In recent years, the health care industry has experienced significant growth in contractual relationships between physicians and health systems. This growth is likely to continue as hospitals will increasingly require physicians’ clinical services and expertise as their reimbursement becomes tied to quality. Practitioners should be aware that enforcement risk is also increasing and particular attention should be paid to compensation strategies. Compensation to physicians must be set at fair market value (“FMV”) and failure to do so could result in exposure to federal and state health care fraud and abuse laws, together with civil and/or criminal penalties. Although there are many ways to determine FMV, it is important for health systems to establish a standardized process for establishing FMV, to retain supporting documentation to support and defend the compensation paid, and to seek third party opinions as may be required for unique arrangements.