Blog December 20, 2023
Navigating Compliance in Hospital-Physician Collaborations


The healthcare sector is an ever-evolving landscape, marked by advancements in medical technology, changes in patient demographics, and shifts in regulatory environments. A significant trend in this sector is the growing collaboration between hospitals and physician groups, exemplified by models like the Foundation Model. These models promise improved operational efficiency and enhanced quality of care. However, they also bring forth a myriad of regulatory and compliance challenges, particularly in the United States. This article explores these challenges, drawing insights from OIG advisory opinions and real-world legal cases pertinent to collaborative healthcare models.


The Foundation Model in Healthcare

The Foundation Model represents a strategic approach in healthcare where hospitals, typically through a non-profit foundation, collaborate closely with physician groups. This model aims to integrate services, align the goals of the hospital and physicians, and improve patient care. However, this model’s intertwined financial relationships and shared responsibilities necessitate a thorough understanding of legal compliance.


Compliance and Regulatory Challenges

Collaborations in healthcare, especially those involving intricate structures like the Foundation Model, face numerous regulatory and compliance challenges:

Stark Law Considerations: This law prohibits physicians from making referrals for certain designated health services payable by Medicare or Medicaid to entities with which they have a financial relationship, unless an exception applies.

Anti-Kickback Statute (AKS) Risks: This statute aims to prevent kickbacks or other forms of remuneration intended to induce or reward referrals for services covered by federal healthcare programs.

False Claims Act (FCA) Implications: This act imposes liability on individuals and companies who defraud governmental programs, including healthcare programs.


Insights from OIG Advisory Opinions

The OIG’s advisory opinions, while not directly addressing the Foundation Model, shed light on compliance issues relevant to such collaborative healthcare models:

Physician Compensation and Referral Arrangements: Advisory opinions often scrutinize physician compensation and referral arrangements, emphasizing the need for compliance with Stark Law and AKS.

Joint Ventures and Conflicts of Interest: The OIG also examines joint ventures and affiliations, focusing on how these arrangements can create conflicts of interest and potentially influence clinical decision-making.


Real-World Legal Case Studies

Baldwin Bone & Joint’s Settlement: In 2019, Baldwin Bone & Joint agreed to pay $1.25 million to settle claims of Stark Law and False Claims Act violations. The case involved allegations that compensation arrangements with shareholder physicians were improperly tied to referral volumes for designated health services, illustrating the risks of non-compliance with the Stark Law​.

Maryland Cardiology Practice Settlement: Several medical facilities agreed to a $35 million settlement over False Claims Act charges related to Stark Law violations. The case involved allegations of kickbacks to a cardiology practice in exchange for patient referrals under the guise of professional services agreements. This case highlights the risks of arrangements that might be perceived as kickbacks, particularly in the context of complex hospital-physician collaborations​.


Best Practices for Compliance

To navigate the complex compliance landscape in healthcare collaborations, several best practices are recommended:

Developing Compliant Compensation Models: Compensation arrangements should be structured in compliance with legal requirements, emphasizing fair market value and avoiding arrangements based on the volume or value of referrals.

Implementing Robust Compliance Programs: Healthcare entities should establish comprehensive compliance programs that include regular audits, employee training, and a strong culture of compliance.

Balancing Legal and Ethical Considerations: It is crucial to balance legal compliance with ethical considerations, ensuring that patient care remains the primary focus.



The Foundation Model, like other innovative healthcare collaborations, presents a complex landscape of compliance and regulatory challenges. This article has explored these challenges through the lens of OIG advisory opinions and real-world legal case studies. As the healthcare sector continues to evolve, maintaining an informed perspective on legal developments, fostering a culture of compliance, and seeking expert guidance will be vital for entities engaged in collaborative models. The ultimate goal remains to provide high-quality, efficient, and ethically sound healthcare services.