Articles August 1, 2014

New Electronic Marketing Approaches Still Governed by Rebate and Fee-Splitting Prohibitions

By Stuart E. Hoffman, DC, FICA
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In this fast-paced electronic era, the Internet and social media have become an exciting, but also daunting and complex new marketing frontier. We are many years past the baseline question doctors of chiropractic were asking years ago, “Should I have a website?” We are now in the hyper-connected Twitter and Facebook phase and some chiropractic practices have fully and fruitfully embraced these technologies to stream health and wellness information to patients and potential patients on a regular basis.

I personally receive dozens of messages and postings from friends and colleagues from around the nation every day. One legal newsletter made an inescapable point when the attorney/author of the article stated: “This nonstop communication has filtered into the daily work routine. With a half a billion people on sites like Facebook, or 8 percent of the world’s population, clearly this trend is not going away.” [1] What is essential for the health care professional is to remember that the same established standards of confidentiality, patient privacy, including HIPAA restrictions, marketing limitations, economic prohibitions and accountability apply to electronic communications as they do to all other forms of communication.

We have looked for authoritative data that might validate or call into question the effectiveness of these message streams and, so far, we have not been able to locate definitive information on how effective these marketing efforts are at either attracting or maintaining patients. There can be no doubt, however, that those practices that are not making any sort of electronic outreach effort may very well find themselves at a significant disadvantage as old school marketing pathways fade out and only on-line alternatives remain in operation. The traditional “Yellow Pages” is a good example of a massive publishing endeavor making the transition to on-line only and as the costs of printing and postage go up, most direct mail marketing programs are looking closely at much lower cost electronic alternatives.

In this new marketing mix are innovative and aggressive companies that are reaching out to all professions and businesses, offering a diverse range of electronic promotional services. Among the more popular marketing programs available to businesses and professionals are “coupon” and “deal of the day” contracts in which the business enters into a contract under which a portion of the receipts from a coupon-based sale are rebated back to the marketing company. According to one recent article, “Although still in its infancy, the breakthrough “deal of the day” industry is projected to exceed $6 billion in sales by 2015.” [2]

The attractiveness of coupon and discount deals to consumers is a well-established fact. On-line coupon searching and “clipping” is a daily occurrence for tens of millions of budget-conscious consumers. Other health care professions have issued warnings about the temptations of such attractive marketing schemes to their members. In a recent notice from the American Dental Association, ADA spokesperson Amy Chase stated: “In today’s economy, the consumer is always looking for, and sometimes even expecting, a good deal when it comes to purchasing products and services. It is no wonder then that many dentists have at least considered utilizing social coupons, such as Groupon, as a means of attracting new patients.”[3] The warning message was, despite the potential and attractiveness of these programs, clear: “However, unlike other professions for which social coupons may be utilized without fear of violating legal or ethical rules and regulations, those in the dental profession must consider the application of professional conduct laws at both the state and federal level before proceeding.” [4]

The impetus and size of this emerging industry does not, in any way, minimize the potential exposure to the doctor from fee-splitting and kick-back prohibitions at either the state or the federal level. Nor does the wide-ranging discussion going on among legal observers and commentators about how these new Internet discount and rebate programs differ from the situations the older regulatory prohibitions were intended to prevent. One widely cited example of this revisionist approach to Internet coupon agreements was published in April of this year in the Columbia Business Law Review. In this piece, attorney/author Christopher Gandia argued that:

“…when careful attention is given to the parameters of these Agreements, it becomes clear that the payments are solely a marketing fee… The social media advertising firms are solely receiving a one-time fee for marketing services rendered; they do not lay claim to any future fees generated from any patients a dentist may gain from the marketing campaign. In fact, the interest of the patient is enhanced, not compromised by these Agreements. The patients receive services that may have been cost prohibitive if not for the discount.” [5]

This is an interesting line of argument but it does not change the fact that the rules in place NOW in the states and nationally via federal statutes and regulations prohibit the economic fee-splitting equation inherent in these coupon deals, regardless of how advantageous they may or may not be to the consumer.

A brief look at the statute books of any state makes these issues clear. The New York statute, which the above cited legal journal article seeks to dispute is crystal clear and watertight:

That any person subject to the above enumerated articles, has 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, including x-ray examination and treatment, or for or in connection with the sale, rental, supplying or furnishing of clinical laboratory services or supplies, x-ray laboratory services or supplies, inhalation therapy service or equipment, ambulance service, hospital or medical supplies, physiotherapy or other therapeutic service or equipment, artificial limbs, teeth or eyes, orthopedic or surgical appliances or supplies, optical appliances, supplies or equipment, devices for aid of hearing, drugs, medication or medical supplies or any other goods, services or supplies prescribed for medical diagnosis, care or treatment under this chapter, except payment, not to exceed thirty-three and one-third per centum of any fee received for x-ray examination, diagnosis or treatment, to any hospital furnishing facilities for such examination, diagnosis or treatment. [6]

