Groupon: Great for Prada Shoes, But Not Physician Services

Everyone likes to find a great deal! I know I look for them in the daily emails I receive from Groupon, Living Social, and a host of other websites that sell discount goods and services. While I have focused my purchasing efforts on Prada winter boots and the like, I have noticed a significant increase in the number of offers related to cosmetic services and products over the past few years.

Interestingly, what brought these particular deals to my attention (since I am not yet in the market for laser vein removal or Botox) is that I recognized many of my own clients were the ones offering the local deals! While this may have been a great revenue-generating scheme for most of them, I wish they had thought to consult me beforehand.

When I reached out to these clients about their appearance on the social media sites, their response was “everyone else is doing it, so it must be fine!” Of course, nobody wants to be left behind when there are new patients and revenue to be gained; however, as I constantly remind my clients, physicians are not like other retailers selling makeup, cupcakes, and scarves. Physicians do need to take into consideration state and federal restrictions on marketing activities - including those daily deals being offered on Groupon and similar sites.

Consider the following:

Fee-splitting: Although fee-splitting laws vary by state, most prohibit a licensed physician from splitting physician revenue in exchange for referrals. Physician revenue is usually anything that can only be sold by a licensed physician. Most social media sites charge a percentage of the income generated on each deal that is sold. They may take this payment from the patient instead of the physician, but it still represents a portion of the fee that the physician would have generated for his or her “professional” service. In some states, fee-splitting prohibitions allow a flat fee but not a percentage-based fee. In other states you may be prohibited from paying any amount for referrals, regardless of the structure.

Anti-Kickback Statute: The federal Ant-Kickback statute prohibits the payment of remuneration in exchange for referrals, directly or indirectly. Although most services being sold on Groupon are not covered by Medicare and thus the federal statute likely does not apply, many states have similar statutes that apply to non-government payors or which do not specify that there be any insurance involved at all. Is the payment to Groupon by a consumer for a discounted service offered by a physician a kickback? Talk through the issues that apply in your state with counsel.

There is no formal AMA opinion, no case law, and no other guidance on these issues. I suspect it’s only a matter of time before states start to take note of these legal issues which could cause these social media sites to become off-limits to physicians, absent a more compliant financial protocol. In Oregon, for example, Groupon deals are no longer permitted for dentists or chiropractors, as the licensing boards for those specialties have decided the financial structure used by Groupon with its “vendors” violate fee-splitting laws for these specialties. In Illinois, where I practice, it’s possible the percentage-based financial structure used by social media sites violates the physician fee-splitting prohibition as well.

If you are thinking about selling your services on a social media site, consider talking with legal counsel about any restrictions that may exist in your state. Additionally, have counsel review the contract for other legal concerns. How long will buyers have to use the deal? How are refunds handled under the contract? Will you be in violation of your payer contracts?

Finally, the attraction of new patients and revenue may be pushing physicians to consider offering new items and services that are of the type which can be sold on social media sites. If you are adding cosmetic services or products, make sure you are in compliance with state laws. For example, some states do not allow unlicensed persons to use lasers or to give injections so make sure you are appropriately staffed.

Like any business ventures into which your practice may enter, do your homework before you make a deal!

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