Referral & Affiliation Agreement Review

A referral or affiliation agreement review is a five-part examination of an agreement between physicians, practices, hospitals, or ancillary service providers addressing patient referral relationships. It covers anti-kickback exposure review, Stark Law exception-fit review, fair market value documentation review, commercial terms review, and compliance-floor verification. Under United States v. Greber, 760 F.2d 68 (3d Cir. 1985), a payment under a referral or affiliation agreement violates the Anti-Kickback Statute if even one purpose of the payment is to induce referrals, even where the payment genuinely compensates for legitimate services rendered too, a "one purpose test" now adopted by at least eight federal circuits. Three lenses evaluate the agreement in a complete review: Anti-kickback exposure review, Stark Law exception-fit review, and fair market value documentation review. 

A referral or affiliation agreement review is a distinct activity from an MSO/PC structuring review, since a referral agreement addresses the narrower exchange around directing patients specifically, while MSO/PC structuring addresses the broader management relationship, though the two can overlap in a single arrangement. The most commonly skipped step in a referral agreement review is confirming every purpose behind any payment in the agreement is documented and legitimate, since good drafting alone does not insulate the parties if underlying communications or testimony reveal a referral-inducement purpose, as Greber itself demonstrates. Physicians and practices entering a referral relationship with a specialist group or facility, hospitals structuring an affiliation arrangement with a referring practice, and healthcare entities auditing an existing referral relationship for compliance risk all use this review before signing.

What Is a Referral/Affiliation Agreement Review?

A referral or affiliation agreement review is the examination of an agreement to confirm its enforceability, quantify its Anti-Kickback and Stark Law exposure, and verify its compensation structure reflects a genuine business purpose independent of referral volume before either party signs. General contract law requires offer, acceptance, and consideration for an agreement to be enforceable, and a review confirms these elements are present alongside compliance with the federal healthcare fraud and abuse framework governing any arrangement touching patient referrals.

Three things a referral agreement review is not.

1. Not the same as reading the stated services description alone. The services description states what the contract claims the payment covers. A review evaluates whether the actual purpose behind the payment matches that description, a distinct and more consequential question.
2. Not the same as contract negotiation. Review identifies and explains risk. Negotiation is the separate, later step of requesting specific changes from the counterparty.
3. Not the same as an MSO/PC structuring review. A referral agreement addresses the narrower exchange around directing patients specifically. MSO/PC structuring addresses the broader management relationship between a lay entity and a professional corporation, though the two arrangements can overlap within a single deal.

What Is the One Purpose Test, and Why Is It the Threshold Question?

The one purpose test is the legal standard the Third Circuit established in United States v. Greber, 760 F.2d 68 (3d Cir. 1985), holding that a payment for professional services violates the Anti-Kickback Statute if any one purpose of the payment is to induce future referrals, even where the payment compensates for services actually rendered too. This standard is the threshold question for any referral agreement review because it determines whether a genuinely legitimate, well-documented payment can still create criminal exposure based on a single additional motive behind it.

The facts underlying Greber make the standard's practical force concrete. A company paid referring physicians an "interpretation fee" structured as 40 percent of the Medicare payment received, capped at a set amount per patient. The defendant argued the fee compensated physicians for real professional work reviewing device data, and the government did not dispute that some legitimate service occurred. Evidence, including the defendant's own prior testimony, that a physician who did not receive the fee would not use the company's service, established that inducing referrals was at least one purpose of the arrangement, and the Third Circuit affirmed the conviction on that basis alone, regardless of the legitimate service component.

The one purpose test has spread far beyond its original circuit. The First, Second, Third, Fourth, Fifth, Seventh, Ninth, and Tenth Circuits have all adopted the standard, and the HHS Office of Inspector General relies on the same rule in its own advisory opinions evaluating proposed arrangements. This breadth of adoption means the standard governs referral agreement analysis in the overwhelming majority of federal jurisdictions rather than functioning as an outlier rule confined to a single circuit.

