Fee-Splitting Concerns

It is important to review your compensation and referral models to prevent inadvertent violations of fee-splitting regulations.
Fee-Splitting Concerns

Commission-based pay is widely used by businesses to motivate employees and contractors. In the medical aesthetic industry, referrals from other medical professionals and complementary nonmedical providers, such as hair salons, health centers and spas, can reap valuable benefits as well. But, in some cases, these types of compensation and referral models run afoul of fee-splitting or fee-sharing regulations, which can put your medical license in jeopardy.

According to the American Medical Association (AMA), fee splitting is defined as the “payment by or to a physician solely for the referral of a patient.” The AMA has explicitly stated that fee splitting is unethical, and its reasoning is simple: A physician’s main purpose is to provide the proper care and treatment of the patient—not to perform unnecessary procedures or refer patients to other providers in order to gain a monetary benefit.

Based on the AMA’s position, many states have enacted statutes that strictly prohibit the sharing of fees between physicians and nonphysicians. For example: New York State Education Law §6530 includes among the definitions of professional misconduct:

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 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 medicine, or a legally authorized trainee practicing under the supervision of a licensee.

The penalties for offering or receiving consideration from a third party for performing professional services can be steep. The New York law authorizes the suspension, revocation or annulment of a healthcare practitioner’s license plus other penalties if he or she:

…directly or indirectly requested, received or participated in the division, transference, assignment, rebate, splitting or refunding of a fee for, or has directly requested, received or profited by means of a credit or other valuable consideration as a commission, discount or gratuity, in connection with the furnishing of professional care or service…

California has a similar prohibition. Its Business & Professions Code Section 650 states:

(a) Except as provided in Chapter 2.3 (commencing with Section 1400) of Division 2 of the Health and Safety Code, the offer, delivery, receipt, or acceptance by any person licensed under this division or the Chiropractic Initiative Act of any rebate, refund, commission, preference, patronage dividend, discount, or other consideration, whether in the form of money or otherwise, as compensation or inducement for referring patients, clients, or customers to any person, irrespective of any membership, proprietary interest, or co-ownership in or with any person to whom these patients, clients, or customers are referred is unlawful.

Put simply, a physician cannot split fees with a nurse, technician, esthetician or any other unlicensed professional irrespective of whether that person is an independent
contractor or employee. Similarly, nurses and physician assistants cannot split their fees.

From the East Coast to the West Coast and in between, there are varying regulations that prohibit the sharing of fees or commission-based payments based on patient volume. There are also some notable exceptions to the fee-splitting prohibition, such as when a doctor refers a patient to another doctor in the same group practice that divides all fees at the end of the year.

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