Jeff Segal, MD, JD, FACS
We have written recently about social networking group discount programs – like Groupon. We cautioned that such programs might be deemed fee-splitting; a practice prohibited by federal law, state law, and licensing bodies. We now have some additional data points to share.
Not everyone knows what Groupon is. Here’s how it works. A local merchant, like a restaurant or hair salon, offers a discount – often 50% off or more. This gets a lot of attention. But, the discount isn’t activated until a critical mass of Groupon subscribers ‘tip” the deal. Enough people must commit to “paying” for the discount. That’s how Groupon gets paid.
I’ll illustrate a Groupon offered by a restaurant. The deal is 50% off a meal valued at $100. The deal is sent to thousands of people in the restaurant’s draw area. The deal requires 20 takers to “tip the deal.” Once 20 people commit, those patrons are charged $50 on their credit cards. Groupon will then give the patron a $100 “gift certificate.” Groupon then pays the restaurant a sum – which might be $25; maybe more; maybe less.
So, Groupon gets paid a handsome sum. The patron gets a great discount. And the merchant delivers products or services at a discount. The restaurant “pays” twice: a discount to the patron; and a fee, deducted by Groupon, for the marketing. The marketing fee correlates with the volume of business the restaurant receives.
In healthcare, this can be perceived as fee-splitting.
The federal government prohibits fee splitting for specific transactions unless there is a safe harbor. There is no safe harbor for social networking group discount programs.
State governments often have anti-kickback statutes, and to date, we know of no state that has carved out safe harbors for social networking group discount programs.
Finally, licensing boards have long standing policies against fee-splitting. And two such boards have recently spoken.
