Professional courtesy discounts potentially violate the federal False Claims Act, anti-kickback, and Stark laws as well as managed care contracts.

For the purposes of this article, professional courtesy discount is defined as the practice of doctors extending free or discounted care to one another and each other's relatives, to hospital employees, and to other health care providers. Discounted often times means insurance only (i.e. waiver of all copays, co-insurance  and deductibles).

According to Kevin McAnaney, an attorney with HHS Office of Inspector General, the government's position is that "generally, a routine practice by a physician of waiving the entire fee for services provided to other physicians without regard to the potential for referrals is not a problem. However, waivers of Medicare or other federal health program copayments to indigent persons, whether physicians or any other group, are problematic." Part B News, April 12, 1999

Thanks to the Kennedy-Kassebaum Bill, certain federal laws and regulations also apply to physician's transactions with private insurers.