By Robert J. Fisher, JD, ByrdAdatto

We at ByrdAdatto receive numerous questions each week from providers, medical spas, wellness counselors and other businesses in the aesthetic space. These questions range from entity structuring to employee disputes to lease negotiations, but questions relating to patient reward programs for referring friends are among the most frequently asked.

Patient referral rewards come with multiple overlapping layers of laws and regulations. In order to understand the risk you might incur by using these referral programs, it is critical to seek advice from a health care attorney before implementing a rewards system or referral incentive initiative.

The federal Anti-Kickback Statute is the starting point for understanding the implications for rewarding a patient for referring a friend. This law states that providers cannot offer remuneration in cash or in kind to induce the referral of a business or service covered by a federal health care program. Stated another way, a provider cannot give a person gift cards, cash, discounted services or anything else of value in exchange for referrals when federal insurance programs, such as Medicare and Medicaid, are involved. The federal Anti-Kickback Statute likely does not apply to your aesthetic practice, since such aesthetic practices are typically cash-based, but it serves as an important building block.

Most states have their own version of an anti-kickback law that uses the federal language as a base, but broadens the restrictions to varying degrees. For example, Texas, New York, Florida and California all have laws that prohibit providing remuneration to a person for referrals, regardless of whether patients are paying with cash or insurance. In these states, giving a patient cash, gift cards or generally anything of value for referring a friend will create the risk of violating the state anti-kickback law. On the other hand, Illinois law only prohibits remuneration for referrals when insurance is involved and does not regulate paying for referrals where the practice is cash-based.

Finally, the regulatory boards—medical boards, nursing boards, etc.—can issue their own rules and regulations that tighten or otherwise modify state anti-kickback laws. Continuing the Illinois example, while its state law does not prohibit providing remuneration for referrals when cash payors are involved, the medical board has opined that it views this practice as unprofessional and unethical. This can result in a medical provider being at risk for loss of license, reprimands, fines and more from the medical board if he or she pays for referrals.

The complexity of health care laws and the importance of identifying the laws applicable to your practice make the risk of creating a patient referral program without talking to a health care attorney too great. There also may be alternative solutions to boost patient numbers, such as installing membership discount systems, that avoid creating a regulatory headache.

To learn about legal and business best practices to keep your med spa compliant and profitable, attend one of AmSpa's Medical Spa & Aesthetic Boot Camps and become the next med spa success story.