Parrella Health Law
By Christopher A. Parrella, Esq., CPC, CHC, CPCO
Boston, MA
A Health Care Provider Defense and Compliance Firm

Modern Nuclear Inc., a California-based mobile PET scan provider, agreed to pay more than $8.33 million, plus additional amounts based on future revenue, to resolve False Claims Act allegations that it paid referring cardiologists excessive supervision fees in violation of the Anti-Kickback Statute. The settlement was based on Modern Nuclear’s ability to pay, and the allegations were not adjudicated.

For healthcare providers, the message is direct: excessive fees paid to referral sources can create Anti-Kickback Statute risk even when the arrangement is papered as a legitimate services agreement.

The Alleged Arrangement

According to the government, Modern Nuclear paid referring cardiologists above-fair-market-value fees to supervise PET scans for patients they referred to Modern Nuclear.

The government alleged the fees exceeded fair market value because the cardiologists were paid for time spent in their offices caring for other patients, time when they were not on site, and additional services beyond supervision that were never or rarely performed. The government also alleged that Modern Nuclear purported to rely on an attorney opinion letter regarding fair market value, but that the letter was based on fundamental inaccuracies and that the consultant ultimately withdrew.

That fact is important. A legal opinion is only as strong as the facts and assumptions supporting it. If the underlying facts are inaccurate, incomplete, or inconsistent with what actually occurs operationally, the opinion may provide little practical protection.

Why Excessive Fees Matter Under the AKS

The Anti-Kickback Statute does not prohibit providers from paying physicians or other referral sources for legitimate services. Providers may enter into medical director agreements, supervision agreements, call coverage agreements, consulting arrangements, clinical oversight agreements, and similar contracts. The compliance risk arises when the compensation exceeds fair market value, is not commercially reasonable, or is tied directly or indirectly to referrals.

A provider cannot solve AKS risk merely by assigning a label to the payment. Calling compensation a “supervision fee,” “consulting fee,” “medical director fee,” or “administrative services fee” does not control the analysis. The government will look at what services were actually performed, whether the services were needed, whether the compensation was fair market value, whether time was documented, whether the physician was paid for unavailable or non-working time, and whether the arrangement was connected to referrals.

Paper Compliance Is Not Enough

The Modern Nuclear settlement is also a reminder that compliance documents must match operational reality. Providers often have contracts, invoices, legal opinions, FMV memos, or consultant reports in the file. Those documents matter. But they are not enough if the actual conduct tells a different story.

Key questions include:

• Was the physician actually present when required?
• Were the services actually performed?
• Was time tracked accurately?
• Was compensation paid for productive services or referral access?
• Was the arrangement commercially reasonable without referrals?
• Did the provider periodically audit performance against the contract?
• Were invoices reviewed before payment?
• Did anyone validate the assumptions in the fair market value analysis?

If the answer to those questions is unclear, the arrangement may carry unnecessary AKS exposure.

Provider Call to Action

Healthcare providers should review all financial relationships with physicians, marketers, referral sources, medical directors, supervisors, consultants, contractors, and related parties. The practical next step is to test each arrangement against fair market value, actual services performed, documentation, necessity, and referral sensitivity before a whistleblower, payer, OIG, DOJ, or state regulator does it for you.

If you have any questions or would like to discuss how this issue may affect your organization, please email Chris directly at cparrella@parrellahealthlaw.com.

Bottom Line

The Modern Nuclear settlement reinforces a basic AKS principle: excessive fees can look like kickbacks.

Providers should not assume that a written agreement, invoice, or legal opinion will protect an arrangement if the compensation exceeds fair market value or the services are not actually performed. The safest arrangement is one that is fair, documented, commercially reasonable, operationally accurate, and defensible without regard to referrals.