Do You Know Where Your Physicians Are? Underperformance Can Cause Financial Arrangements to Exceed Fair Market Value (FMV)

Episode Date: July 23, 2025

In this episode of Stark Integrity, Bob Wade (Captain Integrity) explores a critical—and often overlooked—compliance risk:

Physician underperformance and how it can cause financial arrangements to exceed fair market value (FMV).

The episode centers on a simple but powerful concept:

If you’re paying a physician for an hour of work, you need to ensure that hour is actually being worked.

The Risk of Underperformance

A central theme of the episode is:

Underperformance can create significant compliance exposure.

If a physician:

• Is compensated for services not fully performed
• Does not meet contractual expectations
• Delivers less time or effort than agreed

Then:

The arrangement may exceed fair market value (FMV).

The key point:

FMV is not just about what you agree to pay—it is about what is actually delivered.

Monitoring Is Essential

Bob Wade emphasizes that:

Monitoring physician activity is a core compliance function.

Organizations must:

• Track time and effort
• Validate that services are performed
• Ensure alignment with contractual expectations

Because:

Assumptions about performance are not enough—verification is required.

The Link to FMV Compliance

Underperformance directly impacts:

Fair market value and Stark Law compliance.

Even if compensation is initially set at FMV:

• Inadequate oversight
• Reduced physician effort
• Lack of monitoring

Can result in:

Payments that no longer meet FMV standards.

The takeaway:

FMV compliance is dynamic—it must be maintained over time.

Common Risk Scenarios

The episode highlights practical examples where issues can arise:

• Physicians not meeting expected service hours
• Compensation exceeding the value of services provided
• Gaps between contract terms and actual performance
• Lack of oversight over schedules and productivity

These issues often develop gradually:

Small performance gaps can quickly turn into meaningful compliance risks.

Documentation Matters

Accurate documentation is essential to demonstrate compliance.

Organizations must ensure:

• Services are properly recorded
• Time worked is clearly documented
• Compensation aligns with documented work

Because:

Without documentation, there is no support for the arrangement.

A “Trust but Verify” Approach

A key principle emphasized in the episode is:

Trust—but verify.

While relationships with physicians are built on trust:

• Verification ensures compliance
• Monitoring protects the organization
• Oversight aligns practice with policy

The takeaway:

Effective compliance requires both trust and validation.

Operationalizing Compliance

One of the most important insights is:

Compliance failures typically occur in execution—not design.

Even well-structured arrangements can become problematic if:

• Monitoring is inadequate
• Expectations are unclear
• Operational controls are weak

Organizations should:

• Implement consistent monitoring processes
• Conduct periodic reviews
• Align operations with contractual obligations

Because:

Execution is where compliance is proven—or lost.

Real-World Implications

Failure to address underperformance can lead to:

• Stark Law violations
• False Claims Act exposure
• Repayment obligations
• Increased regulatory scrutiny

The key point:

Operational lapses can quickly escalate into legal and financial consequences.

Practical Steps for Organizations

To mitigate risk, organizations should:

• Monitor physician productivity regularly
• Align compensation with actual services provided
• Maintain detailed and accurate documentation
• Conduct internal audits
• Address discrepancies early

Because:

Proactive oversight is the most effective risk management strategy.

Key Takeaways

• Underperformance can cause compensation to exceed FMV
• Monitoring physician activity is essential
• FMV compliance requires continuous validation
• Documentation must support services performed
• Operational execution drives compliance outcomes
• A “trust but verify” approach is critical
• Proactive monitoring helps prevent enforcement risk

Final Thoughts

This episode reinforces a simple but critical principle:

You must know where your physicians are—and what they are doing.

Compliance is not just about:

• Structuring arrangements correctly

It is about:

Ensuring those arrangements are followed in practice.

Ultimately:

FMV depends on performance, not just agreements.

Because in today’s healthcare environment:

If performance is not monitored, compliance risk is not fully controlled.

Click here to listen to this Stark Integrity Podcast Episode:
https://podcasts.apple.com/us/podcast/do-you-know-where-your-physicians-are-underperformance/id1588939373?i=1000718549068&l=fr-FR