Here, the owner of a practice referred his patients to an MRI center and requested the scan center to send the scans back to the practice to be interpreted by the radiologist that worked with the practice.
The practice had the following arrangement with a W-2 employed , part-time radiologist:. Focusing Jumping to the conclusion today that all percentage based fees are illegal fee splitting, especially in light of the newer Patient Brokering Act, is an oversimplification.
Clients need to work with their lawyers to dissect the arrangement and see if in fact the compensation arrangement in particular is really a referral fee or whether it in fact complies with a number of much clearer provisions of applicable law e. At the end of the day, clients ought to expect their lawyer to do their best to a convey the regulatory landscape, b identify viable options, and c assess the relative risks of each option. The Florida Healthcare Law Firm specializes in healthcare law with substantial legal experience covering a wide range of issues faced by doctors, clinics, nurses, hospitals, treatment centers, physician groups, and surgery centers, imaging centers and medical staffs.
To schedule a no obligation free consultation with an accomplished healthcare law advocate, please fill out the contact form, or call the office toll free at Bain Steven Boyne Jeffrey L. Cohen Bonnie Cunningham David J. Davidson Karen Davila Randy M. Goldberg Karina P. There are a range of fee splitting approaches in between, as well as states that have not addressed the issue at all.
The medical profession historically has recognized an ethical prohibition against physicians paying their professional peers for referrals. One form this takes is the prohibition against fee splitting. Fee splitting occurs when a physician, to generate referrals from other physicians, splits part of the professional fee earned from treating the referred patient with the referring physician.
There are various harms that might arise from fee splitting, including:. A physician may not accept payment of any kind, in any form, from any source…for prescribing or referring a patient to said source.
All referrals and prescriptions must be based on the skill and quality of the physician to whom the patient has been referred or the quality and efficacy of the drug or product prescribed. Abusive billing practices, such as markups, fee splitting and kickbacks, distort rational medical decisions as a result of economic incentive. Concerns are not prompted by the fact that fees are shared but rather by whom and for what intent and effect. Seventeen states have not adopted generally applicable fee splitting statutes per se.
Because virtually all billing companies and some management companies use percentage-based billing arrangements, physicians may inadvertently violate such prohibitions. This exposes them to legal risk and their partners to uncertainty, since the physician may try to exit a contractual arrangement by alleging the underlying contract is void, because it is contrary to law.
Of these, only New York explicitly states that percentage-based agreements with billing companies are impermissible. Courts in both Florida and Tennessee have expressed some concern over percentage-based arrangements with management companies but not with companies whose sole function is billing.
North Carolina is somewhat anomalous as well. Its Board of Medicine has publicly posted an online warning related to fee splitting 6 , but there are no posted records of disciplinary action taken against licensees for fee splitting that would provide more context as what the Board deems impermissible fee splitting.
Finally, two states California and Illinois have statutes prohibiting fee splitting but specifically authorizing percentage-based billing arrangements. California has taken legislative action to protect arrangements that it recognizes as lawful, efficient and presenting a reasonably low likelihood of abuse. The California statute requires that fair market value compensation be paid for billing or management services, providing a reasonable check against abusive relationships.
The Illinois law is also of interest. The likelihood of harm such as upcoding or abusive billing practices is only marginally greater using percentage-based billing arrangements than it is using per-claim billing arrangements. The preference for the latter type of arrangement is a relic of a system whose driving principle was volume rather than value.
Alignment of incentives and shared savings arrangements require that providers and their supporting organizations be able to share costs fairly and accurately among themselves. Legal prohibitions that prevent these organizations from using accurate, non-abusive means to reach that end are undesirable. The performance of billing functions by a third party rather than by a provider itself offers key advantages.
Billing companies:. Moreover, given the general consensus that healthcare costs should be driven by considerations of quality, value and payment for performance, it follows that payments to billing companies should track those principles. They are also unfair to providers who are left to bear the brunt of two risks:. In contrast, a percentage-based billing arrangement allows providers to share risk with their billing companies.
This approach supports a more equitable outcome, considering billing companies have a greater degree of control over success. Overall, compensation of billing companies on a percentage basis provides a net savings to the healthcare system and creates efficiencies for providers. The remaining issue is whether percentage-based billing arrangements increase the likelihood of fraud and abuse. One clear indication that a billing method is susceptible to abuse is when the compensation the provider paid to the biller is not commensurate with the fair market value of the services the biller provided.
Measured on this scale, flat fee billing is far more susceptible to abuse than percentage-based billing. In contrast, a percentage-based billing arrangement ensures that the billing company has an adequate incentive to pursue claims as long as efficiently possible.
Further, it more fairly allocates costs to physicians, ensuring they only pay for claims that the billing company successfully recovered. While some may argue that contracting with third-party billers on a percentage-based basis incentivizes upcoding, it also can be said that per-claim arrangements incentivize duplicate billing and submission of multiple claims. The dispositive factor determining whether abuse is likely to occur is whether the biller has an abusive motive, not whether the physician pays on a flat fee or percentage basis.
Given that percentage-based billings are fairer, more efficient and more equitable in apportioning risk, more and more states are recognizing that these billing practices are not only innocuous but superior. Hoover , at However, it is possible that similar prohibitions may be found in case law, attorney general opinions or other sources of legal authority.
In these cases, the fee splitting statutes are typically limited by their terms to referrals made for those specialized services. To do so is fee splitting and is grounds for disciplinary action. Radiopharmacies sell and distribute radiopharmaceuticals, or drugs containing radioactive isotopes used by healthcare facilities to diagnose and treat diseases.
Due to the short half-life of the radioactive isotopes used in these drugs, hospitals and clinics rely on nearby radiopharmacies, resulting in very localized markets. During the period in which the Commission alleged that Cardinal engaged in anticompetitive conduct, there were only two HPA manufacturers in the U. Specifically, the alleged anticompetitive tactics included:. The patient relies upon the advice of the licensee on matters of referral. All referrals and prescriptions must be based on the skill and quality of the licensee to whom the patient has been referred or the quality and efficacy of the drug or product prescribed.
It is unethical for licensees to offer financial incentives or other valuable considerations to patients in exchange for recruitment of other patients. See Ill. The Illinois Medical Practice Act includes several exceptions, including paying fair market value for billing, administrative assistance or collection services.
Zeterberg , M. Gary Johnson, M. Friedenstab , So. Ryan , N. Note that health care ventures must also comply with state health care fraud and abuse statutes.
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