123s of Patient Reward Programs

May 29, 2020

As stay-at-home orders are being lifted, medical practices begin their process for reopening and returning to normal operations. Medical practices have begun reaching out to their patient base to communicate the anticipated reopening and offer reassurance regarding added sanitation and infection control protocols incorporated for their safety. During this time, practices can look at creative patient appreciation deals to bring back their patient base and it may be especially tempting to reward your patients that bring in referrals. Many providers may consider offering incentives to patients for generating referrals, such as discounts, cash, free procedures, or gift cards. Legally, however, providing anyone something of value in exchange for referrals can be problematic and downright pricey. Patient referrals are governed by and implicate multiple layers of laws. Rewarding referrals may violate federal and state anti-kickback laws, the regulatory laws governing a healthcare professional’s license, or both.

The federal anti-kickback statute prohibits soliciting, offering, giving or receiving anything of value in exchange for referrals when federal insurance programs, such as Medicare and Medicaid, are involved, unless the arrangement falls within certain exceptions. Federal anti-kickback violations typically do not apply to cash-based businesses. However, they are an important to understand as most state anti-kickback laws follow the federal anti-kickback laws or are more restrictive. For example, Texas and California anti-kickback laws are broader than federal anti-kickback laws, as they apply to all payors regardless of whether the payor is a private health insurance or a federally funded reimbursement program. Furthermore, where states have not established their anti-kickback laws, the state courts use the federal anti-kickback laws as the standard. A recent case in Boston, involving a referral program from a dentist clinic, provides a cautionary tale. The moral is that running afoul of the law can be costly. Before structuring any rewards program, you must understand the state laws governing this area.

While direct payment for referrals should be avoided, a properly structured rewards/loyalty program is an effective way to incentivize patient loyalty. There are numerous permutations and combinations as to what factors can be considered in setting up the rewards program but it is important to take note that the key to a compliant rewards program is ensuring patient referrals are not the focus. Compliant patient rewards programs typically are structured as a point system, rewarding a specific number of points for different procedures and purchases. Points for referrals are set lower than the rest of the criteria but whether points can be offered at all for referrals will depend on the scope of the state’s anti-kickback laws. Patient reward programs can be tricky. However, there are viable structures that capitalize on and tap into patient generation. If structured properly, these reward/loyalty programs can be both effective and legal. If you have any questions or want help structuring a compliant referral program, please contact ByrdAdatto at  info@byrdadatto.com.

ByrdAdatto Founding Partner Bradford E. Adatto

Bradford E. Adatto

Brad decided to become a lawyer during sixth-grade Career Day, when he promised to represent his best friend, a future doctor. A few decades later, he started his own law firm that focused on representing health care and corporate clients.