Potential Legal Risks Associated with Online Coupon Advertising
With the explosion of social media and online marketing some dentistries are seeking out the services of SEO companies like The SEO Dentist Services to help them grow their business. But members of the dental community “must” be aware of the risks associated with the new marketing. While dental practices have successfully utilized the services of online coupon companies to attract new patients, there are growing concerns regarding this type of marketing. The American Dental Association has recently published its opinion on the online coupon advertising issue. Before a dentist participates in an online coupon marketing campaign, they must be aware of potential ramifications.
When considering advertising through one of the many online coupon marketing companies, a dentist must consider potential ramifications under state law, federal law, provisions of contracts with third-party payors, and professional ethical rules. The main areas of concern in these arenas are the potential for criminal and civil penalties that may arise by offering gifts, discounts, and fee-splitting in exchange for patient referrals.
Many states have laws in place restricting dentists from offering rewards to others for patient referrals or from splitting a portion of revenue generated from patient services. Additionally, the federal anti-kickback statute generally prohibits dentists’ from offering or paying remuneration to induce others to refer patients that may be eligible for services under a federal healthcare program, including Medicare or Medicaid.
Operation of Online Coupon Advertising Companies
With the explosion of social media and online marketing, several new advertising companies have recently sprung to success. These advertising companies offer the advantage to dentists by requiring no up-front advertising fees. Rather, the advertising company posts advertisements on its website for coupons, along with a brief review of the practice advertised, and information about the coupon offered.
If a patient wants a coupon, they purchase it directly from the advertising company, which keeps a certain percentage of the sales price and passes the remaining money on to the dental practice owner. The advertised practice relies on the total volume of coupons sold and retention of some purchasers as future patients. While this strategy may work well for some businesses, dentists and other medical professionals may risk severe penalties under state and federal law, as well as the violation of ethical guidelines, for participation in these programs.
Many states have laws that directly or indirectly restrict the award of gifts as a means of soliciting dental patients. Some of these laws provide for a broad prohibition making any gifts unlawful, while others may limit the dentist’s use of gifts and rewards only to nominal amounts. Depending on state law, referral gifts may include cash, gift cards, premiums, rebates, discounts, event tickets, or other items or things of value. While items like event tickets may not be commonly thought of as a rebate, some states may interpret items of this nature as offsetting the patient’s fees, making them improper gifts. Because the advertising company receives a fee for each patient that purchases a coupon, that payment may be deemed a referral gift under state law.
The federal anti-kickback statute, 42 U.S.C. §1320a-7b(b), prohibits dentists from offering and paying any remuneration to any person to induce them to refer an individual for the furnishing of a service for which payment may be made under a federal healthcare program (including Medicare and Medicaid).
Dentists giving gifts to others as a means of soliciting patients may run afoul of this provision if they provide services payable by a federal healthcare program. The Patient Protection and Affordable Care Act, passed in 2010, made it clear that, for a dentist to be found guilty, the government is not required to prove that the dentist knew that they were breaching a legal duty in providing a kickback, but only that they intended to perform the act that violated the law.
Additionally, because the statute refers to payments that “may be” under a federal healthcare program, a dentist who accepts such payments may be in violation of the law even if payment for the services at issue was not made by a Medicare or Medicaid patient or out of federal funds.
Many states have laws prohibiting fee splitting between dentists and third parties. Depending on the particular state, “fee splitting” may be defined as broadly as “giving or receiving rebates” and as narrowly as “any unearned rebate, refund, commission, preference, patronage, dividend, discount, or other unearned consideration, whether in the form of money or otherwise.”
Generally, however, fee splitting occurs when a dentist gives or divides a portion of a fee with another person. Additionally, some states allow certain exceptions to their fee splitting laws to allow dentists more flexibility in managing professional relationships within their office space and advertising.
When a dentist participates in an online coupon advertising campaign, the dentist generally splits the revenue generated from the promotion with the advertising company. The advertising company will take the payment from customers, keep a portion of that payment itself, and pass a portion of the sales proceeds along to the dentist.
