How physicians can limit their risk in healthcare marketing

April 10, 2017

Healthcare professionals must be careful when hiring marketers because of complex laws that could result in fines and criminal penalties.

Avoid breaking the kickback law

The federal Anti-Kickback Statute (AKS) establishes criminal and civil penalties for persons who offer, pay, solicit or receive anything of value, directly or indirectly, in exchange for referrals. The AKS has been interpreted as covering any arrangement where one purpose of the payment is to obtain money for referral of services, or to induce further referrals. 

In addition to exclusion from federal payer programs, criminal penalties for violating the AKS include fines of up to $25,000 with jail time of up to five years per violation. Civil penalties include $50,000 per kickback, and three times the payments received unlawfully by providers.    

 

Paying outside marketers

Frequently, physician practices like to pay marketers based on a percentage of the business generated. This arrangement limits the practice’s upfront costs and motivates effort.  

Although not strictly prohibited, the federal government scrutinizes these arrangements because the financial incentive creates a risk of increased costs to federal government programs.  The concern is that if you are rewarding people for generating referrals, they may try to solicit patients and push treatment that might not be needed.  

Given the risks involved, it is not prudent to pay marketers based on a percentage. An arrangement won’t be scrutinized, however, if it meets the requirements of a “safe harbor,” which is an exception to the AKS.  

There are two safe harbors that commonly apply to marketing arrangements: bona fide employee relationships and personal services and management contracts.

 

 

When your marketer is an employee

If a marketer is a legitimate employee of the practice, there typically isn’t a problem.  

However, the practice must ensure that it has sufficient control over the marketing and the employee. Therefore, the practice should properly train and supervise marketing employees to confirm that they are in compliance with state and federal regulations.  

Essentially, the practice is liable for the employee so it must make sure that the employee is not using abusive or heavy-handed sales tactics. For example, the marketing employee cannot be paying for patients or offering gift cards to patients. 

Similarly, a marketing employee cannot provide false information to patients or guarantee specific outcomes from treatment.  

It’s important to note that independent contractors do not meet the employment safe harbor. That means independent contractors cannot be paid for marketing on a percentage basis.

 

Annual contracts

To meet the other safe harbor for personal services and management contracts, the marketing compensation must be based on a contract for at least a year where compensation is a flat rate that is fixed in advance and in line with fair market value.  

Essentially, the practice should be paying fair market value for legitimate marketing services, such as branding, website creation, search engine optimization and ad campaigns. 

The idea is that the practice is not paying for referrals or compensating marketers based on the volume or value of those referrals.

 

Review regularly

Remember, the purpose of the AKS is to curb overutilization by providers engaged in unlawful schemes to generate referrals. The federal government applies the AKS aggressively, and practitioners should be mindful of the environment in which they conduct marketing efforts.  

Therefore, reviewing your marketing arrangements and contracts is a key part of every practice’s basic compliance program.