Why doctors should be careful with Groupon and other social coupons

I just received a Groupon for dental services.  I have seen Groupon’s in the past for medical services and I can’t figure out how selling medical services via a social coupon (the generic name for Groupon like sites) is legal.   This is dangerous, uncharted territory. Consult your attorney before running a Groupon.

As I run practices in New York, I will focus on the their statutes.  New York has some of the strictest “corporate practice of medicine laws,” but almost all states have similar laws prohibiting fee-splitting and all states (and the Fed’s) prohibit kick-backs.

First lets look at the body of law that prohibits a medical professional from entering into a fee splitting arrangement with a third party.

New York’s State Department of Education (the governing body for “health professionals,” a very broad category including Physical Therapists, Doctors, Podiatrists, Chiropractors, Acupuncturists, Athletic Trainers and Massage Therapist – among many others) clearly defines fee splitting as professional misconduct:

29.1 General Provisions – Unprofessional Conduct – Rules of the NY Board of Regents

Unprofessional conduct in the practice of any profession licensed, certified or registered pursuant to title VIII of the Education Law, shall include:

  • directly or indirectly offering, giving, soliciting, or receiving or agreeing to receive, any fee or other consideration to or from a third party for the referral of a patient or client or in connection with the performance of professional services;
  • permitting any person to share in the fees for professional services, other than: a partner, employee, associate in a professional firm or corporation, professional subcontractor or consultant authorized to practice the same profession, or a legally authorized trainee practicing under the supervision of a licensed practitioner.

This prohibition shall include any arrangement or agreement whereby the amount received in payment for furnishing space, facilities, equipment or personnel services used by a professional licensee constitutes a percentage of, or is otherwise dependent upon, the income or receipts of the licensee from such practice.

It is considered fee splitting when a physician pays a fee on a per patient basis or a percentage basis (most social coupons are structured on a 50/50 split of the total amount sold).  It would be legal to pay a flat rate for marketing, such as an ad in a phone book (sorry for the antiquated reference), all advertisers pay the same rates, and there is no differentiation in price for the number of patients that are generated from the ad.

Now lets look at the body of law that prevents an organization from splitting fees with a health professional:

NY State Public Health Law Section 4510(1) states that no entity can refer patients to medical practice for a profit: Medical referral service businesses prohibited.

No person, firm, partnership, association or  corporation,  or  agent  or  employee thereof,  shall  engage  in  for profit any business or service which in whole or in part includes the referral or recommendation of persons to a physician, dentist, hospital, health related facility, or dispensary for any form of medical or dental  care  or  treatment  of  any  ailment  or physical  condition.  The imposition of a fee or charge for any such referral or recommendation shall create a presumption that the business or service is engaged in for profit.

The law further prohibits the practice across state lines: “No physician,  dentist,  hospital,  health  related  facility  or dispensary shall enter into a contract or other  form  of  agreement  to accept  for  medical  or dental care or treatment any person referred or recommended for such care or treatment by a medical or  dental  referral service  business  located  in or doing business in another state …”

The above statues should be enough to cause someone to think twice about this form of “marketing.”  A health professionals license is on the line, in New York a provider’s license  may be revoked, suspended or annulled for professional misconduct if a physician requests, receives, participates in or profits from “the division, transference, assignment, rebate, splitting or refunding of a fee” or “a commission, discount or gratuity” in connection with “providing professional care or services.”

Take Medicare?  Be doubly cautious

If that isn’t enough to keep you away from social coupons, consider the Anti-Inducement Provision, Section 1128A(a)(5) of the Act, which provides for the imposition of civil monetary penalties against any person who offers or transfers remuneration to any individual eligible for benefits under [Medicare or a state health care program] that such person knows or should know is likely to influence such individual in order to receive from a particular provider, practitioner, or supplier any item or service for which payment may be made, in whole or in part, under [Medicare or a state health care program].

The anti-kickback laws

And finally we get to the state and federal anti-kickback laws. These laws broadly prohibit the offer, solicitation, payment or receipt of anything of value, direct or indirect, overt or covert, in cash or in kind, intended to induce referral of patient for items or services reimbursed by all federal programs, including Medicare, Medicaid and programs covering veteran’s benefits. See Social Security Act § 1128B.

The violation of any of these laws puts your medical license at risk, and most are federal crimes.

We are staying far away from social coupons in our practice.  I am going to sit back and see how this one plays out.

Adam Banks is the CEO of NY SportsMed, and consults on practice development, management and marketing.

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