OIG Advisory Opinion 26-10: What Digital Health Companies Should Know Before Paying Clinician Royalties
Clinical expertise is essential to digital health innovation. Physicians and other clinicians help companies design safer products, refine workflows, understand real-world use cases, and validate whether a tool will actually work in practice. Naturally, those clinicians expect to be paid for their contributions—often via royalty or revenue-sharing structures.
But when clinician compensation is tied to product sales, platform adoption, or revenue that the clinician’s own influence may drive, federal fraud and abuse risk can rise quickly.
That is the core message of OIG Advisory Opinion No. 26-10, an unfavorable opinion issued by the U.S. Department of Health and Human Services Office of Inspector General (“OIG”) on May 13, 2026, and posted publicly on May 18, 2026. Let’s break down what happened, why it matters, and what it means for the digital health ecosystem.
What does OIG Advisory Opinion No. 26-10 prohibit?
AO 26-10 does NOT prohibit all clinician royalty arrangements. It does, however, underscore that a royalty or revenue-based payment to a physician or other clinician can create Anti-Kickback Statute (“AKS”) risk when the payment is tied to sales that the clinician may influence, including through teaching, training, proctoring, product advocacy, or recommendations to other providers.
For clinical AI, care management, digital therapeutic, and other digital health companies, the practical lesson is this: a compliance analysis should focus not only on whether the clinician is being paid fair market value (“FMV”), but also on whether the compensation methodology may reward the clinician for driving adoption, utilization, referrals, orders, or other business for Federal health care programs.
The Regulatory Baseline: A Quick Overview of the Anti-Kickback Statute
The AKS is a criminal statute that prohibits anyone from knowingly and willfully offering, paying, soliciting, or receiving any “remuneration”—meaning anything of value—to induce or reward referrals or the purchase of items or services reimbursable by a Federal health care program (“FHCP”) like Medicare or Medicaid.
A Caveat Regarding Advisory Opinions
OIG Advisory Opinions are binding only on the specific requestor who submitted them. You cannot formally point to another company’s opinion in court as a defense. However, the healthcare industry treats these opinions as essential compliance guidance showing how the OIG interprets the law in real time. AO 26-10 should be required reading for any digital health company using physician/clinician consultants.
What Was the Proposed Arrangement in AO 26-10?
The requestor was an orthopedic medical technology company that develops, manufactures, and distributes implant and replacement products across product lines including hip, knee, shoulder, spine, and sports medicine. The company already worked with physician consultants on product development and proposed expanding those relationships through Product Line Agreements under which selected consultants would advise on an entire product line rather than a single device.
The consultants’ duties would include:
teaching, training, and proctoring other providers on products in the line;
reviewing clinical results, designs, testing, and technologies;
attending regular product-line meetings;
discussing strategic initiatives with company personnel; and
reviewing and evaluating designs, prototypes, and related clinical materials.
The company certified that it did not view these services as marketing or promotional activities. But OIG noted a critical limitation: the company could not certify that none of the services would contribute to revenue generation from the products. This was a distinction that proved fatal to the proposed arrangement.
The arrangement created a two-track compensation model:
Track 1 – Hourly FMV: Consultants who failed to meet the applicable Product Line Requirements (minimum annual hours plus a satisfactory performance evaluation) would be paid a pre-stated, hourly FMV rate for documented services actually performed.
Track 2 – Product Line Royalty: Consultants who satisfied the Product Line Requirements would receive a quarterly royalty equal to a specified percentage of the net invoice price for all products sold within the applicable product line, regardless of whether the consultant contributed to any specific product in that line.
To mitigate AKS risk, the company proposed several safeguards, including:
Carve-Outs for Direct Referrals: They excluded product sales from any surgeries performed by the consultant themselves or at facilities where the consultant practiced/held an ownership interest.
FMV Certifications: They certified that they would hire an independent third-party valuation firm to ensure the royalty percentage was consistent with FMV.
No Volume or Value: They stated that the royalty would not take into consideration the volume or value of the consultant's direct referrals.
What did OIG Decide in AO 26-10, and Why?
Despite the built-in safeguards, OIG delivered a hard No on the proposed arrangement. The OIG concluded that the arrangement presented a heightened risk of prohibited remuneration under the AKS if the requisite intent were present, and further concluded that the arrangement failed to satisfy the Personal Services and Management Contracts Safe Harbor.
The OIG’s reasoning centered on a fundamental reality of healthcare marketing: physician influence extends far beyond their own examining rooms.
Because the royalty was tied to sales across an entire product line, the physician would be financially incentivized to act as a “brand advocate.” By teaching, training, and proctoring other providers, the consultant could drive product line sales regionally or nationally, thereby directly increasing their own royalty check. The carve-outs for the consultant’s own procedures did not solve the problem because the royalty base still included purchases resulting from the consultant’s recommendations to others.
OIG was not focused solely on direct self-referrals. It was also concerned with the broader influence a physician consultant could exert through teaching, training, proctoring, and recommending the company’s products to other providers. For safe harbor purposes, the compensation methodology inherently took into account the volume or value of business generated between the parties.
OIG additionally noted that studies show physicians who receive remuneration from a company are statistically more likely to prescribe or order that company’s products, thereby reinforcing the OIG’s concern about skewed clinical decision-making.
A Key Compliance Lesson: Influence Can Be Linked to Business Generation
The most important takeaway from AO 26-10 is that OIG looked beyond the labels that the requestor attached to the arrangement. The requestor called the payments “royalties.” It certified FMV. It proposed carve-outs. It said the services were not marketing activities.
And even so, OIG focused on the economic reality: the consultants were clinicians who used and could influence other clinicians’ use of the company’s products, and they would be paid more when broader product-line sales increased.
