Ethics of Fee Splitting in Group Practices

[FreudianSlippers]

Hello all!

I’m currently funemployed and waiting for my license to come through from the board. I’ve been thinking about joining up with a psychologist who has a successful, thriving, cash-only private practice. I’ve never done private practice work before, and I’ve been having some concerns about how the whole business model is set up. To preface, I’ve done a TON of googling, perused through the ethics code and state laws, but I still can’t determine how legit this is.

So, long story short, If I do accept the position I would be an independent contractor, and it would be a 60% (me)/40% (him) split. The 40% to him would cover mentorship, office supplies, office space, and consultation. Now, this psychologist will probably end up making some referrals to me throughout our time together, as his caseload is full and he trusts me enough to hire me and the location is convenient for clients. However, it seems like this might have some legal/ethical complications, because I know its NOT okay to fee split based on referrals. But, since we agreed the 40% is for other things (e.g. office space)….would that count as an illegal/unethical “kick back” or not?

Furthermore, this business model seems extremely common in the group practice world, where there is a fee split for services (e.g. office space, supplies, marketing, etc), but the group practice leader always benefits peripherally from making a referral. Basically…I just want to make sure I don’t end up in an ethically (or legally) dubious position, and I would never use the excuse “…but everybody else is doing it.” Any advice, experience, or insight on this would be incredibly appreciated.

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[Sanman]

Are you working in the same group practice or as a separate entity? If you are the same group no ethical issues as that is not technically a referral. Illegal would be if you had a PCP referring people to your practice and you pay $20 a referral. Or if the PCP is part owner of the psychotherapy practice and this is not disclosed.

 

[FreudianSlippers]

Are you working in the same group practice or as a separate entity? If you are the same group no ethical issues as that is not technically a referral. Illegal would be if you had a PCP referring people to your practice and you pay $20 a referral. Or if the PCP is part owner of the psychotherapy practice and this is not disclosed.

Thanks for the reply @Sanman!! Do you happen to know if I can be an independent contractor and technically be in the same group practice? I think the psychologist's S-Corp will hire my S-Corp (or something like that)...but I need to be more clear on the business structure. It's actually REALLY good to know that being in the same practice together doesn't count as a referral...I wasn't aware of that but it makes sense why sooo many group practices operate this way. I'm sure everything will be disclosed to clients, and if not i'll make sure it is.

 

[PsyDr]

That is NOT fee splitting. Having an associate or employee take the referral is NOT fee splitting.

 

[WisNeuro]

That is NOT fee splitting. Having an associate or employee take the referral is NOT fee splitting.

No, but this is pea splitting

 

[Therapist4Chnge]

You win today Wis!

 

[Sanman]

That is NOT fee splitting. Having an associate or employee take the referral is NOT fee splitting.

I knew you were going to post this, lol

 

[PsyDr]

@FreudianSlippers

Didn't even bother to read the wikipedia page on fee splitting before you posted this, huh?

 

[FreudianSlippers]

Thanks for the feedback everyone...this really does help put my mind at ease

@FreudianSlippers

Didn't even bother to read the wikipedia page on fee splitting before you posted this, huh?

lol I actually didn't read it, but I did read through tons of health lawyer blog posts about it and I began to overthink things. I did just check out the Wiki entry, while it says what fee splitting is, it still didn't answer my question as directly as I needed...like you all did! 🙂

 

[Sanman]

Thanks for the reply @Sanman!! Do you happen to know if I can be an independent contractor and technically be in the same group practice? I think the psychologist's S-Corp will hire my S-Corp (or something like that)...but I need to be more clear on the business structure. It's actually REALLY good to know that being in the same practice together doesn't count as a referral...I wasn't aware of that but it makes sense why sooo many group practices operate this way. I'm sure everything will be disclosed to clients, and if not i'll make sure it is.

While I am no expert, if you're part of his group practice that is not fee splitting. Does your business card have the name of his practice on top? Then, you should be good. Besides, the only way I can see you would ever get in trouble for fee splitting is if there was an explicit line in our contract that said he got extra cash for every referral he sent your way.

