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Coupon “Daily Deals” Fuel Debate Over Fee Splitting
Posted Wednesday, April 11, 2012

Published in Vein Therapy News April / May 2012 Vol. 5 No. 3

Coupon “Daily Deals” began in late 2008 when Groupon began selling coupons marketing products and services offered by local businesses. In a matter of months, Groupon and subsequent companies like LivingSocial began providing consumers with opportunities to save money at restaurants, hair salons, dry cleaners, grocery stores and health clubs.

Groupon’s market dominance has been amazing. Groupon operated in just five markets in the United States and employed 37 people on June 30, 2009. Two years later, they were in 175 markets in North America and 45 countries. Groupon’s subscriber base grew from 152,203 consumers to 116 million, and the number of merchants offering goods and services grew from 212 to 78,466. Professional service firms took notice.

LivingSocial, Groupon’s biggest rival, has seen similar extraordinary growth. Started in July 2009, LivingSocial has 46 million members worldwide and does business in 25 countries.

Consumer spending through coupon clubs is projected to grow at rates as high as 30% to 35% for several years. Industry research firms estimate domestic consumer spending on daily deal websites at $1.25 billion for 2011. The number is expected to climb to as much as $6 billion by 2015.

How Do Coupon “Daily Deals” Work?

In a typical coupon “Daily Deal” sales arrangement, a vein practice agrees to sell a sclerotherapy treatment at a discount to the daily deal site’s members. The daily deal site offers the discounted product or service to its members in a specific geographic area via its website, e-mail and through social networking sites. Those who choose to purchase the product or service pay the site directly, and the site reimburses the vein practice 50 percent of the monies it collects.

For example, in the context of spider vein treatment, a service many vein practices have offered through daily deal sites – if a physician typically charges $350.00 for an initial consultation and treatment, the daily deal coupon for the treatment would be sold for $175, and the daily deal site would then pay the vein practice approximately $87.50 for each coupon sold. The daily deal site is in effect making referrals to the physician through the online offer and the daily deal site receives compensation in an amount equal to half of the vein practice’s discounted professional fee.

Groupon and LivingSocial are deal-of-the-day websites that feature discounted gift certificates usable at local or national companies.  If a certain number of people sign up for the offer, then the deal becomes available to all; if the predetermined minimum is not met, no one gets the deal that day. Daily deal sites make their money by keeping 40% to 50% of the fee customers pay for the coupon.

Some vein practices view daily deal coupons as a marketing opportunity and offer discounts on elective cosmetic procedures where insurance reimbursement is not involved. Others view patient procurement through daily deal coupon sales as unethical, citing concerns that the process places pressure on patients to proceed with a treatment when they might be having second thoughts.

If done correctly, offering services through a daily deal coupon site could be a way to fill empty slots in the appointment schedule or build word-of-mouth referrals and volume. If done incorrectly, offering a daily deal coupon could harm your practice if you’re not equipped to deal with the increase in telephone calls, patient visits, etc. Stories abound of vein practices that have sold 500 Groupon coupons and were overwhelmed by people who bought coupons and could not get in on time and as a result, tarnished the reputation of the practice on the Internet.

Concerns Regarding Fee Splitting

Many State Department of Professional Regulations boards are increasingly being asked to determine whether medical practices offering clinical services though daily deal coupon sites are engaged in illegal fee splitting. One day, will daily deal coupon discounts be interpreted that participating medical practices are splitting fees, something not allowed under many state laws or regulations? Will daily deal coupons be construed as “paying referral fees to find new patients,” which is an offense under federal and most state laws.

Lack of Guidance

The American Medical Association has no formal policy or directive to its members involving the use of online “daily deal” coupon services. Moreover, the association has never been asked to investigate the legal issues pertaining to physicians’ use of such services.

The American Dental Association appears to be taking a more proactive posture with respect to professional services sold through coupon clubs. The ADA’s Council on Ethics, Bylaws and Judicial Affairs recently formed a subcommittee to explore the ethical considerations raised by the marketing of dental programs and the council plans to issue guidance upon the completion of that review.

