When Chiropractors work with Medical Doctors, fee-splitting issues arise

When Chiropractors work with Medical Doctors, fee-splitting issues arise.  This is like Harry met Sally without the New Year’s scene. 

Chiropractor Courts Medical Doctor for Multidisciplinary, Integrative Medicine Clinic

Harry DC , a chiropractor in California, New York, Texas, Massachusetts, or some other state courts Sally MD, a medical doctor, to establish a partnership founding a multidisciplinary, integrative medicine clinic.  In fact they want to also bring on Tom, an acupuncturist, and Tina, a Reiki practitioner.

The reason Harry wants Sally is because his chiropractic patients often have a lot of pain and require an MD who can prescribe pain relief drugs.  Harry has been referring many chiropractic patients to Dr. Sally, but he’d rather make money off these referrals.

Harry knows that if he asks Sally to give him money for every referral, this would be a prohibited kickback.

He also knows that having an MD in-house will help him market his chiropractic practice.

Harry asks us the following questions:

• Do I have to create a professional medical or chiropractic corporation?  Which one?
• If I create a medical management company (MSO), how much can I charge?  What percentage of revenues are acceptable?
• How do I manage risks of kickbacks and fee-splitting and of corporate practice of medicine?
• Is my state friendly or unfriendly to a multidisciplinary model of care where chiropractors and physcians work side-by-side, and share ownership?
• Does it matter if the patient sees the chiropractor first, or the medical doctor first?

Laws governing professional corporations, kickbacks and fee-splitting are relevant

When reviewing any question about legal parameters of integrative care, or about any innovative arrangement in medicine or chiropractic or another healthcare profession, it’s good to review the underlying legal rules.

For example, let’s take a look at Massachusetts law, which can be quirky.  Searching the law for professional corporations yields some different results.

Massachusetts defines “medical service corporation” (176B) as a corporation organized for the purpose of establishing and operating a non-profit medical service plan.  That doesn’t sound quite right.

On the other hand, “professional corporations” (156a) is a better place to look. Section 3 says that a professional organization may be organized “only for the purpose of rendering professional services and services ancillary thereto within a single profession.”

Right off the bat, this rule sounds different than the Moscone-Knox Professional Corporations Act in California.

In California, we’d have several different options:

• A professional medical corporation, where the MDs own 51% or more and the other providers (for example, chiropractor(s)) own up to 49%.
• A professional chiropractic corporation, where the chiropractors own 51% or more and the medical doctors own up to 49%.

Assuming this is allowable, the question is whether it’s of strategic advantage to Harry, the initiating chiropractor.

We’ll come back to this question.  Let’s turn to fee-splitting.  Massachusetts General Laws Chapter 175H provides:

Section 3. (a) Any person who solicits or receives any remuneration, directly or indirectly, overtly or covertly, in cash or in kind in return for purchasing, leasing, ordering or arranging for or recommending purchasing, leasing, or ordering of any good, facility, service, or item for which payment is or may be made in whole or in part by a health care insurer, or any person who offers or pays any remuneration, including any bribe or rebate, except as provided in subsection (b), directly or indirectly, overtly or covertly, in cash or in kind to induce any person to purchase, lease, order or arrange for or recommend purchasing, leasing or ordering of any good, facility, service, or item for which payment is or may be made in whole or in part by a health care insurer, shall be punished by a fine of not more than ten thousand dollars, or by imprisonment in a jail or house of correction for not more than two and one-half years or in the state prison for not more than five years, or by both such fine and imprisonment, and may be held liable in a civil action under section seven.

It’s not clear from the statutory language itself whether an arrangement that contemplates an MSO receiving compensation at fair market value (FMV) for its services, at a percentage of gross revenues, would be allowed or would constitute illegal fee-splitting.

Sometimes the rules are very clear and sometimes they are ambiguous but one can interpret the rules to support a defensible position.  Sometimes it’s best for counsel to contact the appropriate regulatory Board and get an informal read. The situation is much clearer in California, where Business & Professions Code Section 650(b) explicitly allows an MSO arrangement as a percentage of gross revenues at fair market value.

Strategy

Harry, the chiropractor, has several options here:

• Create a professional chiropractic corporation and if allowed, either hire the MD and/or give the MD shares in the professional corporation.  The risk of this strategy is that even if technically allowed, the chiropractor could be viewed as intruding into the practice of medicine (by virtue of owning the corporation and/or employing the MD).  This could be an unlicensed practice / corporate practice of medicine issue.
• Create a professional medical corporation where Sally MD owns 51%.  The downside here is giving the MD control.  In either case, contracts would need to be carefully drafted so that Harry retains control of the intellectual property and Sally doesn’t walk away with it.
• Harry could rent space to Sally, under the umbrella of his integrative care center.  He would need to put certain things in place to distance himself from liability for Sally’s negligence.  He could probably get paid a flat fee at fair market value for marketing Sally’s medical practice.
• Create an MSO and possibly give Sally equity, if she has a separate, non-clinical role in the MSO that adds value.

Harry and Sally can have a life of happiness together (professionally), but it’s less about infatuation and more about careful legal planning.

Whether you’re a medical doctor, chiropractor, acupuncturist, massage therapist, Reiki or energy healing practitioner, nutritionist, homeopathic doctor, or another healing arts provider, contact us with legal questions about setting up an interdisciplinary or integrative clinical care center.

In the real world, Harry booked a one-hour consultation, and then proposed a compliant arrangement to Sally.  Harry hired our firm to draft the necessary agreements and Sally signed.

And they lived happily ever after.

And, if you go to New York or Massachusetts or California you will find their integrative center flourishing, in its many locations, branded under Harry’s carefully chosen name.

The End.