Over the past twelve months, healthcare organizations have faced significant compliance regulation changes affecting fair market value (FMV) determinations, physician compensation structures, and production requirements under the Stark Law and related federal regulations. These updates require immediate attention from medical groups, hospitals, and health systems.
The Centers for Medicare & Medicaid Services (CMS) implemented annual inflation-based adjustments to key Stark Law compensation thresholds, effective January 1, 2026.
CMS also finalized a controversial 2.5% "efficiency adjustment" reduction to the work RVUs (wRVUs) for most non-time-based services, intended to address what the agency believes to be historical overvaluation. This change impacts approximately 7,000 physician services – and 91% of services provided by physicians across all specialties.
Under existing wRVU-based compensation models, physicians performing identical clinical work in 2026 generate fewer wRVUs than they did in 2025, creating a perceived productivity decline despite unchanged clinical effort. As a result, organizations may face compensation challenges for providers whose production-based pay is tied to wRVU generation.
These threshold adjustments could directly influence how hospitals structure their provider employment agreements, call coverage payments, medical director arrangements, and other limited compensation relationships with physicians and advanced practice providers (APPs).
What Organizations Should Do Now
Auditing physician compensation arrangements for 2026 Stark Law and Anti-Kickback Statute compliance requires a systematic review of all financial relationships with physicians and mid-level providers to ensure alignment with updated regulatory thresholds and FMV requirements.
Organizations should update their compensation tracking systems and compliance monitoring tools to reflect these changes – helping identify and address potential compliance risks before they escalate into regulatory enforcement actions.
We recommend organizations work with their legal counsel, as well as certified and experienced valuation experts, to take the following three steps:
1. Inventory All Compensation Arrangements
Start by compiling a comprehensive data report of all physician compensation agreements, including:
• Employment contracts
• Medical director arrangements
• Call coverage payments
• Administrative and research stipends
• Non-monetary compensation
• Medical staff incidental benefits provided to physicians
2. Assess Each Compensation Component for Compliance
Next, verify that every arrangement includes a current written agreement that is signed, dated, specific, and reflective of actual terms in practice. Each agreement must clearly define services to be rendered by the physician and compensation amounts, specify a fixed term of at least one year, and document commercial reasonableness.
Assess compensation calculations carefully – particularly wRVU-based arrangements impacted by the 2026 Medicare Physician Fee Schedule changes that reduced wRVU values for certain procedural and hospital-based specialties.
Ensure that productivity bonuses, quality incentives, and shared savings distributions comply with Stark Law exceptions and do not violate the fundamental prohibition against compensation determined by the volume or value of referrals for designated health services.
Review each compensation component separately rather than relying solely on total cash compensation figures, as stacked arrangements involving multiple compensation streams require individual evaluation.
3. Validate FMV and Implement Ongoing Monitoring
Conduct annual FMV assessments using independent third-party valuations and compensation surveys.
Identify outlier physicians whose total compensation exceeds the 75th percentile of benchmark data and perform enhanced "deep dive" reviews to determine whether productivity, quality metrics, local market factors, or other legitimate considerations justify higher compensation levels.
Establish clearly-defined thresholds tied to organizational risk and implement ongoing monitoring for business arrangement changes that could render previously-compliant agreements non-compliant, such as changes in physician practice patterns, service mix modifications, or shifts in referral volume.
Organizations that act early to align compensation structures, documentation, and monitoring practices will be best positioned to navigate these changes with confidence.
Ronnen Isakov is Managing Director Advisory Service of Management Group, LLC. His background includes extensive work in areas including business advisory, valuation, network optimization, transaction support, and project management.