The Discounted Exam and the Free Glasses
Dr. Patel opens a new practice and advertises: 'FREE comprehensive eye exam with purchase of glasses - $99 frames included. No other fees. Guaranteed lowest prices in the county.' In fact, the 'free' exam is bundled into a $249 frame package, and patients who decline glasses are billed $85 for the exam. Dr. Patel also offers a $50 'referral bonus' to anyone who sends him a patient, paid in cash. A competing optometrist complains to the Board. Dr. Patel argues that advertising is protected speech and that the bonus is just a marketing cost.
1. Evaluate the advertisement under Arkansas advertising and fee-disclosure rules.
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Advertising is protected but regulable. The Board may prohibit false, deceptive, or misleading advertising. The key test is whether the ad, taken as a whole, is likely to deceive a reasonable patient.
Problems with this ad:
- 'FREE exam' is misleading when the exam is conditioned on a $249 purchase and patients who decline are billed $85. The true price is not disclosed.
- 'No other fees' is false given the $85 fallback charge.
- 'Guaranteed lowest prices in the county' is an unsubstantiated superlative that the practice cannot verify; such claims are typically prohibited unless substantiated.
Required corrections:
- Disclose the conditions of the 'free' offer clearly and conspicuously.
- State the actual fee for an exam without glasses.
- Remove or substantiate the 'lowest price' claim.
- Ensure fee schedules are available on request.
Defense: 'Protected speech' does not protect false or deceptive commercial speech.
2. Analyze the $50 cash referral bonus and Dr. Patel's 'marketing cost' defense.
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Fee-splitting / kickback concerns: Paying cash for patient referrals raises two issues:
- Fee-splitting: paying a portion of professional fees to a non-provider for referrals is generally prohibited.
- Federal and state anti-kickback laws: cash payments for referrals of patients whose care may be billed to Medicare or Medicaid can violate the Anti-Kickback Statute and state equivalents.
'Marketing cost' defense fails because the payment is conditioned on a referral, not on advertising services. The structure - cash per patient - is the hallmark of a kickback.
Board exposure: discipline for fee-splitting, deceptive advertising, and, if public payers are involved, referral to fraud units.
Fix: discontinue the cash bonus; if a lawful marketing program is desired, use flat-fee advertising not tied to individual referrals, and obtain legal review.