GROUPON: PERMISSIBLE MARKETING OR PROHIBITED FEE SPLITTING?
By: Michael R. Webber
Most people are familiar with one or more of the myriad of web-based discount sites, such as Woot, LivingSocial, and of course, Groupon. These companies, and many more, are all part of the “deal-of-the-day” industry offering short-term discounts on goods, and increasingly, services. In some states, these services have recently started to include services such as dental cleanings, laser hair removal and varicose vein treatments.
Some service providers, both within and outside the health care industry, have seen these discounted offers as a means to increase visibility and attract new business. In this view, the discounts appear little different from traditional advertising which includes a first time customer discount. However, traditional advertising typically involves a flat rate to make the offer (such as a newspaper ad) and all advertisers pay the same price. As a result, there is no per diem relationship between the cost of the advertisement and the number of individuals accepting the offer.
Under the traditional Groupon model, there is a fee paid to the marketer (such as Groupon) for each voucher sold, typically 50% of the voucher cost to the consumer. It is this per diem association which raises concerns under the Illinois Medical Practice Act.
Section 22.2 of the Medical Practice Act (225 ILCS 60/22.2) is titled “Prohibition against fee splitting” and states: “(a) A licensee under this Act may not directly or indirectly divide, share or split any professional fee or other form of compensation for professional services with anyone in exchange for a referral or otherwise…” Further, section 22.2(f) states that “a licensee under this Act may not divide, share or split a professional service fee with, or otherwise directly or indirectly pay a percentage of the licensee’s professional service fees, revenues or profits to anyone for: (i) the marketing or management of the licensee’s practice, … (iv) negotiating fees, charges or terms of service or payment on behalf of the licensee, or (v) including the licensee in a program whereby patients or beneficiaries are provided an incentive to use the services of the licensee.”
Based upon section 22.2, a licensee under the Medical Practice Act may be at risk of violating the fee splitting prohibition when utilizing Groupon-type services. In addition, physicians participating in Federal health care programs, such as Medicare or Medicaid, could face criminal liability under the Federal “Anti-Kickback Statute”, 42 U.S.C. §1320a-7b(b).
This author is aware that the Illinois Department of Financial and Professional Regulation is conducting a review of the issues raised by Groupon-type services, but no official position has been announced by the Department. Until this issue is more clearly defined, any licensee under the Medical Practice Act should approach these arrangements with caution, and when in doubt, consult a knowledgeable attorney.