Healthcare Compensation and Referrals: Avoiding Compliance Pitfalls in Physician Deals

Host Jonathan Porter welcomes Husch Blackwell’s Hal Katz back to the podcast to discuss best practices for structuring physician compensation arrangements and navigating the complex compliance landscape surrounding healthcare referrals. Fresh off presenting at the American Association of Orthopaedic Executives (AAOE) conference, Hal and Jonathan share insights on how healthcare organizations can align financial incentives while staying on the right side of Stark Law and False Claims Act requirements. We begin by examining the spectrum of compliance violations in physician compensation arrangements, from blatant criminal schemes designed to “buy surgeries” through sham consulting contracts to more nuanced cases where well-intentioned financial teams make statements about downstream benefits that later appear in DOJ complaints. Hal discusses a recent DOJ Stark intervention against a Tennessee health system and provides practical guidance on what healthcare executives and compliance officers should and should not say during physician compensation discussions. Next, we turn to the mechanics of how compensation is calculated, drawing lessons from major cases like Tuomey and a Florida hospital settlement where the formula itself included problematic metrics. Hal explains the risks of “black box” compensation arrangements and offers best practices for creating transparent, defensible methodologies that can withstand government scrutiny. Our conversation then shifts to private equity investment in healthcare and the tension between financial realities and compliance requirements. We discuss industry terms like “leakage” and “keeping procedures,” examining how organizations can have honest conversations about referral patterns without crossing legal lines. We close with actionable compliance recommendations. Hal outlines concrete steps that executives, compliance officers, and physician group leaders can take today to strengthen their guardrails and build sustainable, defensible business practices in an increasingly scrutinized industry.  Jonathan Porter | Full Biography Jonathan focuses on white collar criminal defense, federal investigations brought under the False Claims Act, and litigation against the government and whistleblowers. He draws on his experience as a former federal prosecutor to guide clients in sensitive and enterprise-threatening litigation. At the Department of Justice, Jonathan earned a reputation as a top white-collar prosecutor and trial lawyer and was a key member of multiple international healthcare fraud takedowns and high-profile financial crime prosecution teams. He serves as a vice chair of the American Health Law Association’s Fraud and Abuse Practice Group and teaches white collar crime as an adjunct professor of law at Mercer University School of Law. Hal Katz | Full Biography Based in Austin, Texas, Hal provides healthcare clients with guidance on corporate, transactional, regulatory, and public policy matters. With over 30 years in practice, he has witnessed firsthand the evolution of the healthcare industry that continues to reshape the business and approaches of healthcare delivery. He represents for-profit, nonprofit, and governmental entities, including medical groups, hospitals, technology companies, behavioral health organizations, private equity funds, academic medical centers, and health plans. Since 2011, Hal has served the American Bar Association’s Health Law Section in a variety of leadership posts— including as its Chair from 2020 to 2021. Additionally, from 2017 to 2018, he chaired the Health Law Section of the State Bar of Texas. Hal also serves on the Board of Trustees of Integral Care and on the Board of the Texas e-Health Alliance, where his work focuses on governance, policy, and the responsible use of technology in healthcare.