This is the fourth in a six-part series on incentive design, deal structure, and how these issues surface in transactions and enforcement. Other relevant topics will be discussed in our upcoming presentation, Physician Owner Mindset, Compliance Guardrails: Growth Without the Gotchas, to be given at the American Alliance of Orthopaedic Executives on Tuesday, April 21.

The call comes without warning.

An agent from the Office of Inspector General—or someone from the Department of Justice or a state Medicaid Fraud Control Unit. Sometimes it’s not a call at all—it’s a federal agent at reception holding a Civil Investigative Demand or a grand jury subpoena.

The investigation may have been underway for months. The organization learns about it when the government is ready to ask questions or request documents.

Documents like emails describing growth strategy as “keeping more cases in-house.” Decks explaining how physician ownership will “drive volume to the ASC.” Text threads discussing how to “tighten alignment” to improve returns. And talking points prepared for investors focusing on “internal capture” and “referral optimization.”

While these materials were written for an internal audience, they become evidence once scrutiny starts.

What the Government Reads First

Investigations into physician organizations often begin with a working theory.

When compensation, ownership distributions, or other payments correlate with referral patterns, investigators start with skepticism. Their goal is to establish that the financial arrangements caused the referrals—or at least rewarded them in ways that implicate the Anti-Kickback Statute, Stark Law, or state equivalents.

The first document requests target the materials that reveal intent and business purpose:

• Internal emails and text messages
• Board presentations and meeting minutes
• Pitch decks and investor materials
• Strategic planning documents
• Compensation committee records
• Spreadsheets used to model growth or physician economics
• Draft agreements and negotiation correspondence

These materials are rarely written with regulatory scrutiny in mind. They are written quickly, under deadlines, for people who understand the business shorthand.

That shorthand becomes the government’s narrative.

The Language That Creates Problems

Casual language about growth and strategy can be read very differently under investigation.

Phrases that feel routine in healthcare services become evidence of intent:

“We have an internal pipeline.”
The government reads: physicians are steering referrals based on ownership.

“We can keep more cases.”
The government reads: the arrangement is designed to capture referrals that would otherwise go elsewhere.

“We can move volume to the ASC.”
The government reads: physicians are being incentivized to change referral patterns.

“We need to drive cases internally.”
The government reads: the financial model depends on referral direction.

“Tighter physician alignment will improve distributions.”
The government reads: ownership returns are tied to referral behavior.

These phrases may have been intended to describe capacity utilization, patient access, or operational efficiency. Once an investigation begins, they are interpreted through a different lens.

In some investigations, the government does not need to prove that anyone intended to violate the law. It needs to show that the arrangement’s purpose or effect was to induce or reward referrals.

Internal communications often provide that showing.

How Investigations Begin

Most physician organizations do not learn they are under scrutiny until the government is ready to act.

Common triggers include:

• Whistleblower complaints – Often from former employees, partners, or competitors who have access to internal communications.
• Billing data analysis – Unusual patterns in claims data, particularly when physician ownership correlates with utilization.
• Auditor referrals – When Medicare auditors find something that appears serious or systemic.
• Related investigations –The organization is not the target, but its arrangements surface during review of a hospital, ASC, or other entity.
• Transaction disclosures – Issues identified during M&A diligence sometimes lead to voluntary disclosure or government inquiry.

By the time the call comes or the CID arrives, investigators have usually reviewed preliminary information. They know what they are looking for.

The organization’s response—and the documents it produces—will shape everything that follows.

The Critical Early Decision

When government contact occurs, the most important decision is made in the first hours.

Do not respond immediately. Do not produce documents or allow interviews immediately.

This is not obstruction. It is prudence.

The instinct is often to cooperate quickly, to explain that the arrangement is legitimate, to provide context that will resolve the misunderstanding.

That instinct is dangerous.

Anything said in those early conversations becomes part of the record. Statements made without full understanding of what the government already knows—or what documents exist—can create new problems.

Documents produced without careful review can include materials that are privileged, irrelevant, or misunderstood without context.

Interviews conducted without preparation can result in inconsistent statements, even when everyone is trying to be truthful.

The right first step is always the same: engage experienced healthcare regulatory counsel immediately.

