A medical director agreement does not arrive stamped “kickback.” It may look like an ordinary solution to a staffing problem, a physician’s side role, or a fair way to pay for legitimate work. Federal investigators may read the same agreement very differently when the money, work, and referrals do not line up.
That difference matters in West Texas, where one physician may serve several facilities and a small provider may depend on a few referral relationships. The Anti-Kickback Statute, the Stark Law, and the False Claims Act can all reach one arrangement, but each law asks a different question and requires a different defense.
Our team at Keith & Lorfing includes former federal and state prosecutors. We defend physicians, practice owners, laboratories, and other health-care professionals facing federal investigations, subpoenas, audits, and criminal charges.
If your practice is facing allegations involving kickbacks, self-referrals, false claims, billing fraud, or another federal health-care offense, speak with a healthcare fraud defense lawyer before responding to investigators, auditors, or government requests.
Stark and the Anti-Kickback Statute ask different questions
The federal Anti-Kickback Statute is a criminal law. It prohibits knowingly and willfully offering, paying, soliciting, or receiving remuneration to induce or reward certain referrals or orders involving a federal health-care program.
The physician self-referral law, commonly called the Stark Law, is a civil payment and referral rule. It generally bars a physician from referring Medicare patients for designated health services to an entity with which the physician—or an immediate family member—has a financial relationship, unless an exception applies.
| Issue | Anti-Kickback Statute | Stark Law |
|---|---|---|
| Main question | Was something of value knowingly and willfully offered, paid, solicited, or received to induce or reward covered business? | Did a physician make a Medicare referral for designated health services to an entity with a financial relationship, without meeting an exception? |
| Intent | The government must prove knowing and willful conduct in a criminal case. | Intent is not an element of the underlying referral and billing prohibition. |
| Programs | Federal health-care programs, including Medicare and Medicaid. | The federal referral and billing prohibition centers on Medicare designated health services; related Medicaid rules also exist. |
| People and entities | Can reach payors, recipients, marketers, providers, and others involved in the arrangement. | Focuses on physician referrals and the entities that furnish and bill for designated health services. |
| Main exposure | Criminal charges, fines, imprisonment, civil penalties, and program exclusion. | Denied claims, refunds, civil penalties, and possible related False Claims Act exposure. |
The laws overlap, but they are not interchangeable. An arrangement may create a Stark issue without criminal intent, an Anti-Kickback Statute issue without a physician self-referral, both problems, or neither.
What makes a payment a possible kickback
“Remuneration” is broader than cash in an envelope. It can include free or discounted rent, excessive consulting pay, debt forgiveness, free staff, gifts, or another benefit offered in exchange for covered referrals or orders.
Still, a questionable payment is not enough by itself to prove a crime. Prosecutors must connect the remuneration to inducing or rewarding covered referrals or business and prove that the defendant acted knowingly and willfully.
The “one purpose” rule in the Fifth Circuit
In the Fifth Circuit, which includes Texas, a payment can violate the statute when one purpose of the remuneration was to induce referrals—even if the arrangement also had a legitimate business purpose. The government must still prove the remaining elements, including knowing and willful conduct. See United States v. Ogba.
That distinction makes the records behind the contract important. Time logs, fair-market-value work, negotiations, invoices, and messages may show whether the parties were paying for real services or for federal program business.
Safe harbors protect qualifying arrangements
The Anti-Kickback Statute safe harbors protect arrangements that satisfy detailed conditions. They address areas such as bona fide employment, personal services, space and equipment rental, investment interests, discounts, and some value-based arrangements.
Failing to meet every safe-harbor condition does not automatically make an arrangement illegal. It means the arrangement loses that protection and must be evaluated under the statute based on all the facts, including the parties’ intent and the connection between payment and referrals.
Stark analysis starts with four gates
Stark is often called a strict-liability law because the government does not have to prove bad intent to establish the underlying referral or billing violation. But the analysis should not begin and end with a contract defect.
The first questions are:
Referral: Did a physician make a referral as the law defines that term?
Service: Was the referral for a designated health service?
Payment: Was the service payable by Medicare?
Relationship: Did the physician or an immediate family member have a direct or indirect ownership, investment, or compensation relationship with the entity?
If any answer is no, the federal Stark prohibition may not apply. If every answer is yes, counsel then examines the available statutory and regulatory exceptions.
