In today’s video, we shed more light on the substantive legal issues in a per-click or software fee for telemedicine patients.

I’m Michael H. Cohen, founding attorney of the Cohen Healthcare Law Group. We help healthcare industry clients just like you navigate healthcare and FDA legal issues so you can launch, or continue to scale, your health and wellness business, products, service.

Our healthcare startup in this scenario has purchased a HIPAA-compliant software from a vendor.  The healthcare startup wants to charge the patient every time the patient accesses the platform and connects with the physician, and this makes economic sense to the venture.

If your healthcare startup’s business model or legal question is something like this scenario, here are some starting strategies and tips to get you oriented.

First, federal law can be relevant because state enforcement authorities actually do look to federal law, which normally is much more robust and well-developed, they look at this in addition to state law prohibitions, which might be skinned.  Federal law thus provides guidance and model answers.

Second, when you ask a question about fee-splitting or kickback issues, don’t expect a yes/no answer.  The go/no-go decision is a binary one you’ll make as a business judgment.  But what you get from your lawyer or law firm is to weigh in on the magnitude and probability of the risk, the shape of the risk; so they can do some legal research for like scenarios; and, they can make some recommendations to help you with risk assessment and risk mitigation.

Risk Assessment: what are the risks?  Risk Mitigation: what can you do about the risks?

This is like speeding toward a yellow light, that’s a metaphor I gave.  If you could on your own look to see whether the light is clearly red or clearly green, then you wouldn’t need legal counsel. But it’s really that simple. You typically race in into the yellow.

Third, anti-kickback and fee-splitting laws contain broad prohibitions.  They don’t have exceptions, they have safe harbors.

If you fit a safe harbor, like a ship going into a safe harbor, it doesn’t mean you are guaranteed to be immune from enforcement storm, but it means the winds are likely going to calm down and your ship is probably going to hang out in the harbor safely.  And, if you fall a little bit outside the safe harbor that does not mean necessarily mean that your mast will be shredded by the winds.  But it means you have to look carefully and position yourself.

Fourth, OIG opinions have addressed access, licensing, or software “per-click” fees in technology. In general, flat fees are better, because the essence of a kickback is a fee that varies by value or volume of the patients involved.

Some healthcare startups use tiered fees as a way to create some logical structure that, if they’re really pressed by regulations, hopefully trying to fall within the safe harbor ideally.

Then again, some states, such as New York, which flatly prohibit any kind of percentage-based fee or sharing of fees between the professional provider, the medical doctor, and the software company. So this makes it challenging in New York

We’ve blogged elsewhere about New York State Education law, Section 6530, Subsection 19, which prohibits: “Permitting any person to share in the fees for professional services,” with some exceptions involving certain other clinical professionals. So, structures are going to need even more care there.

One final point: even if you don’t find a specific prohibition, the fact that there is a general prohibition, say in the state statute generally prohibiting kickbacks and fee-splitting, that augurs caution, that’s good enough.  And then you have to look to safe harbors that might apply, such as for example in California, potentially you’ve got a safe harbor for arrangements that involve compensation at fair market value.

If you want to rely on a fair market value justification, the more neutral the method, the better.  On the other hand, the more the structure provides incentives for physicians to increase patient purchases for reasons other than medical necessity, the less defensible.

That’s the general principle, we can talk more. Thanks for watching. If you still have questions, please click on the link below, cohenhealthcarelaw.com/contact, to send us a message or book an appointment. Here’s to the success of your healthcare venture, we look forward to speaking with you soon.