I’ve been hearing a lot of concern from physicians lately about Groupon. Surprisingly, this concern has shifted from “Is this profitable?” to “Is this legal?” This is a very good question and a legitimate concern. Before I go into any more detail I will say that you should consult your attorney before running a Groupon campaign. The reason you should seek legal advice is because each state has different laws regarding how you can promote medical services.

The specific “issue” that has physicians concerned is the fee-splitting between a medical practice and a third party, for services promoted. Each state has different statutes that outline what they consider fee-splitting, but the purpose of the law remains the same, prevent kick-backs to third parties promoting medical services. In New York, for example, the NY State Department of Education, which governs “health professionals,” clearly states in Part 29.1 of it’s General Provisions that “fee splitting” is considered unprofessional conduct:

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

  1. 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;
  2. 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

Also, the NY State Public Health Law Section 4510(1) states that no entity can refer patients to a medical practice for a profit:

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.

So what exactly fee splitting?

Fee splitting refers to when a physician pays a fee on a per patient basis or a percentage basis. Most group discount companies, such as Groupon and Living Social, split revenue 50/50 with the practice.

How does fee splitting differ from other marketing efforts?

It’s perfectly legal to pay a flat rate for marketing, such as paying an agency a set monthly fee for online advertising, SEO, social media marketing, TV commercials, magazine ads, etc. The price is pre-determined and does not vary based on the number of patients generated. There are some companies that guarantee “conversions” (leads) or website rankings for the practice and will only take payments when this happens. While you should be skeptical of these types of businesses to begin with, they don’t violate any laws because they aren’t being paid based on the number of patients they bring the practice.

What about my state?

Again, I encourage you to consult your attorney about your state’s statutes and laws. You can search for your state’s Board of Regents online, as well as Public Health Laws, to do some research on your own.

It is also important to note that this in’t just a state issue; there are Federal anti-kickback laws in place. Federal law prohibits 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 veterans benefits (Social Security Act § 1128B) .

I anticipate the government, both state and federal, coming out with a much more defined stance on Groupon and their relationship with medical practices, in the near future. I don’t think this has happened yet because of the many other challenges that the federal and state governments are currently facing, as well as the fact that these laws were created before the huge growth of group discount sites like Groupon. However, once this “warning” occurs you’ll start to see the enforcement of these laws (fines, loss of medical license, possible jail time). Until then, consult with your attorney before signing up with Groupon or any other group discount site.

If you would like to learn more about the benefits and drawbacks to using Groupon you can email Turbo or call us at 877-673-7096 x2.