Designated health services
CMS identifies 12 categories of designated health services. They include clinical laboratory services, physical and occupational therapy, radiology and certain imaging, radiation therapy, durable medical equipment, home health services, outpatient prescription drugs, and inpatient and outpatient hospital services.
CMS also publishes an annual list of service codes. The billing code and the service actually furnished can therefore matter as much as the name used in an agreement.
A paperwork problem is not always fatal
Some Stark exceptions require a signed writing, set compensation, fair-market-value terms, or commercially reasonable arrangements. A missing document, expired term, or payment that differs from the agreement deserves immediate review.
But “missing signature” should not be treated as an automatic admission. Current law allows some signature requirements to be completed within 90 days, and CMS recognizes that a collection of contemporaneous documents may sometimes satisfy a writing requirement. The regulations also contain limited rules for temporary noncompliance and reconciling certain payment discrepancies. The exact exception and dates control.
Do not backdate or recreate records. Counsel should determine what existing documents show, whether a correction rule applies, and whether repayment or disclosure should be considered.
Arrangements that deserve a closer review
The contract’s title does not decide whether it is lawful. Investigators compare the paper terms with what the parties actually did.
Medical directorships: Review the defined duties, time records, compensation method, work performed, and evidence supporting fair market value.
Office or equipment leases: Check the space or equipment actually used, rent, term, access, shared expenses, and whether compensation changes with referrals.
Laboratory and imaging relationships: Examine ownership, ordering patterns, billing, distributions, and any benefit tied to a physician’s own referrals.
Consulting and speaking work: Confirm that the work occurred, the subject had a genuine business need, and payment matched the services provided.
Marketing agreements: Determine what the marketer was paid to do, how compensation was calculated, and whether payment depended on patients, orders, or reimbursed claims.
Marketing arrangements can also appear in telemedicine fraud, durable medical equipment, and pill mill investigations. A flat fee is not automatically safe if the parties’ real agreement ties payment to reimbursed business, patient orders, prescriptions, or federal reimbursement.
How these allegations can become a False Claims Act case
The False Claims Act reaches people and entities that knowingly submit false claims, cause false claims to be submitted, or knowingly use certain false records or statements. “Knowingly” includes actual knowledge, deliberate ignorance, and reckless disregard; specific intent to defraud is not required.
The Anti-Kickback Statute states that a claim including items or services “resulting from” a violation is a false or fraudulent claim under the False Claims Act. That does not make every claim filed during a questioned relationship automatically false: the parties may still dispute whether the claim resulted from the alleged kickback and whether the False Claims Act’s knowledge standard is met.
A Stark problem is not automatically a False Claims Act case either. The government or a whistleblower generally must establish the required false claim or statement and knowledge, not merely point to a contract defect.
False Claims Act cases may begin with data analysis, an audit, or a sealed lawsuit filed by a private whistleblower known as a relator. Because billing, compensation, and referral records often overlap, these investigations may also expand into upcoding and unbundling allegations.
EKRA reaches some private-pay arrangements
The Eliminating Kickbacks in Recovery Act, or EKRA, is a separate federal criminal statute. It covers certain remuneration involving referrals to recovery homes, clinical treatment facilities, and laboratories, and its definition of a health-care benefit program is not limited to federal payors.
EKRA carries a maximum statutory penalty of 10 years in prison and a fine of up to $200,000. Its exceptions are not identical to the Anti-Kickback Statute safe harbors, so an arrangement structured for AKS compliance is not automatically protected under EKRA.
The wording and reach of EKRA have produced legal disputes, and the result can turn on the compensation method, the recipient’s role, and the jurisdiction. A laboratory or treatment provider should receive advice tied to its specific arrangement rather than assume every commission or salary is prohibited.
Exclusion can outlast the criminal case
The HHS Office of Inspector General may exclude individuals and entities from federal health-care programs under several different authorities. Some exclusions are mandatory after specified convictions; others are permissive and depend on the statutory ground and facts.
According to HHS-OIG’s exclusion guidance, federal programs generally will not pay for items or services that an excluded person furnishes, orders, or prescribes. The payment ban can also affect an employer or provider that bills for the excluded person’s work.
Exclusion is not the same as losing a medical license, and it does not always follow every investigation. For many providers, however, losing access to federal reimbursement would be the most damaging practical consequence of the case.
Building the defense around the right law
Our white-collar defense starts by tracking the elements of the actual allegation, not by relying on a general claim of fairness.