Comparable language and a host of court cases upholding fee-splitting and kick-back prohibitions are on the books in every US state and will likely be very slow to adapt to what some are arguing are the positive and different context of the new Internet discount and other incentive programs. This does not mean that regulatory bodies are not looking at possible amendments and exceptions to the current iron clad prohibitions, based on Internet and other consumer-supporting discounts and incentive programs. Recently, the Oregon Board of Chiropractic Examiners explored the discount coupon issue and on May 2, 2012, issued a statement of clarification under which they determined that two specific coupon vendors had revised their contracts to provide a means, within the law and rules, to offer those services, and advised all Oregon DCs that:

Groupon and Living Social now offer flat-fee advertising contracts which do not violate the rule. DCs should make sure they are signing this version of any contract. [7]

It is vitally important to note that the very specific exceptions identified by the Oregon Board are a rare exception to the almost universal prohibition against kick-backs and fee-splitting and do not necessarily cover all of a doctor’s potential exposure. Limitations on fee-splitting and kickbacks are not just state regulatory and statutory issues.

Among the more dangerous dimensions of these issues is the Stark law and related federal anti-kick-back statutes. The definitive and most far-reaching federal anti-kickback statute known as the Stark law (after the bill’s author, California Congressman Fortney Stark) is a broadly worded statute that makes it a federal crime to pay or receive remuneration of any kind for referrals or services “compensable” under any federal or state health care program. More specifically, the anti-kickback statute makes it a felony, punishable by up to five years in prison and a $25,000 fine, to “knowingly and willfully” solicit, receive, offer or pay any remuneration in return for (1) referring or arranging for services payable by any federal or state health care program, or (2) purchasing, leasing, ordering or arranging for any goods, facilities or services which may be paid for in whole or in part by any federal or state health care program.

Recently, despite an occasional crack in the prohibition regulatory curtain such as was published in Oregon, anti-kick back laws have been getting a broader interpretation by the courts and here is an example which you will want to take note of. Some cases are more straightforward than others. One court case going on in South Carolina has alleged that a hospital is in violation of Stark rules “by providing compensation in excess of fair market value and that took into account the volume or value of the referrals or other business the physicians generated.” (U.S. ex rel Drakeford v. Tuomey Healthcare System, Inc.), Civ. No. 3:05-2858 (D.S.C.) Not so obvious, a New York court recently found a doctor guilty of violating anti-kick-back laws when he entered into an agreement with a landlord to pay a percentage of his fees as rent for the office space. Even more astounding are cases in which non-compete clauses in contracts between health care providers and facilities have been found to be in violation of Stark law pr0visions since such limitations erode patient choice. (New Castle Orthopedic Associates v. Burns, the Supreme Court of Pennsylvania).

Be exceedingly careful when offering patients or colleagues any incentive to seek or continue care. This includes free services, incentives for referrals from current patients, transportation to and from your clinic if the cumulative value exceeds a modest limit, not collecting required co-pays or deductibles. One respected ICA member with an extensive Medicare practice has even placed the folloiwng sign on his front desk:

[table class=””]

Stark Law
It is illegal to waive deductibles and co-payments for Medicare, Medicaid and other patients.
To perform services for no charge or free is against the law.
Doctors must charge a fair market value.
Not to charge for these services is a violation of the Gift and Inducement portion of the Stark Law.
Please do not ask for discounted fees or to waive any fees.


I am not necessarily recommending that you have a similar sign but it highlights the risk you may be taking by not closely following the anti-kickback rules. What I am recommending is that before you sign any promotional contract that you check with your state chiropractic regulatory board and obtain a written policy on the service you are about to purchase. Also, it is essential that a legal review of the federal status of any such program be undertaken. Please remember, that regardless of what a state may say and any regulatory “green light” you may receive from your state, federal provisions may impact the situation. Caution and a maximum compliance effort are always the best way to proceed, regardless of how tempting any marketing scheme may appear on the surface.

[1] Sacopulos, Michael J, JD, “Social Media Policies: What Every Practice Should Have in the Age of Mark Zuckerberg”, July 13, 2011, Becker’s ASC Review On-Line.

[2] Drum, Tracy L, “Groupon Deals Equal to Fee Splitting, Experts Say” Plastic Surgery Practice, accessed 08-15-212 .

[3] Soderlund, Kelly, “Dental Groupons, Incentives-Possible state, federal legal issues as well as ethical ones” American Dental Association News, November 231, 2011.

[4] Ibid

[5] Gandia, Christopher, “Why Social Media Advertising Does Not Constitute Impermissible Fee Splitting Under New York Law,” Columbia Business Law Review, April 11, 2012,

[6] N.Y. EDN. LAW § 6509-a : NY Code – Section 6509-A: Additional definition of professional misconduct; limited application

[7] Oregon Board of Chiropractic Examiners (OBCE Publication) Update on Fee-splitting Rule and Online Advertising, May 2, 2012.

stuart-hoffmanSTUART HOFFMAN, DC is president of ChiroSecure, a liability insurance company endorsed by the International Chiropractors Association. To find out more about ChiroSecure’s malpractice and business related insurance programs contact Dr. Hoffman at 1-866–8032- 4476 or visit ChiroSecure’s website at