Fee Splitting

The question and answer in the October 18, 2002, “At Your Service” column was provided to alert readers about avoiding problems that might occur with these types of business arrangements because of existing state and federal laws (related to reimbursement by government payers) and ethical guidelines. Because blatant “kickback” arrangements are rarely seen, regulators scrutinize variations on arrangements in which referrals are made between providers and the compensation agreement involves pricing other than at fair-market value. We recognize, as does Dr. Wittkopp, that percentage compensation arrangements are commonplace. For this very reason we believe it is important that physicians realize that they may trigger regulatory scrutiny. Psychiatrists are encouraged to check with their legal counsel to determine how state and federal regulators view any such arrangement, and avoid potential problems.

The APA ethics opinion was cited because it appears to be directly on point; we will defer to APA for any comment or elaboration on the ethics opinion.

This psychiatrist has questioned whether it truly constitutes fee splitting for a psychiatrist to rent space to a nonmedical therapist and then—in exchange for office space, secretarial services, and other administrative support—have this person pay him or her a percentage of the fees generated from patients and third-party payers. The writer points out that this is a common arrangement in the business community. He also adds that it is unfair to change the definition of fee splitting, thus putting unreasonable constraints upon psychiatrists.

APA, through the Principles of Medical Ethics With Annotations Especially Applicable to Psychiatry, Section 2, Annotation 7, has clearly defined this practice as fee splitting. Instead, the arrangement should be a mutually agreed-upon set fee for administrative support services. This is a longstanding position of APA, having been written about by the APA Ethics Committee for more than 25 years (see Section 2-C of the Opinions of the Ethics Committee on the Principles of Medical Ethics).

This policy is to help ensure a climate in which psychiatrists deal honestly with patients and to safeguard against the conflict of interest inherent in an arrangement whereby a psychiatrist will monetarily benefit from every referral he or she makes to the contracted partner. Such an incentive system, in some instances involving very large sums of money, can potentially compromise clinical objectivity and thus the physician’s role as the patient advocate. Rather, referrals by the psychiatrist should be based upon the training, competence, specific skills, and ethical qualifications offered by the professional to whom a patient is to be referred.

Likewise, the AMA Institute for Ethics has noted that ethical compensation hinges on ensuring that physician rewards reflect professional activity (patient care services) rather than other factors that can “smack of fee splitting.” The AMA has also opined that “no physician shall bill or be paid for a service which is not performed; mere referral does not constitute a professional service for which a professional charge should be made or for which a fee may be ethically paid or received.”

Income percentage splitting arrangements may also violate state laws and medical board regulations. For instance, the North Carolina Medical Board condemns fee splitting, and, like APA, believes that ”sharing profits between a nonphysician or paraprofessional and a physician partner on a percentage basis is also fee splitting and is grounds for disciplinary action.”