A genuine doctrinal complication exists at the margins, and it remains unresolved. Some commentators argue the Supreme Court's 2016 materiality standard in Universal Health Services, Inc. v. United States ex rel. Escobar, 579 U.S. 176 (2016), could, in a False Claims Act context specifically, create an opening to argue that a genuinely minor, secondary inducement purpose fails to satisfy the materiality element a False Claims Act theory requires. This argument has not displaced Greber's continued application in direct Anti-Kickback prosecutions, and courts have not resolved how far, if at all, Escobar's materiality reasoning actually narrows the one purpose test's practical reach.

Three one purpose test rules for contract review.

1. Confirm every stated purpose behind any payment in the agreement, since the analysis looks at actual purpose and intent rather than the contract's own recitals alone.
2. Confirm the compensation structure does not correlate with referral volume or value in any way, since a fee that rises and falls with referrals invites the exact inference Greber found sufficient for conviction.
3. Confirm internal communications and prior statements about the arrangement do not undermine the agreement's stated legitimate purpose, since Greber itself was proven in part through the defendant's own earlier testimony about why physicians used the service.

Stark Law's Strict Liability Standard, and Why Good Faith Is Not a Defense

The Stark Law, 42 U.S.C. § 1395nn, restricts a physician from referring a patient for designated health services to an entity with which the physician has a financial relationship, unless the arrangement fits within a specific regulatory exception. This restriction applies regardless of the parties' intent, a critical distinction from the Anti-Kickback Statute's purpose-based analysis.

The strict liability consequence of this structure carries significant practical weight. Unlike the Anti-Kickback Statute's knowing and willful standard, Stark Law liability attaches regardless of intent, meaning a good-faith arrangement that simply fails to satisfy every element of an applicable exception violates the statute even without any referral-inducement motive at all. A hospital and a physician group that negotiate an affiliation arrangement in complete good faith, genuinely believing the deal serves legitimate business purposes, still violate Stark Law if the arrangement misses a single required element of the exception it was meant to fit.

The Anti-Kickback Statute and the Stark Law operate through fundamentally different mechanisms as a result. The Anti-Kickback Statute is a criminal, intent-based statute reached through the one purpose test, where the government must prove the defendant's actual purpose included inducing referrals. The Stark Law is a civil, strict liability statute reached through a mechanical exception-fit analysis, where the government need only show the financial relationship exists and no exception applies, with no inquiry into the parties' state of mind at all. This distinction changes what kind of defense is even available under each statute, since a good-faith belief in compliance offers no defense to a Stark Law claim the way it might factor into an Anti-Kickback Statute intent analysis.

What a Referral/Affiliation Agreement Review Includes

A referral or affiliation agreement review includes six components: Anti-Kickback exposure review, Stark Law exception-fit review, fair market value documentation review, referral volume and fee correlation review, commercial terms review, and compliance-floor verification. Each component targets a distinct regulatory or financial exposure in the agreement.

1. Anti-Kickback exposure review. The reviewer evaluates whether any documented or apparent purpose behind the payment could support a referral-inducement inference under the one purpose test.
2. Stark Law exception-fit review. The reviewer confirms the arrangement satisfies every specific element of the applicable exception, since partial compliance does not protect against strict liability.
3. Fair market value documentation review. The reviewer confirms a contemporaneous analysis supports the compensation as reflecting genuine value for services rendered.
4. Referral volume and fee correlation review. The reviewer checks the compensation structure for any correlation, direct or indirect, with the volume or value of referrals.
5. Commercial terms review. The reviewer confirms the agreement's scope, term, and termination provisions reflect the parties' actual business relationship.
6. Compliance-floor verification. The reviewer confirms the agreement does not attempt to waive or contract around the Anti-Kickback Statute or Stark Law's respective requirements.

The Referral Services Safe Harbor and Personal Services Exception

The referral services safe harbor, 42 C.F.R. § 1001.952(f), protects a fee paid to a referral service, provided the fee does not vary with the volume or value of referrals generated and the service does not exclude a qualified provider from participation. This safe harbor addresses a specific, common arrangement where an entity connects patients with participating providers in exchange for a fee unrelated to how many referrals result from the connection.

