Patient Reward Programs in the Post-lockdown Medical Aesthetic Industry

Posted By Mike Meyer, Wednesday, June 3, 2020

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By Bala Mohan, JD, ByrdAdatto

As stay-at-home orders are being lifted, medical practices have begun re-opening and returning to normal operations. Medical practices have begun reaching out to their patient bases to communicate their anticipated re-opening and offer reassurance regarding added sanitation and infection control protocols that must be incorporated for safety. During this time, practices can look at creative patient appreciation deals to bring back their patient base; it may be especially tempting to reward patients who bring in referrals. Many providers may consider offering incentives to patients for generating referrals, including discounts, cash, free procedures or gift cards. Legally, however, providing anyone with something of value in exchange for referrals can be problematic and downright pricey. Patient referrals are governed by multiple layers of laws. Rewarding referrals may violate federal and state anti-kickback laws, the laws governing a health care 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 important to understand, as most state anti-kickback laws follow the federal anti-kickback laws or are even 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, state courts use the federal anti-kickback laws as the standard. This recent case in Boston, involving a referral program from a dental 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 your state's laws governing this area.

While direct payment for referrals should be avoided, a properly structured rewards program is an effective way to incentivize patient loyalty. There are numerous permutations and combinations of factors that can be considered when setting up the rewards program, but it is important to note that ensuring patient referrals are not the focus is the key to a compliant rewards program. Such programs typically are structured as a point system, awarding a specific number of points for different procedures and purchases. Points for referrals should be set lower than the rest of the criteria, but whether they can be offered at all 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.

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Bala Mohan, JD, knew from a very young age that her choice of career would be related to science because she excelled in her biology and chemistry coursework. With a strong passion for genetics and the desire to find a cure for her mother—who was diagnosed with diabetes at an early age—Mohan obtained a Bachelor of Technology in Pharmaceutical Biotechnology. Having worked as a scientific researcher during her undergraduate studies, Mohan greatly values attention to detail and is a meticulous person. She then pursued a master's in Entrepreneurial Biotechnology to gain knowledge about business and startups. This landed her a position with Cleveland Clinic Innovations, where she evaluated over 100 innovations and negotiated deals with potential investors. In this role, Mohan had the opportunity to interact with business and health care lawyers from multiple health care organizations, and she quickly realized that her real calling in life was to be a health care attorney. Subsequently Mohan obtained her JD and was able to pursue a career that combined all her interests—science, business and law.

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