For AKS purposes, business generation is not limited to direct referrals or direct orders. Recommendations, training, implementation support, speaking, clinical champion activities, and other forms of clinician influence matter if they may drive utilization.
The key question OIG is asking is “Does this compensation create a financial incentive to steer utilization of federally reimbursable items or services?” If the answer is yes, a requestor should think twice about moving forward with the arrangement.
What does AO 26-10 Mean for Digital Health and Health Tech Companies?
Although AO 26-10 involved orthopedic medical devices, the OIG’s reasoning translates directly to digital health and health tech business models. A digital health company may face similar issues when a physician, therapist, nurse practitioner, health system leader, or other clinician advisor is compensated based on:
Total platform revenue or an entire clinical vertical (e.g., your behavioral health or RPM platform);
Licenses or subscriptions sold to customers that the clinician advises, trains, or influences;
Patient volume, utilization, or orders associated with the clinician’s network or customer base;
Adoption by health systems, practices, or providers where the clinician serves as a clinical champion
To be clear – clinicians can be paid for their expertise. OIG has expressly recognized that consulting arrangements serve legitimate and beneficial purposes when physicians provide specialized clinical or technical expertise to support product development, evaluation, and refinement. The issue is whether the payment structure may create a financial incentive to steer, recommend, promote, or influence the use of a product or platform in a way that generates Federal health care program business.
Common Digital Health Arrangements That Deserve Closer Review
AO 26-10 is particularly relevant for companies that use clinician advisors as product experts, clinical champions, implementation partners, or market-facing validators. Examples that may warrant careful AKS review include:
Physician advisory board members who receive revenue-based compensation tied to an entire platform or service line;
Clinical AI advisors paid a percentage of revenue from a specialty-specific module they help refine and also help introduce to health systems;
RPM or RTM advisors whose compensation increases when practices they train or influence adopt the company’s solution;
Digital therapeutic or clinical decision support consultants paid based on product utilization or customer revenue;
Equity, warrants, or bonus arrangements that reward clinician advisors for customer growth, patient volume, or utilization involving reimbursable services; and
Key Opinion Leader or speaker arrangements where educational, implementation, or training activities may also function as adoption-driving activities.
None of the above arrangements are automatically unlawful. But each should be analyzed carefully, especially where the clinician is in a position to order, recommend, influence, or facilitate federally reimbursable business.
Why Fair Market Value is Necessary, but not Enough
One of the clearest messages from AO 26-10 is that an FMV determination does not guarantee compliance. In this instance, the requestor certified that it would obtain an independent valuation to support the royalty percentage. OIG nevertheless found the arrangement problematic because the compensation methodology could still take into account business generated by the consultants’ recommendations to others.
For digital health companies, FMV matters, but OIG will also examine the structure, purpose, operational reality, selection criteria, duties, documentation, and downstream business-generation incentives of every clinician engagement.
How Nixon Law Group Can Help
Navigating the intersection of clinician collaboration and federal fraud and abuse laws is complicated, and getting the structure right is critical.
At Nixon Law Group, we help all types of digital health and health tech companies structure compliant arrangements that support innovation.
Structure Assessment: We review your current and proposed clinician consulting, advisory board, KOL, training, and product-development arrangements to ensure compensation is tied to documented, trackable services rather than broad revenue shares.
Safe Harbor Alignment: We help tailor your arrangements to fit squarely within an AKS safe harbor, assessing residual risk and recommending structural adjustments.
Alternative Incentive Strategies: If revenue-based royalties are off the table, we help design compliant equity structures, milestone-based compensation, fixed-fee models, or other arrangements that still attract world-class clinical talent.
Compliance Infrastructure: We build documentation, contracting, and compliance processes that scale as the company moves from product development into commercialization.
Please reach out to the Nixon Law Group team to ensure your compensation arrangements are built on a legally sound foundation.
Frequently Asked Questions
Does OIG Advisory Opinion 26-10 apply to digital health software companies, or is it limited to medical device makers?
While AO 26-10 arose from an orthopedic device company’s arrangement, the OIG’s analysis focuses on whether compensation creates a financial incentive for a clinician to steer utilization of federally reimbursable items or services. This concern is equally applicable to software platforms, digital therapeutics, telehealth tools, care management solutions, and clinical AI tools used in connection with Medicare or Medicaid.
Can a physician ever receive royalty payments from a health technology company under the AKS?
Yes, but the structure matters. The OIG recognizes that physician royalty arrangements can be compliant when: (1) they are tied to a specific, identifiable intellectual property or inventive contribution by the physician; (2) the royalty base is limited to the product(s) the physician directly helped develop; and (3) the compensation does not vary based on the physician’s ability to influence utilization by others. AO 26-10 failed primarily because the royalty was tied to an entire product line regardless of the physician’s contribution to any given product in it.
Why is Fair Market Value not enough to make a clinician royalty arrangement compliant?
FMV goes to the amount of compensation, not the structure. The AKS safe harbor requirements also demand that compensation not be determined in a manner that takes into account the volume or value of referrals or other business generated between the parties. Even a royalty percentage certified as FMV by an independent valuator can violate this requirement if it is calculated as a percentage of sales the clinician may influence—as was the case in AO 26-10.
What is the Personal Services and Management Contracts Safe Harbor, and why did the arrangement fail to qualify for it?
This safe harbor protects personal services arrangements if, among other requirements, the aggregate compensation is set in advance, is consistent with FMV, and is NOT determined in a manner that takes into account the volume or value of referrals or other business generated. In AO 26-10, the royalty was calculated as a percentage of total product line sales—meaning, sales driven in part by the physician’s training and advocacy activities—which the OIG concluded indirectly took into account the volume or value of federally reimbursable business, thereby disqualifying the arrangement from safe harbor protection.