Three Ways to Pay a Referral Source

The governing principle: a licensee may not pay, offer, or receive consideration as inducement for the referral of patients, and may not split fees with an unlicensed person. Structure determines legality, and intent does not cure a prohibited structure.

A - per-patient payment tied to treatment value: unlawful. It is consideration for referral, the core of the prohibition, and the dollar threshold makes the link explicit. Disclosure to patients does not fix it. Federal anti-kickback and Stark analysis also applies if any federal payer is involved.

B - flat consulting fee: potentially lawful, but only if genuine. It must be fair market value for actual services, documented with deliverables and time records, in a written arm's-length agreement, and not contingent on referral volume or value. If the 'consulting' produces nothing and the payment tracks the referral stream, it is a disguised inducement regardless of its label.

C - percentage-of-collections rent: high risk. Rent that rises with production in the space functions as volume-based remuneration from a referral source. The defensible structure is fixed rent at fair market value supported by a rent analysis, with a written lease, no volume or referral component, and separate space genuinely used.

When an arrangement can be structured two ways, choose the fixed, documented, fair-market-value version - and have health care counsel review it before signature.

Marketing company: paying a lay entity per patient generated is payment for patient solicitation and referral, which the fee-splitting statute prohibits even though the recipient is not a licensee and no clinical service is involved. The label 'marketing' does not control; the per-patient structure does. A defensible alternative is a flat or hourly fee for advertising services (design, website, campaign management) with no payment keyed to the number of patients or the revenue they generate, plus review of any advertising content for truthfulness and the appropriate licensure identifiers. Advertising must not be false or misleading, and the practice remains responsible for what the vendor publishes.

Periodontist's offer: equally unlawful in the other direction - a licensee may not pay for referrals any more than accept payment for them. Treating it as a professional courtesy or a 'case management fee' does not change the analysis. The lawful relationship is a treatment-based one: the general dentist refers because the patient needs specialty care, the specialists return the patient with a report, and neither side pays for the flow.

Avoid a middle ground of 'small' or 'occasional' payments. Any per-referral consideration is the prohibited structure, and repeated small payments are the easiest pattern for an auditor to trace.

Restructure:

• Replace A with nothing - eliminate any payment to the group that varies with referrals. If Dr. Patel wants visibility with the group's diabetic patients, provide genuine educational sessions or co-management under a written agreement at fair market value.
• Convert B into a real service agreement: defined scope, schedule, deliverables, hourly or fixed fee supported by a market analysis, terminable without penalty, and no referral expectation in the recitals.
• Convert C to fixed monthly rent at an appraised fair market value, written lease, defined premises, utilities and term specified, no percentage component.
• Replace per-patient marketing with a flat-fee services contract; review all ad copy for accuracy.
• Decline the periodontist's per-referral payment and document the decline.

Retain: the fair market value analysis or appraisal, signed agreements, invoices, time and service records, rent payments, advertising approvals, and an annual compliance review memo. If any arrangement involves federal payers, obtain a separate anti-kickback and Stark review.

Also address: patient-facing disclosure of any financial interest where required, and a written policy for staff so that no one recreates a per-referral payment informally. The recurring exam point: structure and documentation determine legality - fair market value for real services is defensible; anything that tracks patients or production is not.