As in other businesses, the dentist then relies on retention of a certain percentage of patients for follow-up visits, in order to profit from the coupon advertising campaign. If it is determined that the advertising company secured or solicited patients for the dentist in exchange for money, the dentist may be held in violation of state fee splitting laws.
The dentist may also be found in violation of federal law under the anti-kickback statute as a result of paying the advertising company cash to induce the company to refer a patient for services for which payment may be made under a federal program. Like some state laws, the federal law makes certain exceptions for a dentist’s participation in a referral program. However, because the online advertising campaign involves the dentist paying for the volume of patients generated, rather than paying a flat fee to a referral service, this type of advertising may not be subject to the exception.
In addition to state laws, dentists are often subject to ethical rules determined by regulations of state agencies. For instance, the Georgia Board of Dentistry amended its former rules in November, 2010, adding a provision that “[a] dentist shall not give rebates or split fees with a referral source.”
Additional ethical rules are promulgated by American Dental Association; all members of the ADA volunteer to abide by the ADA Principles of Ethics and Code of Professional Conduct as a condition of membership. Section 4.E of the ADA Principles of Ethics and Code of Professional Conduct provides that dentists may not “accept or tender ‘rebates’ or ‘split fees.’” In the same ways that dentists may run afoul of state laws by offering discounts, referral gifts, and fee splitting, they may also run afoul of ethical guidelines. Similarly, states such as Illinois, Texas, Arizona and New Jersey also prohibit the use of referral gifts.
Dentists offering discounts, referral gifts, or rebates may also incur legal problems pursuant to the terms of their contracts with third party payors. Contracts with insurance companies often require that fees submitted to the insurer reflect any rebates or reductions in fees charged to patients. Therefore, if a discount is given to a patient after the service has been billed to the insurer, the dentist may be held in breach of the contract with the insurer. As such, the dentist may be required to reduce the cost of services billed to the insurer.
Additionally, many insurance contracts include “most favored nation” provisions. These terms require the dentist to provide the insurer with the best price that the dentist charges for a particular service. Dentists who offer a discount to certain patients, even if only a small group over the course of a short time, may be required to reduce the cost of services billed to an insurer thereafter. In fact, the dentist may be forced to refund money previously paid by the insurer for similar services that were initially billed to the insurer at the dentist’s regular price.
If dentists participate in the actions described above, they may be exposed to significant legal risk. Dentists found to be in violation of state laws may be subject to fines, suspension, and even license revocation. Dentists found to be in violation of federal law may be charged with a felony and subject to fines, imprisonment, and exclusion from federal healthcare programs.
Additionally, if the dentist makes an improper payment to a Medicare or state healthcare patient, he or she may be in violation of the federal Civil Monetary Penalties Law, which could subject the dentist to liability for additional monetary penalties. Dentists found to be in violation of ethical rules may also be subject to additional penalties as decided by Dental Boards and/or the ADA. Finally, dentists who are sued and found to be in breach of their contracts with insurers may be subject to civil damages awards, potentially including punitive damages.
Because online coupon advertising is a new and growing trend, its effect on dentists under state and federal law has not fully been broadly determined. As the penalties imposed upon dentists who are found to be in violation of the law or ethics codes may be severe, the most prudent approach for dentists may be to wait for some time to see how the law develops before engaging in this type of advertising campaign. Additionally, dentists may seek guidance from state agencies regarding expected determinations under local law.
Before a dentist enters into an advertising campaign [or social media campaign], they should seek legal advice as to the application of state and federal laws, most favored nation clauses, ADA Ethical rules, and Dental Board rules. While the marketing of any dental practice is important, an ill-advices marketing campaign could result in a dentist being censured, reprimanded, fined, suspended, or losing his or her license.
Stuart J. Oberman, Esq. handles a wide range of legal issues for the dental profession including practice sales, real estate transactions, lease agreements, non-compete agreements and professional corporations. For questions or comments regarding this article please call (770) 554-1400 or visit www.gadentalattorney.com
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