Practice Management, Fee Splitting, and Referral Arrangements
What you must know
California prohibits paying or receiving consideration for the referral of a patient (Business and Professions Code section 650) and prohibits fee splitting with unlicensed persons. Compensation must be for something real - services rendered, space used, equipment provided - and priced at fair market value. Percentage-of-collection arrangements inside the dentist's own professional corporation or with bona fide employees are different from paying a marketer or a referring colleague per patient. Management service organizations may provide administrative services for a flat or fair-market-value fee, but the dentist must retain clinical control, and ownership must satisfy the corporate practice of dentistry doctrine: only licensed dentists may own a dental practice or professional corporation.
Insurance-related conduct is a frequent source of discipline: billing for services not rendered, upcoding, waiving patient copayments as an inducement while billing the plan for the full amount, and misrepresenting dates or providers. Genuine discounts to self-pay patients differ from routine waiver of coinsurance.
On sale or closure of a practice, patient records and notice obligations follow the transaction; patients must be able to obtain copies and continue care.
Traps
- Paying a per-new-patient marketing fee or a referral fee to a physician or specialist.
- Assuming a rent-free arrangement with a referring colleague is harmless (it can be a disguised kickback).
- Letting a non-dentist own equity or control clinical decisions.
- Assuming a written contract makes an illegal arrangement legal.
Rule of thumb
Follow the money: if payment varies with the number or value of referrals, it is probably prohibited. If it is fixed and reflects fair market value for a real service or facility, it usually is not.