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A Common Accounting Mistake That’s Illegal

Given the prevalence of commissions on sales, you might presume that when a non-physician refers a doctor, receiving a commission is OK. But you would be wrong, and it is important to understand why.

According to AmSpa:

In most states, medical facilities, including medical spas, or aesthetic practices must be owned by physicians or physician-owned corporations. And in most of these states, all payments for medical services must be made in full to the owner of the facility—the physician or physician-owned corporation. If a percentage of such a payment goes to someone else, however, the facility has engaged in a practice known as fee-splitting, which is illegal in most states. Typically, this is an issue associated in the medical spa business with facilities that give employees commissions.

This might sound like a minor technicality, but in almost every state this mistake is illegal because fee splitting is considered a conflict of interest.

aesthetic practice Why Fee Splitting is a Conflict of Interest

Regardless of the law, fee splitting is very common at medical spas, because the physicians who own and operate these establishments rarely conduct the actual treatments, opting instead to perform more lucrative procedures elsewhere. Estheticians, laser technicians, nurse practitioners, nurses, and physician’s assistants establish the client base and do most of the work. Physicians want to reward the people who make the business a success, but using commissions as a reward puts everyone at risk.

Where fee splitting is illegal, doctors can face suspension, revoked license, or significant fines. The same goes for the non-medical professional. Ethically, the reason fee splitting is illegal is that medical decisions should be made by doctors, not for a profit incentive, but there is a legal way to maintain profit incentives for employees.

What You Should do Instead of Fee Splitting

Start by checking your state’s laws or consulting with a local attorney to see if Fee Splitting is illegal. If it is:

1.     Stop receiving commission payments

2.     Stop giving commission payments

3.     Stop offering gift cards to patients who refer friends

4.     Stop offering deal sites like Groupon for medical treatments

There isn’t any one uniform way to charge patients. A medical director who helps at a practice they don’t own might want a monthly salary. This flat fee can include services such as reviewing charts, good faith exams and consultations. For continuity of care, doctors might intervene in the case of an event. When these events occur, spa’s need to charge for each provider’s services independently.

Non-physicians can also have bonus plans, pay-per-service systems, and perhaps even profit-sharing programs to provide incentives that are similar to those that can be achieved through commissions. These types of setups can be very lucrative for employees, and they prevent everyone from running afoul of any fee splitting-related legislation.