CAMLAW: Complementary and Alternative Medicine Law Blog

Anti-kickback and fee-splitting issues for integrative medicine clinics and medical spas

Anti-kickback and fee-splitting issues can pose challenges to integrative medicine clinics and medical spas.

This is particularly true when integrative medicine clinics and medical spas, wellness centers, and other health care organizations run into corporate practice of medicine issues. The corporate practice of medicine doctrine and anti-kickback concerns (also known as self-referral or conflict of interest laws) often come together, yet confuse lawyers as well as business owners and operators.

The corporate practice of medicine doctrine prohibits corporate entities from practicing medicine or from interfering in the physician's practice of medicine. State corporate practice of medicine rules often require physicians to be housed within their own professional medical corporation, which can then contract with the integrative medicine center or medical spa.

Anti-kickback, self-referral, and fee-splitting statutes prohibit physicians from getting or giving a percentage-based referral. In other words, they cannot receive or render any fee, payment, discount, or other kind of remuneration that would essentially make it appear as though this is being given in exchange for accepting or furnishing a patient referral.

This is simple concept but difficult in practice, because the organization (medical spa, integrative care center, wellness clinic, holistic health enterprise) needs to structure its financial arrangements so that at the end of the day, it makes a profit and can also reward the physician for his or her labors, and it is difficult to do so without appearing to offer an unlawful 'kickback' if the arrangement is in way tied to patient volume.

One possible solution is to structure the arrangement as a lease, so that the physician pays fair market value for rental of space, and additionally, pays the corporate entity (center or clinic), which then acts as a medical services organization (MSO), for administrative services. The patient makes the check out to the doctor and the doctor renders a flat, monthly fee for the lease and the administrative services. The facility has to calculate the economics so that this is mutually profitable, even though it does not give the appearance of having payments flow based on patient volume.

Some states extend the anti-kickback rule / prohibition on fee-splitting to other professions, such as chiropractic, nursing, and psychology. Note New York's law which does so, while exempting massage therapists:
§6500 Introduction.

This title provides for the regulation of the admission to and the practice of certain professions. This first article applies to all the professions included in this title, except that prehearing procedures and hearing procedures in connection with the regulation of professional conduct of the profession of medicine and physician's assistants and specialist's assistants shall be conducted pursuant to the provisions of Title II-A of article two of the public health law. Each of the remaining articles applies to a particular profession. §6503 Practice of a profession.

Admission to the practice of a profession (1) entitles the licensee to practice the profession as defined in the article for the particular profession, (2) entitles the individual licensee to use the professional title as provided in the article for the particular profession, and (3) subjects the licensee to the procedures and penalties for professional misconduct as prescribed in this article (sections sixty-five hundred nine, sixty-five hundred ten, and sixty-five hundred eleven).

§6509-a Additional definition of professional misconduct; limited application.

Notwithstanding any inconsistent provision of this article or of any other provision of law to the contrary, the license or registration of a person subject to the provisions of articles one hundred thirty-two, one hundred thirty-three, one hundred thirty-six, one hundred thirty-seven, one hundred thirty-nine, one hundred forty-one, one hundred forty-three, one hundred forty-four, one hundred fifty-six, one hundred fifty-nine and one hundred sixty-four of this chapter may be revoked, suspended or annulled or such person may be subject to any other penalty provided in section sixty-five hundred eleven of this article in accordance with the provisions and procedure of this article for the following:

That any person subject to the above enumerated articles, has directly or indirectly requested, received or participated in the division, transference, assignment, rebate, splitting or refunding of a fee for, or has directly requested, received or profited by means of a credit or other valuable consideration as a commission, discount or gratuity in connection with the furnishing of professional care, or service, including x-ray examination and treatment, or for or in connection with the sale, rental, supplying or furnishing of clinical laboratory services or supplies, x-ray laboratory services or supplies, inhalation therapy service or equipment, ambulance service, hospital or medical supplies, physiotherapy or other therapeutic service or equipment, artificial limbs, teeth or eyes, orthopedic or surgical appliances or supplies, optical appliances, supplies or equipment, devices for aid of hearing, drugs, medication or medical supplies or any other goods, services or supplies prescribed for medical diagnosis, care or treatment under this chapter, except payment, not to exceed thirty-three and one-third per centum of any fee received for x-ray examination, diagnosis or treatment, to any hospital furnishing facilities for such examination, diagnosis or treatment. Nothing contained in this section shall prohibit such persons from practicing as partners, in groups or as a professional corporation or as a university faculty practice corporation nor from pooling fees and moneys received, either by the partnerships, professional corporations, university faculty practice corporations or groups by the individual members thereof, for professional services furnished by any individual professional member, or employee of such partnership, corporation or group, nor shall the professionals constituting the partnerships, corporations or groups be prohibited from sharing, dividing or apportioning the fees and moneys received by them or by the partnership, corporation or group in accordance with a partnership or other agreement; provided that no such practice as partners, corporations or in groups or pooling of fees or moneys received or shared, division or apportionment of fees shall be permitted with respect to care and treatment under the workers' compensation law except as expressly authorized by the workers' compensation law. Nothing contained in this chapter shall prohibit a medical or dental expense indemnity corporation pursuant to its contract with the subscriber from prorationing a medical or dental expense indemnity allowance among two or more professionals in proportion to the services rendered by each such professional at the request of the subscriber, provided that prior to payment thereof such professionals shall submit both to the medical or dental expense indemnity corporation and to the subscriber statements itemizing the services rendered by each such professional and the charges therefor.
Just for good measure, the Rules of the Board of Regents throw in a mirror prohibition (http://www.op.nysed.gov/part29.htm#29.1):
1. directly or indirectly offering, giving, soliciting, or receiving or agreeing to receive, any fee or other consideration to or from a third party for the referral of a patient or client or in connection with the performance of professional services;

