Is it fee-splitting to share profits in an acupuncture, chiropractic, osteopathic, or MD physician group?

An acupuncture student from Northern California wrote in asking the following question about fee-splitting, kickbacks, Stark / self-referral, and group practices.She wrote:

I am an acupuncture student. In my practice management class, we were asked to divide into groups of three and open a pretend practice. I found your blog on fee-splitting and thought that I would ask you a couple of questions. If you are not able to answer, I understand.

I had heard that fee-splitting was illegal in California, and I was concerned about how we would legally structure our fake-business within the confines of the law. I wanted to be able to address that issue that some of the future acupuncturists in the group may be much more successful at retaining and seeing patients (someone might see 3 people per hour and someone else might see 1 person in 4 hours.

Also, down the line when our practice is fabulously successful and we want to hire new acupuncturists, can we do something like what law practices do? in creating associates with a potential carrot of partnership, so that they are invested in making the practice work?

My response:

In general, clinicians can form a professional corporation under the Moscone-Knox Professional Corporation Act. For example, acupuncturists can have shares in a professional acupuncture corporation and thereby derive profits from the venture.

This in itself is not considered fee-splitting.

Practitioners also can get a paid a bonus for productivity.

Things get a bit more complicated under federal law, if Medicare is involved, but the above is the basic framework under state law.

If the owner of the acupuncture group says, “here’s $20 for every patient you refer me,” that’s a problem.

As well, distinguish self-referral (practitioner refers to another entity in which practitioner has a financial interest) from kickback (practitioner gives or receives anything of value in exchange for a referral). Under California law, Business & Professions Code 650 prohibits kickbacks while 650.01 prohibits self-referral. (On the federal side, self-referral is known as “Stark”).

Illegal fee-splitting is a form of kickback.

While 650(a) prohibits kickbacks, 650(b) permits payment or receipt of consideration for services other than referral of patients, if the consideration is commensurate with the value of the services furnished–for example, billing and collections, or administrative services. So, for example, sometimes you will see a management company, billing the professional corporation at fair market value, for services rendered.

I hope this is helpful – with the caveat that this isn’t legal advice for a specific situation, and, that we haven’t formed an attorney-client relationship.

Feel free to suggest that fellow students follow www.camlawblog.com or www.cohenhealthcarelaw.com, or subscribe on those sites to my newsletter.

Fee-splitting and anti-kickback questions can be tricky. For legal counsel, contact our healthcare legal team at Cohen Healthcare Law Group, A Professional Corporation. We serve acupuncturists, chiropractors, naturopathic physicians, MDs and DOs, integrative medicine clinics, medical facilities, wellness and fitness centers, and healthcare entrepreneurs and businesses.