Why Outside Counsel Matters Early

In-house counsel and business advisors play critical roles. But government investigations require a different skill set.

Experienced outside counsel in healthcare enforcement matters can:

• Assess what the government knows. Understanding the scope and theory of the investigation informs every decision that follows.
• Control the response process. This includes determining what documents are responsive, what information is privileged, and how to present the organization’s position.
• Prevent new problems. Often, it’s the reaction—not the action itself—that leads to the worst results. Inconsistent statements, document destruction, and poorly considered disclosures create independent liability.
• Negotiate process and timing. Experienced counsel can often narrow requests, extend deadlines, and manage how the investigation proceeds.
• Prepare for interviews. If interviews occur, they should happen only after thorough preparation and with counsel present.

This is not the time to create new written materials explaining the arrangements. Memos drafted after an investigation begins are often viewed as self-serving and can introduce new inconsistencies.

The goal is to manage the process carefully, using the existing record to present a coherent defense.

What Not to Do

When scrutiny begins, certain mistakes are made repeatedly.

Do not discuss the investigation broadly within the organization.
Limit knowledge to those who need to be involved. Speculation and worry lead to poorly considered statements.

Do not alter, delete, or “clean up” documents.
This includes emails, texts, and files on personal devices. Document preservation is mandatory once an investigation is anticipated. Destruction—even of materials that seem irrelevant—can result in obstruction charges.

Do not try to “get ahead of it” with explanations.
The urge to provide context is strong. Resist it. Let counsel control the narrative and timing.

Do not assume this will be resolved quickly.
Investigations move on the government’s timeline. Cooperation does not guarantee speed. Patience and discipline matter.

Do not create new documents that characterize past conduct.
If the organization needs to understand its own arrangements, that work should occur under attorney-client privilege with guidance from counsel.

How This Affects Transactions

Government scrutiny doesn’t halt deals—it alters them.

When an investigation is disclosed during diligence, buyers respond predictably:

• Expanded diligence. The buyer will want to understand the scope of exposure, review the same materials the government requested, and assess the strength of the organization’s position.
• Deal structure changes. Buyers may require larger escrows, longer holdback periods, or indemnities that shift risk to sellers.
• Price adjustments. The cost of potential liability—and the distraction of managing the investigation—affects valuation.
• Insurance issues. Representations and warranties insurance becomes harder to place, and coverage for regulatory matters is often excluded or limited.
• Timeline delays. Investigations extend closing timelines and create uncertainty that can cause deals to collapse.

Even if the investigation resolves favorably, the process is expensive. Legal fees, business distraction, and deal friction add up quickly.

The organization that built a defensible record from the start—with clear documentation, disciplined messaging, and structures that match their stated purpose—has options. The organization that relied on informal communications and loose language has fewer of them.

The Record You Wish You Had

Most organizations facing scrutiny wish they had created a different record.

They wish the pitch deck had focused on capacity and patient access instead of “moving volume.”

They wish the board minutes documented clear business rationale for compensation changes instead of vague references to “alignment.”

They wish the emails discussing ASC performance had avoided language about “keeping cases” and “driving referrals.”

They wish someone had reviewed the investor materials before they went into the data room.

That record is created long before any investigation begins. It reflects how the organization thinks about its arrangements and how disciplined it is in describing them.

Once the call comes, the record is fixed. The only question is how to manage it.

Closing Observation

Government investigations often begin with materials that were never intended to be read by outsiders. Emails written quickly between partners. Texts about strategy. Draft decks pulled together under deadline. Internal talking points that use shorthand.

Materials like these shape how everything else is viewed.

The organizations that manage scrutiny well are the ones that built a defensible record from the beginning—not because they anticipated investigation, but because they understood that clarity and discipline reduce risk.

When the call comes, the first response matters. Engage experienced outside counsel immediately. Do not create new documents. Do not provide statements or interviews without preparation.

The investigation will proceed on the government’s timeline. The organization’s goal is to manage the process carefully, avoid new problems, and present a coherent defense using the record that exists.

The best defense is the one you built before anyone was looking.

Next in this series: How incentive decisions show up again during audits, partner issues, payer questions, and deals—often at the worst possible time.