Health Care Providers’ Use of Groupon Stirs Up Controversy

Posted by Judy Mayer on August 01, 2012
Fraud and Abuse

Every day Groupon, Living Social, Buy With Me, and a host of other social coupon websites flood  the inboxes of millions of consumers with daily deals.  These websites offer discounts on a variety of products and services, and are extremely popular among restaurants and businesses for their ability to bring in new customers and generate revenue. 

 But what if the deal is for a dental exam, laser vein removal, or Botox® treatments?  The general public probably doesn’t care about the ramifications of using social coupons for health care services, because, let’s face it, everyone likes a great deal.  Health care providers, however, definitely should. 

 Why?  Because, depending on the nature of the daily deal, a health care provider who offers a discount through these types of social coupon websites could be violating federal and/or state laws.

 The Model

 In a typical daily deal arrangement, a business agrees to sell its product or service at a discount.  While the discounts vary, they are traditionally 50 percent or more off the regular price.  Consumers who choose to purchase the product or service pay the social coupon website directly, and the revenue generated from the promotion is split evenly between the business and that website.  These websites generally do not charge a fee to publicize the promotion. 

 For example, a dentist typically charges $300 for an exam, cleaning and x-rays.  The dentist partners with Groupon and offers a promotion featuring the same exam, cleaning and x-rays for $100.  Groupon would promote the deal, pay the dentist $50 for each deal sold, and retain the remaining $50.

 State Fee-Splitting Prohibitions

Many states prohibit a licensed health care provider from splitting professional fees with unlicensed third parties.  As previously stated, a social coupon website generally receives payment directly from the consumer/patient and then submits a portion of that payment to the health care provider.  Because the website retains a portion of the original payment, which technically represents a portion of the fee that the provider would have generated for his or her professional service, this arrangement, depending on the state, may constitute illegal fee-splitting. 

In New York, for example, it is considered unprofessional conduct for a health professional to engage in fee splitting.  Specifically, the regulations at 8 NYCRR 29.2 provide that a health professional is engaging in unprofessional conduct if he or she “permit[s] any person to share in the fees for professional services, other than:  a partner, employee, associate in a professional firm or corporation, professional subcontractor or consultant authorized to practice the same profession, or a legally authorized trainee practicing under the supervision of a licensed practitioner . . . .”

Accordingly, before partnering with Groupon, a health care provider would be well advised to consider whether a social coupon arrangement constitutes illegal fee-splitting under the laws of his or her respective state.  Failure to conduct this element of due diligence risks censure, reprimand, fines, suspension, and even license revocation. 

Federal and State Anti-Kickback Statutes

Health care providers who receive payments from a federal health program, such as Medicaid or Medicare, and partner with social coupon websites face additional concerns.

The federal Anti-Kickback Statute (42 U.S.C. § 1320a-7b) is a criminal statute that prohibits the offer, solicitation, payment, or receipt of any remuneration in return for, or to induce, the referral of any patient for any item or service that may be paid by a federal health care program.  In other words, where remuneration is paid to induce or reward referrals of items or services payable by a federal health care program, the Anti-Kickback Statute may be violated.  For purposes of this statute, “remuneration” encompasses anything of value, including the transfer of items or services for free or other than fair market value.  Prohibited conduct includes not only paying and receiving remuneration to induce referrals, but also to induce the purchasing, leasing or ordering, or arranging of any good, facility, service or item payable by a federal health care program. 

With respect to a daily deal arrangement, the federal Anti-Kickback Statute should not apply if the discount offered is solely for medical procedures and other services that are not covered by the Medicare or Medicaid programs.  However, to the extent that such procedures or services may be payable by Medicare or Medicaid, a daily deal arrangement could trigger kickback concerns, if the payment made to (or retained by) the website  is determined to be an illegal payment in exchange for referrals.

To clarify how the federal Anti-Kickback Statute would apply, if we modify the example above from a dental exam, cleaning and x-rays to cataract surgery, then the $50 fee paid to (or retained by) the social coupon website could be  determined to be remuneration in exchange for the arranging of referrals for cataract surgery (a service that may be paid by the Medicare program) if the health care provider participates in Medicare and the patient is a Medicare beneficiary.  Such beneficiaries may be economically motivated to use a social coupon for covered services when their co-payments, co-insurance, and/or deductibles create a cost to them that exceeds the social coupon price. 

At present, most of the services (including dental exams) sold on social coupon websites are elective, non-insured, out-of-pocket services, so the federal Anti-Kickback Statutes would not apply.  Still, many states have similar statutes that apply to situations where other insurance or out-of-pocket payments are involved.  For example, both Massachusetts and Texas have broad anti-kickback statutes that apply to all types of health care insurers. 

A violation of the Anti-Kickback Statute constitutes a felony and can subject a health care provider to fines, imprisonment, and exclusion from federal health care programs. 

Insurance Contract Violations

Health care providers considering social coupon arrangements should also ensure that they are not violating their contracts with insurance companies.  Some of these agreements contain a “most favored nation” clause, which traditionally requires the provider to give the best price for a particular service to beneficiaries of the insurer.  If a provider offers a daily deal promotion for a particular service, an insurer could invoke this clause to compel the provider to offer the same reduced price for that service to all patients covered by the same insurer.

Ethical Implications

Finally, the provision of daily deal discounts also may have ethical implications.  The codes of ethics for certain professional associations, including the American Medical Association (“AMA”) and the American Dental Association (“ADA”) provide, respectively, that physicians and dentists may not split fees for the referral of a patient.  For the reasons described previously, daily deal arrangements may violate these prohibitions.  Although compliance with the AMA’s or ADA’s code of ethics is not mandatory, members voluntarily agree to abide by the applicable code as a condition of membership. 

Conclusion

To date, no state has disciplined a provider for offering a deal through a social coupon website.   It is in all likelihood, however, only a matter of time before most state boards of licensure and national professional associations take a position on the legality of these types of promotions.  Until then, health care providers should be cautious and consult an attorney before signing up with a daily deal website like Groupon or Living Social.

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