 

[FreudianSlippers]

While I am no expert, if you're part of his group practice that is not fee splitting. Does your business card have the name of his practice on top? Then, you should be good. Besides, the only way I can see you would ever get in trouble for fee splitting is if there was an explicit line in our contract that said he got extra cash for every referral he sent your way.

Gotcha. Yeah..that definitely wouldn't happen haha

 

[FlowRate]

Another way of thinking about this is that you're not paying him a one-time fee for being referred a patient. You're paying him some amount of all your collections regardless of whether patients are referred to you or enter your caseload in a different manner.

You've hinted at why arrangements like this can be very good for the practice owner (overhead is probably 15-30% so the other 10-25% goes to the owner), especially if you see lots of patients.

 

[foreverbull]

This has come up from time to time and it is ethical and common practice. It’s not about referral kickbacks, it’s about splitting business costs in an equitable way based on your contribution to the owner/group and the costs you incur. The referrals are the result of working together and are a benefit that isn’t part of the financial equation. As someone mentioned earlier, if you were charged per referral, that’s when it’s fee splitting and unethical.

A 60/40 ratio is very common. People who aren’t early career psychs can sometimes negotiate a bit higher.

 

[FreudianSlippers]

Another way of thinking about this is that you're not paying him a one-time fee for being referred a patient. You're paying him some amount of all your collections regardless of whether patients are referred to you or enter your caseload in a different manner.

This has come up from time to time and it is ethical and common practice. It’s not about referral kickbacks, it’s about splitting business costs in an equitable way based on your contribution to the owner/group and the costs you incur. The referrals are the result of working together and are a benefit that isn’t part of the financial equation. As someone mentioned earlier, if you were charged per referral, that’s when it’s fee splitting and unethical.

A 60/40 ratio is very common. People who aren’t early career psychs can sometimes negotiate a bit higher.

Great explanations!! Thank you both so much

 

[psych.meout]

Can we talk about the larger issue of whether this actually meets the legal definition of "independent contractor?"

The owner of this practice is providing supervision and consultation (ya know, kinda like an employer does for their employees) and has OP seeing the patients at their office using their office supplies, their billing service, their EMR system, etc.

Maybe I'm just naive and ignorant from still being in grad school, but how does this legally qualify as independent contracting?

 

[AbnormalPsych]

Independent contractor defined | Internal Revenue Service

Review the definition of an independent contractor and related tax obligations.

www.irs.gov

Independent contractor (self-employed) or employee? | Internal Revenue Service

Learn how to determine whether a person providing a service to you is an employee or an independent contractor.

www.irs.gov

 

[LadyHalcyon]

It's a fancy way of getting out of having to pay for benefits insurance, etc

Can we talk about the larger issue of whether this actually meets the legal definition of "independent contractor?"

The owner of this practice is providing supervision and consultation (ya know, kinda like an employer does for their employees) and has OP seeing the patients at their office using their office supplies, their billing service, their EMR system, etc.

Maybe I'm just naive and ignorant from still being in grad school, but how does this legally qualify as independent contracting?

 

[psych.meout]

It's a fancy way of getting out of having to pay for benefits insurance, etc

Which is my point exactly. It seems like psych private practices widely abuse independent contracting rules so that practice owners can get out of the responsibilities of being an employer.

 

[AbnormalPsych]

Which is my point exactly. It seems like psych private practices widely abuse independent contracting rules so that practice owners can get out of the responsibilities of being an employer.

This is one of the reasons I passed on some full-time group private practice offers that have come up. The benefits of my current medical center job are pretty great to have for an ECP.

 

[Sanman]

Whether you are an independent contractor or an employee depends on a number of factors that are often murky. Generally, it had to do with the level of control one has over work processes, productivity, etc. I don't think we have enough information to decide whether this is abuse of the term or not.

 

[Sanman]

Whether you are an independent contractor or an employee depends on a number of factors that are often murky. Generally, it had to do with the level of control one has over work processes. I dont think we have heard enough either way to decide whether someone is an independent contractor.