2. permitting 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. This prohibition shall include any arrangement or agreement whereby the amount received in payment for furnishing space, facilities, equipment or personnel services used by a professional licensee constitutes a percentage of, or is otherwise dependent upon, the income or receipts of the licensee from such practice, except as otherwise provided by law with respect to a facility licensed pursuant to Article 28 of the Public Health Law or Article 13 of the Mental Hygiene Law;

: § 29.13 Special provisions for the profession of massage therapy.

a. Unprofessional conduct in the practice of massage therapy shall include all conduct prohibited by Sections 29.1 and 29.2 of this Part, except as provided in this section, and shall also include the following:

1. advertising not in the public interest shall include but not be limited to:

i. using pictures depicting an unclad or undraped human form;

ii. using any proper name under which the licensee is not registered unless it is the name of the establishment, firm, partnership, corporation, or professional limited liability partnership or corporation;

2. nothing in this Part shall be construed to prevent a licensed massage therapist, when advertising his or her practice, from using the letters "LMT" or from identifying areas of practice, such as, but not limited to: shiatsu, acupressure, amma, bodywork, reflexology, Swedish medical massage therapy, polarity, tuina, and connective tissue massage, provided that such identified areas of practice are within the scope of practice of massage therapy as defined in Section 7805 of the Education Law.

3. nothing in this Part shall be construed to prevent the ownership of a firm or corporation practicing massage therapy in this State by an unlicensed person or persons, or to prevent any contractual or employment arrangement between such person or persons and the professional licensee conducting such practice and computing the salary of professional employees, or the amount due the owner of such firm, partnership, or corporation on the basis of a percentage of the receipts from the performance of professional services. This provision shall apply in lieu of Section 29.1(b)(4) of this Part;

4. the provisions of Section 29.1(b)(5) of this Part prohibiting immoral conduct shall apply in the practice of massage therapy. Massage of genital areas and massage of a client who is not properly draped for massage, or by a massage therapist who is not properly dressed, shall be considered immoral conduct;
So essentially, New York law appears to allow fee-splitting for a massage therapist, while prohibiting fee-splitting for the Title VIII professions which include: chiropractor, nurse, psychologist, and others. However, these non-physician providers do not have corporate practice of medicine issues, so it may be possible to structure the agreement between them and the health care facility more directly than the way the arrangement is structured with the physician or professional medical corporation.

One has to go state by state to determine whether the anti-kickback provisions apply more broadly than to physicians, and also note that in some states, the 'kickback' issue is distinct from an additional but related concern, that of the physician or health care practitioner having a financial interest in an entity to which he or she refers.
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Michael H. Cohen is Principal in Law Offices of Michael H. Cohen and also President of The Institute for Integrative and Energy Medicine, a nonprofit organization exploring legal, regulatory, ethical, and health policy issues in the judicious integration of complementary and alternative medical therapies (such as acupuncture and traditional oriental medicine, chiropractic, naturopathic medicine, homeopathy, massage therapy, energy healing, and herbal medicine) and conventional clinical care. Michael H. Cohen is author of books on health care law, regulation, ethics and policy dealing with complementary, alternative and integrative medicine, including Healing at the Borderland of Medicine and Religion, Complementary and Alternative Medicine: Legal Boundaries and Regulatory Perspectives (1998), Beyond Complementary Medicine: Legal and Ethical Perspectives on Health Care and Human Evolution (2000), and Future Medicine: Ethical Dilemmas, Regulatory Challenges, and Therapeutic Pathways to Health Care and Healing in Human Transformation (2003).
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