How Do I Get Paid? Understanding Compensation Arrangements for Mental Health Practices

How can you bring in more clients and generate new business without running afoul of healthcare laws?

A psychotherapist taking notes while in a session with a client.

If you run a mental health practice, you know that growing your business is an exciting (but scary) adventure. You may want to find creative ways to bring in more clients and generate new business. But which compensation arrangements are legal? Which are not? Here, we break down some common ideas for getting paid as a mental health practitioner and why they might not be a good idea. 

Idea #1: Paying for Referrals.

In many areas of commerce, you can refer a friend and earn a bonus. So why not adopt similar incentives for referrals to your practice or monetize your patients’ trust in your opinion of other clinicians? Can you pay individuals who refer clients to your practice or receive payment for referring clients to other providers?

In short, these sorts of compensation agreements can violate various state and federal laws against referrals and kickbacks. Namely, the federal Anti-Kickback Statute prohibits individuals and entities from offering anything of value, whether cash or otherwise, in exchange for any federal healthcare program business. Federal healthcare programs include Medicare, Medicaid, Tricare, Department of Labor health programs, and more. 

Learn more about kickbacks in this video.

Watch this video on YouTube.

Fee-splitting laws place similar restrictions on the use of referrals. And it’s not just cash. Giving or receiving gift cards, payment for things, and other forms of remuneration are also usually illegal.

Finally, referral arrangements may violate not only specific state and federal laws prohibiting referrals but also your state’s practice act and ethics rules for mental healthcare providers.

Idea #2: Monetizing the Clients That a Clinician Takes With Them Upon Departure.

If a clinician leaves your practice, you may find it tempting to charge the clinician a fee for each patient that follows them to their new practice. This arrangement might seem “fair” based on the loss in your practice revenue due to the clinician’s departure. However, monetizing clients can lead to tricky ethical and legal situations. This could be seen as a referral arrangement, and it could implicate your obligations for the transfer of care. 

Establishing an employment or independent contractor agreement with each clinician can help clarify termination and transfer of care procedures. But trying to monetize the situation could get you into trouble. If you’re concerned about losing business to departing clinicians, a well-crafted contract can help set expectations and guard against competition.

Related Article: Leaving for a New Practice? Here’s What Healthcare Professionals Need to Know.

Idea #3: Fee-Splitting for Students or Supervised Personnel.

Do you or your clinicians work with students, provisionally licensed clinicians, or those needing supervised hours? If so, billing and payment procedures can get complicated. 

Splitting fees with supervised personnel sounds like a good idea; it creates an incentive for supervised personnel to drive in more business or get independently licensed to heighten their earning potential. But fee-splitting laws may target these sorts of arrangements, too. 

Moreover, if you bill a licensed provider’s services for students’ work performed under their supervision, it could implicate more federal laws. For example, these arrangements could trigger the False Claims Act or a multitude of state equivalents. Carefully consider billing, insurance, and supervisory standards before taking such actions.

Idea #4: Hiring a Psychiatrist To Prescribe.

Our psychotherapy clients often tell us that they want to expand their practices’ offerings and drive new business by hiring a psychiatrist. However, this would violate the corporate practice of medicine (“CPOM”) doctrine in many states. CPOM prevents a business from “practicing medicine” by prohibiting them from hiring physicians to work under non-physician owners or entities. The idea is that physicians should remain free to exercise their own medical judgment without influence from a business that is not owned by like-licensed medical professionals. 

Thus, hiring a psychiatrist is typically forbidden. However, there may be permissible ways to bring psychiatry services into your practice. A healthcare attorney can help you decide what is best for your practice’s goals. 

For a discussion on the corporate practice of medicine doctrine, see our video.

Watch this video on YouTube.

Idea #5: Using Marketing Tactics Common In Other Industries.

As you try to get your name out in the marketplace, you may seek to mimic the tactics of other types of service providers. But again, healthcare follows special rules. Other potentially problematic business activities include: 

  • Networking membership groups that require, encourage, or incentivize referrals.;
  • Advertising agreements that reward the advertiser for referring readers to the practice; and
  • “Doorbuster” promotions that offer prospective patients excessive discounts to get them in the door, followed by a hike in the cost of services for subsequent visits.

Tips For Staying Compliant.

You may be thinking, “Well, it sounds like I can’t do anything! How can I get paid?” We understand. The contours of the various state and federal laws surrounding payment arrangements can be overwhelming. It’s tricky to understand how to grow your revenue while remaining compliant.

Thus, here are some tips for staying “legal” with respect to compensation arrangements for your mental health practice: 

  1. Avoid activities that could be considered referrals. If you’re on the fence about whether something could qualify, an attorney can help you understand what qualifies and whether any exceptions might apply.
  2. Consider your ethical obligations to patients and other therapists. If a compensation arrangement seems unethical, then it likely raises a host of considerations.
  3. Talk to an attorney about your options. There may be ways to raise your revenue and help your business grow; they just may differ from the methods you originally had in mind. A solution will likely be specific to your circumstances and needs. A healthcare attorney can discuss the risks, options, and best practices to help you reach your goals. 

Get Legal Support.

In short, the regulations that surround healthcare differ from those of other industries. Seek out an attorney with deep experience helping independent practices like yours before you implement any creative ideas for drumming up new business.

For guidance on these or any other legal issues in any of the states where we practice, schedule a time to talk to us. Our law firm offers free consultations to help you determine if we’re a good fit.

This blog is made for educational purposes and is not intended to be specific legal advice to any particular person. It does not create an attorney-client relationship between our firm and the reader. It should not be used as a substitute for competent legal advice from a licensed attorney in your jurisdiction.

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