclose that information to regulatory authorities. To protect your organization against Stark Law violations, ask newly hired physicians to report any potential conflicts of interest. Physicians should complete a conflict of interest questionnaire upon hiring and again at least once a year thereafter.

Evaluate vendor performance for compliance. To achieve accreditation by The Joint Commission, health systems must demonstrate that they have implemented mechanisms for reviewing their contracts with external vendors. This review process must include oversight of contract terms as well as costs. You need to evaluate vendor performance so you can comply with state and federal regulations and accrediting agencies. Create vendor surveys (to be completed by providers who use the vendors’ products and services) to better manage and evaluate your vendor relationships and reduce vendor-related compliance risks.

TractManager’s Compliance Suite helps you identify and resolve potential compliance risks before they happen. The Compliance Suite automates compliance, allowing you to easily monitor provider time/activities, record gifts and other non-monetary compensation, identify and avoid conflicts of interest, and evaluate your vendors. To learn more, download our new Compliance Guide for detailed explanations on how to navigate healthcare contracting compliance.


Brooke Brown, RN, BSN

Vice President of Product Management

Brooke Brown joined TractManager’s Contract Management division in 2017


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TractManager’s Contract Analytics tool helped a Northeast U.S. health system analyze 6,000+ contracts in six weeks instead of two years, saving more than $320K in staff salaries.

TractManager’s Contract Analytics tool helped a Northeast U.S. health system analyze 6,000+ contracts in six weeks instead of two years, saving more than $320K in staff salaries.

Manually reviewing the overwhelming volume of data contained in your contract assets to ensure compliance is a daunting and incredibly time-consuming task, which most organizations do not have the time or resources to undertake ...

The Experts’ Guide to Healthcare Compliance

Understand critical components to mitigate risks and avoid penalties.

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