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We Told You So…

Apr. 9th 2012

We have written recently about social networking group discount programs – like Groupon. We cautioned that such programs might be deemed fee-splitting; a practice prohibited by federal law, state law, and licensing bodies. We now have some additional data points to share.

Not everyone knows what Groupon is. Here’s how it works. A local merchant, like a restaurant or hair salon, offers a discount – often 50% off or more. This gets a lot of attention. But, the discount isn’t activated until a critical mass of Groupon subscribers ‘tip” the deal. Enough people must commit to “paying” for the discount. That’s how Groupon gets paid.

I’ll illustrate a Groupon offered by a restaurant. The deal is 50% off a meal valued at $100. The deal is sent to thousands of people in the restaurant’s draw area. The deal requires 20 takers to “tip the deal.” Once 20 people commit, those patrons are charged $50 on their credit cards. Groupon will then give the patron a $100 “gift certificate.” Groupon then pays the restaurant a sum – which might be $25; maybe more; maybe less.

So, Groupon gets paid a handsome sum. The patron gets a great discount. And the merchant delivers products or services at a discount. The restaurant “pays” twice: a discount to the patron; and a fee, deducted by Groupon, for the marketing. The marketing fee correlates with the volume of business the restaurant receives.

In healthcare, this can be perceived as fee-splitting.

The federal government prohibits fee splitting for specific transactions unless there is a safe harbor. There is no safe harbor for social networking group discount programs.

State governments often have anti-kickback statutes, and to date, we know of no state that has carved out safe harbors for social networking group discount programs.

Finally, licensing boards have long standing policies against fee-splitting. And two such boards have recently spoken.

From the Oregon Board of Dentistry:

The Board has recently become aware of different companies soliciting Oregon licensees to enter into contracts for marketing and promotion services between the licensee and the company to promote voucher systems for potential patients. The Board has preliminarily determined that these may violate the unprofessional conduct rule OAR 818-012-0030(3) which prohibits offering rebates, split fees, or commissions for services rendered to a patient to any person other than a partner, employee or employer.

The Board suggests that until this can be fully reviewed by the Board, licensees proceed with caution and if they feel necessary seek legal counsel on this matter or contact the Board office…

From the Oregon Board of Chiropractic Examiners:

The Oregon Board of Chiropractic Examiners (OBCE) declined to begin rulemaking to amend the prohibition on fee-splitting at their July 21st meeting at the University of Western States. This decision means Groupon type fee-splitting arrangements are still prohibited for chiropractic physicians.

The OBCE members stated that chiropractic clinics who have utilized Groupon would not be sanctioned as previously many have clearly not understood that this is fee-splitting. However, now the profession has been informed several times that fee-splitting aJI§l1gements such as the current Groupon program violate the rule. The OBCE recommends that chiropractic physicians refrain from marketing programs that include a split fee in the referral or recruitment of patients.

Take the hint….

The Oregon Board of Chiropractic Examiners noted that one other group discount program, Living Social, had already changed its program to flat-fee marketing. Flat-fee marketing would generally not be considered fee-splitting.

At one time healthcare providers were forbidden to advertise. The world changed. But, it took time. Perhaps one day licensing bodies, state, and federal authorities will provide safe harbors for doctors to provide heavily discounted services as part of an aggressive marketing campaign.

In 2012, be careful. Unless and until some agency or licensing body explicitly says the zone is clear, healthcare practitioners should tread with caution.

Posted by Jeff Segal, MD, JD, FACS | in News | No Comments »