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General regulatory information for supplier, clinic and procurement staff, not legal advice. Have qualified counsel review any actual agreement.
Short answer
A referral agreement for medical supplies is a written arrangement in which one party sends customers or patients to a supplier and receives something of value. If any item or service is payable in whole or part by a Federal health care program, the Anti-Kickback Statute makes paying or receiving remuneration for referrals a felony. No template makes a per-referral fee safe, so the useful tool is a clause checklist measured against the federal safe harbors.
Definition and scope
This page uses “referral agreement” for any contract in which a person is paid, credited or rewarded for referring an individual to a supplier, or for recommending that someone purchase, lease or order a supply item. The same arrangement appears under other names: a medical supply referral agreement, a referral program for durable medical equipment (DME), a finder’s fee, a commission or an affiliate arrangement. They are analysed the same way, because the statute looks at the remuneration and what it is paid for, not the label. For related topics see fee splitting versus kickbacks, medical device sales commissions and medical supply affiliate programs.
Why a per-referral fee is the core risk
Under 42 U.S.C. 1320a-7b(b)(1), whoever knowingly and willfully solicits or receives “any remuneration (including any kickback, bribe, or rebate) directly or indirectly, overtly or covertly, in cash or in kind” in return for referring an individual, or in return for purchasing, leasing, ordering or recommending any good, facility, service or item payable in whole or part under a Federal health care program, commits a felony. Paragraph (b)(2) covers the other side: knowingly and willfully offering or paying such remuneration to induce a referral or recommendation. Each paragraph carries a fine of up to $100,000, imprisonment of up to 10 years, or both.
Two points matter for drafting. First, the text reaches payments made “directly or indirectly” and “in kind”, so routing a fee through a third party or paying in free goods does not change the analysis. Second, subsection (h) states that a person need not have actual knowledge of the section or specific intent to violate it. For penalties and enforcement see Anti-Kickback Statute penalties for medical suppliers.
Clause checklist against the personal services safe harbor
The Office of Inspector General (OIG) describes safe harbors as payment and business practices that potentially implicate the statute but are not treated as offenses. The one most often compared to a referral contract is 42 CFR 1001.952(d)(1), which says “remuneration” excludes a payment from a principal to an agent for the agent’s services only if every listed standard is met. The table maps each standard to a clause an agreement would need to settle.
| Clause to check | Standard in 42 CFR 1001.952(d)(1) |
|---|---|
| Written and signed | (i) The agency agreement is set out in writing and signed by the parties. |
| Scope of services | (ii) It covers all of the services the agent provides for the term and specifies them. |
| Term | (iii) The term is not less than 1 year. |
| Compensation formula | (iv) The method is set in advance, consistent with fair market value in arm’s-length transactions, and not determined in a way that takes into account the volume or value of referrals or business generated that may be paid for under Medicare, Medicaid or other Federal health care programs. |
| Lawful purpose | (v) The services do not involve counseling or promoting a business arrangement or other activity that violates State or Federal law. |
| Proportionate scope | (vi) The aggregate services contracted for do not exceed what is reasonably necessary for a commercially reasonable business purpose. |
Reading the table, the compensation row is where a typical referral template fails: a fee computed per referral, or as a percentage of referred sales, is by construction determined by the volume or value of referrals, which standard (iv) excludes. A template can be complete on the other five rows and still not satisfy the safe harbor. Safe harbor protection also requires meeting every condition, and the safe harbors are voluntary, so falling outside one does not by itself establish a violation; it means the arrangement is judged on its facts and intent.
Referral services are a different structure
A bilateral deal in which a supplier pays a party for each lead is not the same as a referral service. 42 CFR 1001.952(f) protects payments between a participant and a separate entity serving as a referral service only when all four standards are met:
- The service does not exclude any individual or entity that meets the qualifications for participation.
- Any payment a participant makes is assessed equally against and collected equally from all participants and is based only on the cost of operating the service, not on the volume or value of referrals or business generated.
- The service imposes no requirements on how the participant provides services to a referred person, apart from permitting a requirement to charge the referred person the same rate as others, or to furnish services free or at reduced charge.
- The service makes five specified disclosures to each person seeking a referral, kept in a written record signed by that person or by the individual making the disclosure for the service: how it selects the group of participants, whether the participant paid a fee, how it selects a particular participant, the nature of the relationship between the service and the participants, and the nature of any restrictions that would exclude a participant.
The practical contrast: a flat, equal, cost-based fee charged to every qualified participant fits the referral service model, while a fee that rises with each referral does not.
Where it matters for clinics and suppliers
A supplier that bills Medicare or Medicaid for DME or other supplies, a clinic that recommends where to order, and a procurement office that signs a vendor referral arrangement are all parties who could be on either side of paragraph (b)(1) or (b)(2). Discounts have their own rule: 42 CFR 1001.952(h) defines a rebate as a discount, not given at the time of sale, whose terms are fixed and disclosed in writing to the buyer at the time of the initial purchase, and the definition of discount excludes cash payments and cash equivalents (apart from rebates paid by check), so a “referral credit” paid in cash is not a discount. For the supply contract itself, see supply agreement clauses for medical supplies; for payments aimed at patients, see beneficiary inducement for medical suppliers.
Common misunderstandings
“A signed template is compliant.”
A signature satisfies only the first row of the table. The statute and safe harbor look at what the payment is for and how it is calculated.
“A small fee or non-cash credit is fine.”
The statute covers remuneration “in cash or in kind” with no minimum amount in the text quoted above.
“We did not know about the law.”
Subsection (h) provides that actual knowledge of the section or specific intent to violate it is not required.
“Missing a safe harbor means it is illegal.”
Safe harbors are voluntary protection. An arrangement outside one is evaluated on its facts; that is a reason for counsel review, not an automatic finding.
FAQ
Is there a referral agreement template for medical supplies that is compliant?
No template can be called compliant on its own. Compliance depends on how compensation is set and whether payment relates to referrals for items payable by a Federal health care program, under 42 U.S.C. 1320a-7b(b). Use the table above as a checklist and have counsel review the actual terms.
What does a medical supply referral agreement need to say?
If it is analysed as a personal services arrangement, it needs a signed writing, a specified scope of services, a term of at least one year, and compensation set in advance at fair market value without regard to the volume or value of referrals (42 CFR 1001.952(d)(1)).
Can a DME referral program pay per referral?
A per-referral payment is the conduct paragraphs (b)(1) and (b)(2) describe when the item is payable by a Federal health care program. The personal services safe harbor excludes compensation that takes referral volume or value into account.
What is the penalty?
Up to $100,000 in fines, up to 10 years in prison, or both, for each violation of paragraph (b)(1) or (b)(2).
Sources
- 42 U.S.C. 1320a-7b, Criminal penalties for acts involving Federal health care programs, Cornell Legal Information Institute, https://www.law.cornell.edu/uscode/text/42/1320a-7b, checked 2026-11-01.
- 42 CFR 1001.952, Exceptions (safe harbors), paragraphs (d)(1), (f) and (h), Cornell Legal Information Institute, https://www.law.cornell.edu/cfr/text/42/1001.952, checked 2026-11-01.
- HHS Office of Inspector General, Safe Harbor Regulations, https://oig.hhs.gov/compliance/safe-harbor-regulations/, checked 2026-11-01.
