While referral fees is a common practice for many businesses, it’s a big no-no when it comes to the practice of medicine in New York and physicians may be staring down professional misconduct charges if they cross the line. Many laws and regulations speak to this issue.
For example Educational Law §6530(18) prohibits “directly or indirectly offering, giving, soliciting, or receiving or agreeing to receive, any fee or other consideration to or from a third party for the referral of a patient or in connection with the performance of professional services.” This law has also been applied to payments made by a physician to a third party for patient steering. A similar prohibition applies to dentists and is outlined in the Office of the Professions rules.
Fee-splitting is also prohibited as is giving or receiving consideration for the referral of Medicaid services. For example, under Education Law §6531, unless an exception applies, it is generally professional misconduct if a physician “has has directly or indirectly requested, received or participated in the division, transference, assignment, rebate, splitting, or refunding of a fee for,or has directly requested, received or profited by means of a credit or other valuable consideration as a commission, discount or gratuity, inconnection with the furnishing of professional care or service, including … any … goods, services, or supplies prescribed for medical diagnosis, care, or treatment under this [the law].”
The concern is that if a physician financially benefits from a referral fee, there is a danger that the physician will be “exercising undue influence on the patient” by making an improper referral, which is prohibited under Education Law §6530(17), or otherwise “[o]rdering …excessive tests, treatment, or use of treatment facilities not warranted by the condition of the patient,” which is prohibited under Education Law §6530(35).
Providers should also be concerned with the New York’s Stark law on self-referrals. Similar to the Federal physician self-referral law, New York’s Stark law, in general, prohibits a provider from making a referral for clinical laboratory, pharmacy, radiation therapy, X-rays, or imagining to an entity in which either the provider or an immediate family member has a financial relationship.