Percentage compensation arrangements: suspect, but not illegal

Percentage compensation arrangements, in which a service is outsourced to a contractor that is paid in accordance with the level of its performance, are widely used in many business sectors. The HHS Office of Inspector General (OIG) has shown concern that these arrangements in the healthcare industry may offer incentives for the performance of unnecessary services or cause false claims to be made to Federal healthcare programs in violation of the antikickback statute and the False Claims Act. Percentage compensation arrangements can work and need not run afoul of the law as long as the healthcare organization carefully oversees the arrangement and sets specific safeguards in place. These safeguards include screening contractors, carefully evaluating their compliance programs, and obligating them contractually to perform within the limits of the law.