 

[WisNeuro]

Which is my point exactly. It seems like psych private practices widely abuse independent contracting rules so that practice owners can get out of the responsibilities of being an employer.

It's easy to avoid the crappy contractor jobs, if you have a reputable degree and a good training background. There is one big practice here that pays like crap and fills itself up with contractors, and it's staffed almost exclusively with grads from the now shuttered Argosy in the area. That being said, there's also another decent sized multiple site clinic that has floated some contractor offers my way that paid pretty well along with decent infrastructure. Flexibility and control are the upsides, but I already get that where I am, along with a good salary and benefits, so I passed. If I ever went part-time and wanted to explore adding more forensic stuff, I'd actually consider it.

 

[FreudianSlippers]

Whether you are an independent contractor or an employee depends on a number of factors that are often murky. Generally, it had to do with the level of control one has over work processes, productivity, etc. I don't think we have enough information to decide whether this is abuse of the term or not.

This! Also, for the sake of anonymity I deliberately left out quite a bit of info. I will say that in reading these responses it definitely doesn't sound like this is abuse of the term independent contractor. Also, as a side, the psychologist has been working with a healthcare lawyer to set up the business contract and model, and i'm sure they've taken this into account.

 

[psych.meout]

This! Also, for the sake of anonymity I deliberately left out quite a bit of info. I will say that in reading these responses it definitely doesn't sound like this is abuse of the term independent contractor. Also, as a side, the psychologist has been working with a healthcare lawyer to set up the business contract and model, and i'm sure they've taken this into account.

Because no one would ever consult a lawyer to abuse loopholes in a system and exploit others for their own financial gain.

 

[Sanman]

Because no one would ever consult a lawyer to abuse loopholes in a system and exploit others for their own financial gain.

Cynical about capitalism much? A lawyer can't create the loophole. They can only advise a client about what they can or cannot do based on the law.

No one forces someone else to take a crappy position. Unfortunately, you are only worth what the market is offering you.

 

[psych.meout]

Cynical about capitalism much? A lawyer can't create the loophole. They can only advise a client about what they can or cannot do based on the law.

I consider myself a realist.

[/QUOTE]No one forces someone else to take a crappy position. Unfortunately, you are only worth what the market is offering you.
[/QUOTE]

The problem with that logic is that it assumes perfect knowledge. People don't know about the realities and legalities of these things without experience, mentoring, etc., and teaching business and career related skills and knowledge is sorely lacking from doctoral programs. This allows people like practice owners to prey on ECPs and other professionals. Though thus isn't exactly unique to the mental health field, this kind of exploitation, rent seeking, and other abuse is rampant.

 

[Sanman]

I consider myself a realist.

No one forces someone else to take a crappy position. Unfortunately, you are only worth what the market is offering you.
[/QUOTE]

The problem with that logic is that it assumes perfect knowledge. People don't know about the realities and legalities of these things without experience, mentoring, etc., and teaching business and career related skills and knowledge is sorely lacking from doctoral programs. This allows people like practice owners to prey on ECPs and other professionals. Though thus isn't exactly unique to the mental health field, this kind of exploitation, rent seeking, and other abuse is rampant.
[/QUOTE]

If only some of these young people had a degree that teaches them how to independently research topics of interest...oh wait.

There is more knowledge out there now than there ever has been thanks to the internet. How do you think the practice owners learned?

 

[PsyDr]

I consider myself a realist.

No one forces someone else to take a crappy position. Unfortunately, you are only worth what the market is offering you.
[/QUOTE]

The problem with that logic is that it assumes perfect knowledge. People don't know about the realities and legalities of these things without experience, mentoring, etc., and teaching business and career related skills and knowledge is sorely lacking from doctoral programs. This allows people like practice owners to prey on ECPs and other professionals. Though thus isn't exactly unique to the mental health field, this kind of exploitation, rent seeking, and other abuse is rampant.
[/QUOTE]

If only there was an ethical code that prohibited financial exploitation... and a way to report said exploiters.