A referral or affiliation agreement structured as a genuine management or personal services arrangement can qualify for the same protections covered in MSO/PC structuring analysis, the AKS Personal Services safe harbor and the Stark Law Personal Services exception, when the compensation is set at fair market value and remains unrelated to referral volume. An agreement that blends referral-facilitation language with genuine management or consulting services benefits from analyzing both frameworks together rather than assuming a single safe harbor covers the entire arrangement.

What a Referral/Affiliation Agreement Review Cannot Change

A referral or affiliation agreement review identifies negotiable terms, and three categories of content sit outside what negotiation can alter regardless of legal representation.

1. The Anti-Kickback Statute's one purpose standard itself, since no contract drafting can override this standard, which turns on actual intent and purpose rather than contract language alone.
2. The Stark Law's strict liability standard, since a good-faith belief in compliance does not excuse a failure to satisfy every specific element of an applicable exception.
3. The specific regulatory elements each safe harbor and exception requires, since the parties cannot waive or approximate these elements through their own agreement's terms.

Common Red Flags in Referral and Affiliation Agreements

Common red flags in referral and affiliation agreements fall into five categories, and each creates a distinct regulatory risk.

1. A payment or fee structure that varies with referral volume or value, the precise pattern that supported the conviction in Greber.
2. Informal communications or side agreements suggesting a referral-inducement purpose independent of the written contract's own stated terms.
3. No documented fair market value analysis supporting the compensation as reflecting genuine value for services actually rendered.
4. No element-by-element exception-fit analysis for a Stark-implicated financial relationship, leaving the arrangement exposed to strict liability regardless of intent.
5. Reliance on the arrangement's legitimate business purpose alone, as if that fact by itself provides a defense, when the one purpose test specifically rejects this reasoning.

Fee Structure and the Review Process

A fixed-fee referral or affiliation agreement review charges one set price for the full review instead of billing by the hour. The review process runs in five steps and takes three business days under standard turnaround, with a rush option available for a near-term signing deadline.

1. Submission. The party sends the agreement along with any referenced fair market value analysis or supporting documentation.
2. Intake. The reviewer confirms whether the arrangement involves designated health services under Stark Law and whether federal healthcare program billing is involved.
3. Review. The reviewer reads the agreement clause by clause, checking compensation structure, exception fit, and documented purpose.
4. Delivery. The reviewer sends a written letter identifying risks and recommended questions within three business days under standard turnaround.
5. Discussion. The party and reviewer discuss the letter and confirm which points to raise with the counterparty before signing.

Referral Agreement Review vs. Relying on Internal Compliance vs. Self-Review

A party choosing between a self-review, an internal compliance department's own assessment, and an independent contract review faces a different independence and analysis depth under each option. The comparison below states what each delivers on four factors that matter most before signing.

An internal compliance department serves an important function within an organization, and it does not always substitute for independent review, since internal reviewers can face organizational pressure to approve a deal already underway rather than flag it as genuinely risky.

About the Review Service

A qualified referral and affiliation agreement review service demonstrates direct familiarity with the Anti-Kickback Statute's one purpose test, the Stark Law's strict liability exception framework, and fair market value documentation standards. Verification steps include confirming the reviewer's experience with healthcare fraud and abuse compliance specifically and confirming whether the review addresses the exception-fit analysis element by element.

Referral & Affiliation Agreement Review: Complete Reference Table

Conclusion

A referral or affiliation agreement can violate federal law even when it genuinely pays for real services, since the "one purpose test" established in United States v. Greber, now adopted across at least eight federal circuits, holds that a payment triggers Anti-Kickback liability if inducing referrals is even one purpose behind it, regardless of how legitimate the rest of the arrangement looks on paper. The Stark Law adds a separate, harder-edged risk on top of that: it imposes strict liability with no intent requirement at all, meaning a good-faith deal that misses a single element of its intended exception violates the statute just the same as one built to skirt the rules deliberately. 

A compensation structure that correlates with referral volume, informal communications suggesting an inducement motive, or the absence of a documented fair market value analysis can each turn an otherwise ordinary affiliation into real criminal or civil exposure. To have your own referral agreement checked against both standards before you sign, an online contract review service can flag these purpose and exception-fit risks in advance.