New Patient Incentives: When a Small Gift Card Brings Big Legal Trouble

Are you a healthcare practice aiming to generate new patients with offers like a $20 Starbucks card after the completion of a new appointment? Here are things that you might not have considered.

New Patient Incentives Starbucks Gift Card

Have you seen those social media ads offering a Starbucks gift card to any new patients at a medical or dental practice? They likely break the law. To many, this just seems like any other marketing scheme – “buy our products or services, and you’ll get a free gift!”  For most businesses, incentivizing potential customers with perks is a fairly common business practice. However, in the heavily regulated sphere of healthcare, these patient incentives must be carefully analyzed to be sure they don’t violate healthcare laws. And while violations can lead to exceedingly expensive fines, they can also land you in federal prison.

The (Confusing) Regulatory Scheme  

The Anti-Kickback Statute

The Anti-Kickback Statute makes it a crime for a practice to use offers or rewards of anything of value – that means products or services, including gift cards, shuttle services, or waived copays — to lure federal healthcare program beneficiaries to their practices. Under this law, illegal payments to lure federal healthcare program beneficiaries can be as overt as bribes or rebates, or it can be more covert in-kind inducements, such as luxury travel to the practice’s office. This essentially means that you, as a healthcare practice, cannot offer rewards to patients who will use products or obtain services for which a Federal healthcare program will pay.

However, the law has legitimate transaction exceptions. One important exception is based upon the existence of an employment relationship. The employment relationship exception means that the salary paid by an employer to an employee (who has a real employment relationship with the employer) for providing services that may be reimbursable by a Federal healthcare program is acceptable and does not constitute an illegal payment.

This, of course, makes logical sense. How can hospitals enter into payment arrangements with physicians if they cannot pay physicians a salary, for fear of violating the Anti-Kickback Statute? This is also true in other employment settings, such as physicians needing to hire nurses and other medical staff.

The Anti-Kickback Statute is quite broad, which created some concern that the law inadvertently included some innocuous commercial transactions among healthcare practices. The Department of Health and Human Services created a list of legitimate transaction exceptions that would not be considered criminal.

There are steep punishments if there is no legitimate transaction exception to the offers or rewards that a practice uses to lure federal healthcare program beneficiaries to obtain services at their practice.  Violating the Anti-Kickback Statute is a felony and is punishable by fines of up to $100,000 and up to 10 years in prison.

The Civil Monetary Penalties Law

Another law that is frequently implicated in advertising arrangements is the Civil Monetary Penalties (CMP) law, which is intended to combat fraud, waste, and abuse within Medicare and Medicaid. This law prohibits practices from offering anything of value to federal and state healthcare beneficiaries in order to influence or induce those patients into using the practice’s services.

For example, advertising and offering free massages by a licensed massage therapist to all patients at your practice will likely influence more patients to come to your practice, including patients without legitimate medical concerns, because they would like a free massage. This type of activity is prohibited by the CMP law.  

However, there are certain legitimate exceptions for acceptable activities under the CMP law. For example, if a practice were to decide that having some childcare available at their location for all patients would allow busy people with children to come into the practice when they are in need of care (instead of avoiding getting care because they do not have access to childcare), it would potentially be a legitimate exception to the CMP law. While having childcare present in the practice can influence patients to come into the practice for healthcare services, the intent behind the policy of providing childcare is to promote access to care.

This particular legitimate exception requires careful analysis, as the law says that in order for an inducement to promote access to care, it must not be tied to the provision of other federal or state health services, cannot be in the form of cash or things that can be converted into cash (such as debit gift cards), and cannot be disproportionally large.  

Another exception to potentially influencing patients is an inducement of fairly insignificant monetary value. If your practice wanted to provide new patients with a $5 gas card to use at a gas station, this would be allowed so long as your practice does not give a gift worth more than $15 per item or provide more than $75 worth of gifts to any single patient per year. If the incentive you offer patients, whether for new patients to come into your practice or existing patients to come get annual screenings, is below that threshold, then it is legal.  

The problem that practices often face is that it is very easy to get complacent about staying compliant with this rule since we are discussing relatively small amounts of money. But make no mistake, giving nominal gifts to patients who use federal or state healthcare requires your practice to keep an accurate accounting of what the value of the gifts are and when they were given, so that your practice does not pass that $15 per item or $75 per patient within a given year. Compliance is possible but it does require your practice to be diligent.

We have discussed two legitimate exceptions to the CMP law’s prohibition on trying to influence beneficiaries to obtain healthcare services at your practice. Knowing the exceptions is crucial because violations of the CMP law are quite costly, ranging from $15,000 for each claim or bill for a designated health service, $100,000 for each arrangement or scheme, and $50,000 for each offer or receipt of any kind of benefit that would influence patients to use your practice.

When Gift Cards Become Problematic

Let’s say your healthcare practice, in an attempt to generate an increase of new patients giving your location a visit, advertises that new patients who make and complete an appointment will receive a $20 Starbucks gift card. Fancy coffee at Starbucks can be pricey and you want to offer a bit more than a $10 card, which can barely purchase one of the more expensive coffee beverages. While this offer is well intended, it carries certain risks if you provide any services which are payable by Federal or state healthcare program.

There are several issues with a $20 Starbucks gift card for completing a new patient appointment. By definition, this is an offer used to influence potential new patients to encourage them to use your healthcare services which are payable by Federal and state healthcare programs.  Furthermore, it is outside of the nominal value safe harbor to the CMP law, which requires gifts to be of a very minimalistic financial value of up to $15 per item or $75 per patient annually.

Expand Your Healthcare Practice in a Compliant Manner

This is not to say that no gifts or services can be provided to your patient populations merely because their healthcare services are reimbursable through a Federal healthcare program. However, it is important to remember that you must carefully analyze how a plan to offer gifts or services for these populations will be looked at by the Office of the Inspector General for the Department of Health and Human Services.

Are you starting or expanding your healthcare practice, and need guidance on which types of advertising practices and patient incentives comply with the law? Please contact an experienced lawyer at Jackson LLP: Healthcare Lawyers for thoughtful guidance on how to expand your healthcare practice in a compliant manner.   

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