Kickbacks, Fee-Splitting, Corporate Practice of Medicine, Stark, MSOs: Guiding Healthcare Ventures through the Maze
This article was originally published at Cohen Healthcare Law Group
All variations on a theme: you’re an entrepreneur, seasoned in healthcare ventures, who wants to start a company that brings in healthcare practitioners (medical doctors, chiropractors, psychologists, health coaches, wellness coaches, massage therapists, Reiki practitioners, nurses) and/or healthcare services (Botox, fillers, injectables, body sculpting, lasers, telemedicine and telehealth services, online healthcare subscriptions, concierge medical services, anti-aging, homeopathy, naturopathic medicine, energy healing, stem cell therapies, hydration therapy, integrative medicine….).
Fundamentally, you’re worried about legal rules prohibiting kickbacks, fee-splitting, corporate practice of medicine, as well as Stark law; you don’t know whether the MSO or management structure will work; you’d like to be as aggressive as possible yet not incur the huge civil (and sometimes criminal) penalties.
Joe has a service called Your VIP Wellness.
Your practitioner is essentially a platform that connects you, the patient or client, with a ton of health and wellness services: doctors, nurses, naturopathic physicians, wellness coaches, nutritionists, and so on.
What legal roadblocks will Your practitioner face, and how can Your practitioner generally navigate them?
1. Kickback/Fee-Splitting, and Corporate Practice of Medicine: Who Hires Who
The first thing Joe has to understand, with respect to kickback/fee-splitting and corporate practice of medicine issues, is who can hire who.
Joe has a variety of practitioners in mind. Some are licensed, some are unlicensed healthcare practitioners. Some are independent, some are dependent. Some are medical doctors, some are allied health, some are complementary and alternative medical practitioners.
The physicians are the thorniest.
In states with a strong corporate practice of medicine doctrine, medical boards scrutinize excessive control by the corporate entity even over such matters as medical practice advertising.
When we looked at Joe’s model, he called all his practitioners “consultants.”
The language here creates enforcement risks for corporate practice of medicine. Joe can’t hire physicians in a strong corporate practice of medicine state.
In fact, the physician is not providing “consulting” services to Your VIP, but rather, the practitioner is hiring Your VIP for administrative and/or marketing services. Thus, the client is Your VIP, and not the healthcare licensee.
2. Kickback/Fee-Splitting, and Corporate Practice of Medicine: Financial Arrangements
The second important piece for Joe is the financial arrangement between Your VIP and the healthcare practitioner This arrangement should be carefully structured so as to avoid even the appearance that Your VIP is “splitting” the patient revenue, with that provider.
Your VIP’s fee to the practitioner should be structured as an administrative fee that the healthcare practitioner pays for using Your VIP’s technology platform.
The analogy is to the medical management company. We’ve written extensively on this blog about the MSO model.
Going back to the first point, the idea is that the medical doctor hires Joe’s company and not the reverse; and Joe is merely acting as the medical doctor’s agent for the banking transaction.
3. Kickbacks, Fee-Splitting, Corporate Practice: Who is the Practitioner
Legal rules about kickbacks and fee-splitting typically apply to many healthcare practitioners, not just MDs.
States have their own laws that mirror many aspects of federal anti-kickback law. So even if “Stark” or “federal AKS” is not involved, state law can make a difference.
Typically, the anti-kickback and fee-splitting prohibitions are contained in the state licensing law.
In some states, practitioners such as massage therapists are not licensed. They may be subject to a certification process through a professional organization, or regulated by county, or there may be establishment registration in a given county or municipality or city. It can take careful legal spade-work to determine whether practitioners such as massage therapists are subject to the fee-splitting prohibitions.
New York, for example, has several different statutes and regulations embodying such prohibitions. New York law, generally, is messy or weird (and not in a good way, the way Austin is weird). Massage therapists are referenced here but not there. This regulation states the rule way and that one repeats it with some slight variation—does that make a difference?
Sometimes you need a legal memo.
The point here, though, is that it’s important to check to whom the fee-splitting prohibition applies.
Would a given agency bring an enforcement action for fee-splitting involving non-licensed health and wellness coaches, or spiritual counselors, or non-psychologist hypnotherapists? To us, that seems doubtful. More likely the issue will be unlicensed practice (or medicine, psychology, dietetics, or some other profession).
4. Corporate Practice: Medicine only? Psychology too?
Another issue is whether the prohibition against corporate practice applies only to medicine, or also to psychology and behavioral health, or also to other healthcare professions.
It’s best to find an attorney or legal team that can understand all these issues synergistically, because they fit together like a Rubik’s Cube when assessing a given structure.
5. Safe Harbors
Federal anti-kickback law contains some commonly utilized safe harbors—places where your venture can, like a ship, be sheltered from regulatory storms, so long as it meets the enumerated criteria.
States often have parallel safe harbors, or at least may look to federal law and “drag and drop” the requirements across the line.
For example, the aggregate compensation for the management company must be set in advance for at least one year. This criterion requires a nuanced discussion of the overall enforcement risk and what risks the business owner is willing to take in light of the overall legal environment.
Aggressive enforcement authorities can move in if the scenario presented involved paying for leads in a way that varies based on patient value or volume.
Sometimes it seems that the more legally safe and plain vanilla the arrangement is, the less likely it will make money; and the more aggressive or proactive the business strategy, the more it can tread on compliance hot buttons. There’s a lot of judgment and experience that is required to titrate the difference.