Federal Anti-Kickback Statute

The Federal Anti-Kickback Statute prohibits the payment or receipt of kickbacks, or remuneration (including any kickback, bribe or rebate), in return for or to induce the referral of Medicare or Medicaid business. The Federal Anti-Kickback Statute also prohibits the offer or payment of any remuneration to any person to induce the person to purchase or recommend purchasing any service for which payment may be made in whole or in part under a Federal health care program.

The Federal Anti-Kickback Statute is a very broad statute. In addition to governing traditional health care relationships among health care providers and other referral sources, the statute also applies to arrangements among non-health care providers where any purpose of the arrangement is to induce referrals.With respect to cosmetic procedures and other medical services not covered by Medicare, the Federal Anti-Kickback Statute should not be an issue. To the extent that such procedures may be payable by Medicare, the daily deal coupon programs are unlikely to fit within the “referral services” safe harbor.

Attorneys specializing in professional conduct issues are finding themselves at the center of an emerging conflict that will face off state licensing boards, ethics commissions and professional societies on one side of the conference table against daily deal coupon sites like Groupon and LivingSocial selling coupons redeemable for discounted medical services.

“A key question that has yet to receive clear direction is whether the unique daily deal coupon business model offered by several hundred online coupon sites are permissible formats for physicians to retain new patients and advertise medical services.”

Some states may determine that daily deal coupon sales represent a unique, but legitimate, avenue for fee-based advertising. Others states may determine that professionals interacting with daily deal coupon sites are violating state ethics rules regulating dentists, doctors, attorneys, accountants and dozens of other professionals. State boards tend to be underfunded and overloaded with cases focusing on practitioner misconduct.

Fee splitting rules have existed in most state ethics regulations for many years. The rules seek to prevent third parties from exercising undue influence over the conduct of licensees in the performance of their professional duties. In theory, the spitting of fees is unethical because such arrangements could conflict with the best interests of the users of professional services, patients.

Ultimately, daily deal coupon sites may not suggest the type of undue influence that medical ethics rules were designed to address. Medical ethics boards have frequently tolerated transactions by medical professionals linked to fees without alleging illegal fee splitting. A familiar example involves bill collection services that take a percentage of the collections before remitting the remainder to the medical practice.

Groupon’s Disclaimer

Groupon offers that it has not independently done a legal analysis and assessment as to whether the Groupon program violates federal or state laws addressing fee splitting, kickbacks and referral fees. Groupon has acknowledged that there may be issues with particular states and their licensing authorities, but it is unaware of any specific ruling or action by a state medical board. Groupon suggests there may be an argument that the amount paid to Groupon is an advertising fee for promoting the service provider rather than a referral fee or fee splitting arrangement. Groupon has pointed to no authority supporting that position. It is important to stress that Groupon is taking a “buyer beware” position and assumes no responsibility for determining whether the program raises legal implications for the service providers. Groupon informs all participants that they are responsible for determining whether their participation is in compliance with applicable laws and regulations.

To the best of my knowledge, no states are known to have punished a medical professional over online daily deal discounts – so far. Of course, there are a multitude of additional aspects to these laws that should also be considered before deciding whether you’re comfortable with running a daily deal for your practice.

Summary

All vein practices need to seek guidance from their attorney before participating in a daily deal coupon promotion. It is critical that you familiarize yourself with the potential issues associated with participating with daily deal coupon sites like Groupon or LivingSocial. It is also critical to determine whether participation in a daily deal coupon site is consistent with your state’s regulatory requirements. This article was written to be informative, not designed to take a position one way or the other. As new information comes to my attention, I will pass that information along via this column.

David Schmiege is the president and CEO of Vein Specialists of America Ltd., a practice management consulting and advisory firm. Please direct any questions you may have for Schmiege to 630-789-3636 or e-mail him at [email protected].

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