Hi, everyone. In today’s video, George is a marketing professional who does SEO and digital marketing in house for physicians and health and wellness businesses. George is wondering whether it’s okay for medical practices to pay his fee through the management company or MSO, or directly from the professional medical corporation.

Hi, I’m Michael H. Cohen, founding attorney of Cohen Healthcare Law Group. We help healthcare industry clients, just like you, navigate the complex terrain of healthcare and FDA law so you can grow, launch, scale your healthcare business.

George has an odd question. So, the fees are owed by the physician to George. So ideally, they would be paid by the physician or the MD’s professional medical corporation to the marketing company. George’s company. That’s the cleanest way to do it.

However, you know, marketing is something normally done by the MSO. So, it would not be unusual for the MSO to hire someone like George and then charge a marketing fee to the professional medical corporation. So that’s how the fees will flow. But the main consideration is how the marketing fee is structured.

So, while it’s common for MSOs to subcontract marketing services to a third-party marketing company like George, wherever services are provided in the healthcare industry and marketing, we recommend that the marketing fees be charged at fair market value and usually at a flat fee. If more than fair market value is given or received for marketing services, it sets up anti-kickback problem. Because the fee values, the fee varies by volume patients. So that’s why we typically use a flat fee.

Now, in states like California, they allow a large percentage of gross profits to be paid to the MSO. But we reserve that arrangement for management and administrative duties. More about that on our blog. The essence, again, is that a variable marketing fee can be seen as a fee that varies by value or volume of patients. And that’s really the definition of a kickback.

So that’s why we recommend a flat rate to mitigate the risks of anti-kickback violations. And these can also come on a state level.

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