Our healthcare fraud defense attorneys examine how Stark, the Anti-Kickback Statute, the False Claims Act, billing rules, and related criminal statutes interact before determining which defenses the evidence actually supports.
For an Anti-Kickback Statute allegation, the issues may include:
No prohibited remuneration: The item or payment was not a benefit covered by the statute.
No referral link: The payment compensated legitimate work and was not meant to induce or reward federal program business.
No knowing and willful conduct: The evidence does not prove the required criminal state of mind.
Protected structure: A statutory exception or regulatory safe harbor applies.
Claim causation: The government cannot connect the alleged violation to the claims it identifies.
For a Stark allegation, the issues may include:
No covered referral: The conduct did not involve a referral as Stark defines it.
No designated health service: The service or billing code falls outside the covered categories.
No financial relationship: The ownership or compensation link required by the law is absent.
Applicable exception: The arrangement meets an exception when all documents and conduct are considered.
No separate False Claims Act proof: The evidence does not establish the knowledge or claim elements needed for additional FCA liability.
Fair-market-value evidence can be important, but it is not a universal defense. An arrangement may be commercially reasonable even if it is not profitable, and compensation may be fair market value yet still fail another requirement.
What to do after a subpoena, audit, or internal warning
Do not rush to “fix” the contract before counsel reviews it. A well-meant rewrite, deletion, or backdated signature can damage a defense and create a separate records problem.
Instead:
Preserve the evidence: Secure contracts, amendments, messages, billing records, calendars, time logs, valuation material, and payment data.
Identify who counsel represents: The company’s lawyer does not automatically represent each physician, owner, or employee.
Control government contact: Route investigator, auditor, and payer requests through counsel before providing an informal explanation.
Review ongoing conduct: Decide with counsel whether and how to pause or change an arrangement without altering the historical record.
Separate the legal theories: Map the evidence to AKS, Stark, the False Claims Act, EKRA, and any billing allegations rather than treating them as one offense.
An internal corporate investigation can help identify the actual issue, preserve privileges, and prevent an untested assumption from becoming the organization’s official response.
West Texas experience for a federal health-care investigation
Keith & Lorfing focuses its practice in West Texas, with offices in Abilene, Lubbock, Midland, and San Angelo. Russell Lorfing served as a federal prosecutor in Lubbock, and our team includes multiple former federal and state prosecutors.
Our attorneys bring more than 75 years of combined experience and more than 500 jury trials. We use that trial background to test the government’s theory, reconstruct what the arrangement actually required, and separate a compliance problem from an intentional crime.
If you received a subpoena, audit request, target letter, or unsealed whistleblower complaint, speak with counsel before responding. Call (325) 480-8100 or contact Keith & Lorfing for a free consultation.
Frequently asked questions
Can I violate Stark without meaning to?
Yes. Intent is not an element of the underlying Stark referral and billing prohibition, so good faith alone does not prevent a violation.
That does not mean every paperwork defect creates the same liability. Counsel should first determine whether Stark applies, whether an exception was satisfied, and whether a statutory or regulatory correction rule affects the result.
Does an AKS safe harbor have to apply?
No. Full compliance with a safe harbor gives an arrangement protection, but failing to meet a safe harbor does not by itself establish a crime.
The arrangement must then be evaluated under the statute, including the payment’s purpose, the referral connection, and the parties’ knowledge and intent.
Does the Anti-Kickback Statute cover private insurance?
The federal Anti-Kickback Statute covers referrals and orders connected to federal health-care programs. State laws may reach private insurance, and EKRA can reach certain laboratory, recovery-home, and clinical-treatment-facility arrangements involving public or private health plans.
Will a Stark violation lead to criminal charges?
Stark itself is a civil law. The same conduct may create criminal exposure if prosecutors can prove a separate offense, such as an Anti-Kickback Statute violation, health-care fraud, false statements, or obstruction.
What does federal program exclusion mean?
An excluded person or entity generally cannot receive federal health-care program payment for items or services they furnish, order, or prescribe. The effect can extend to a provider or employer billing for the excluded person’s work.
Whether exclusion is mandatory, permissive, or available at all depends on the conviction, conduct, and statutory authority involved.
Should I cooperate with an OIG or DOJ investigation?
Cooperation can affect how a case develops, but it should be a planned decision made after counsel understands the request, the evidence, and the client’s status. An informal interview can create statements that are difficult to correct later.
