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This Wisdom of the Crowd (ACC member discussion) addresses whether physicians and hospitals can offer compensation to persons providing referrals. This resource was compiled from questions and responses posted on the forum of the Health Law Committee ACC Network.*

*Permission was received from the ACC members quoted below prior to publishing their forum comments in this Wisdom of the Crowd resource.


  1. Are physicians or hospitals legally and ethically permitted to offer compensation to anyone who provides referrals to them? Does it matter if the person providing the referral (and receiving the compensation) is another physician? Does it matter if the persons providing the referral are extra-jurisdictional?

Wisdom of the Crowd:

Response #1: Hospital and physician referrals will run afoul of state and federal Anti-Kickback Statutes (AKS) and Stark Laws. Additionally, both entities are limited to receive any transfer of value under the Sunshine Act.i

Response #2: I cannot answer all your questions because I work at a home health agency, not a hospital. However, the following has been my experience:

  1. Payment for referrals becomes more/less legal and ethical depending on whether that is their primary form of payment. Independent contractors should not be paid for referrals, nor should anyone who has an interest in the company (such as shareholders).

Please be aware that we never deal with physicians in our referral process, nor do we have a physician in our office, so some rules may be different. Additionally, if I remember correctly, the person providing the recommendation being a physician does make a difference.

My suggestion would be to work your way through the AKS (Anti-Kickback Statutes), as that is the best way to get the correct answer to your questions.ii

Response #3: In addition to the federal AKS (Anti-Kickback Statutes) (42 U.S.C. 1320a-7b), its safe harbors (, and the advisory opinions (, if federal health dollars are involved, check out the list of statutes at Also, be mindful of the federal and any state equivalent false claim act issues that could be implicated, and if your arrangement is contemplated by the special fraud alerts ( As you research the issue, look for fee splitting prohibitions as well as prohibitions on referrals or inducements for referrals.

I'm not endorsing the Fight Fraud America website. The only thing I know about it is that the listed California statutes are the ones I would have mentioned, notwithstanding that the links are broken (since the state changed how it published laws on the website a few years ago). Texas is listed as under construction, but I recall Texas has a prohibition on physician fee splitting that could be implicated by payments for referrals.

Once you've identified the relevant state statutes, you may want to look for state attorney general opinions or other interpretative guidance to help understand the contours of the law. For example, California AG opinion 01-107 analyzes H&S code 445. You can find the AG opinions at - use the "Search for Opinions" link.

To try and answer the numbered questions:

  1. Q: Are physicians or hospitals legally and ethically permitted to offer compensation to anyone who provides referrals to them? A: It depends, but it is a fraught area that includes potential criminal liability. Q: Does it matter if the person providing the referral (and receiving the compensation) is another physician? A: It could, but as a practical matter, probably not in a helpful way. In states where fee splitting by a physician with a non-physician is aiding and abetting the unauthorized practice of medicine, having another physician may avoid the aiding and abetting issue. However, there are still a number of issues to consider. For example, does the exchange of compensation create a conflict of interest for both physicians, which could violate the physicians' duties to their patient? Q: Does it matter if the persons providing the referral are extra-jurisdictional? A: Probably not - the federal statute makes the giver and receiver guilty of a crime. If you fall outside the federal statute, at least one party to the exchange has a state license. Plus, I'd imagine that states would be creative with their long-arm statutes to find a way to assert jurisdiction over someone who is extra-jurisdictional.iii

Response #4: I don't have much more to add, but as another commenter mentioned, compensation for referrals paid to a bona fide employee generally is permitted if you follow the AKS (Anti-Kickback Statutes) and Stark guidelines as applicable to your facts. I also agree with the comment on state fee-splitting laws -  many states have AOs dealing with fee-splitting scenarios. You might also want to check the AMA Ethics Rules and opinions and/or the Medical Board rules of the states in question.iv

iResponse from Erich Drotleff, Director, Healthcare Legal Counsel, Sutherland Healthcare Solutions, New York (Health Law eGroup, February 8, 2015). iiResponse from: Robert Mason, Associate General Counsel, Diversified Health Management, Ohio (Health Law eGroup, February 9, 2015). iiiResponse from Gavin Galimi, Executive Vice President, General Counsel, and Chief Compliance Officer, March Vision Care, Inc., California (Health Law eGroup, February 9, 2015). ivResponse from Kenny Johnson, Senior Corporate Counsel, Quest Diagnostics Incorporated, Texas (Health Law eGroup, February 9, 2015).
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