Fee Splitting and Risk Management Considerations
By Anne Huben-Kearney, RN, BSN, MPA, CPHQ, CPHRM, CPPS, FASHRM
Assistant Vice President, Risk Management Group

Psychiatrists make referrals to colleagues all the time. However, what if there is financial compensation given to the psychiatrist for making a referral? Or, is it ok to share office space or a secretary? Some of these questions come up as new psychiatrists start their practices, leave an academic or group setting for private practice, or the receiving psychiatrist wants to express appreciation for referrals received from colleagues. Do these types of arrangements constitute fee splitting?

Fee splitting is “payment by a medical specialist (as a surgeon) of a part of the specialist’s fee to the physician who made the referral.”1 Both the AACAP Code of Ethics and Section 2, Article 7 of the Principles of Medical Ethics with Annotations Especially Applicable to Psychiatry (“The Principles”) address these types of situations. Specifically, Section 2, Article 7 of The Principles provides the framework for supervision or administrative services in exchange for financial remuneration in the annotation:

“Section 2. Article 7. An arrangement in which a psychiatrist provides supervision or administration to other physicians or nonmedical persons for a percentage of their fees or gross income is not acceptable; this would constitute fee splitting. In a team of practitioners, or a multidisciplinary team, it is ethical for the psychiatrist to receive income for administration, research, education, or consultation. This should be based on a mutually agreed-upon and set fee or salary, open to renegotiation when a change in the time demand occurs.”2

The Principles note several examples, which include renting out office space between two psychiatrists. It is not appropriate and would be considered fee splitting if the psychiatrist renting the space asks for and receives a percentage of the billing fees from the psychiatrist leasing the space.

Another example provided asks about the psychiatrist paying a colleague brought into the office, whether the colleague is a psychiatrist or behavioral health professional. The response reflects the principle previously noted: that the psychiatrist may receive income for administration, research, education, or consultation as long as the income is based on a mutually agreed-upon and set fee or salary, open to renegotiation when a change in the time demand occurs.

Another issue that may arise includes supervisory fees. Many states require collaborative agreements between psychiatrists and Advanced Practice Professionals, such as Psychiatric Nurse Practitioners and/or supervision by psychiatrists of nonmedical behavioral health professionals. In addition to ensuring that you comply with your state law concerning supervision and collaborative practice agreements, it is important to review The Principles, Section 2, Article 7.

Finally, the issue of whether a psychiatrist can refer to another physician and receive fees for the referral. It is important to note that there should be no perception of “kickback,” meaning that a referral is only made to another professional based on the patient’s needs and the other professional’s education, expertise, and experience, rather than financial compensation, in any form. In addition, the federal Stark Law prohibits a physician from making referrals for certain designated health services payable by Medicare to an entity with which he or she (or an immediate family member) has a financial relationship (ownership, investment, or compensation) unless an exception applies. Designated health services include clinical lab services, physical therapy, occupational therapy, radiology, durable medical equipment, home health services, outpatient prescription drugs, and inpatient and outpatient hospital services.3

The American Medical Association has also opined on fee splitting, stating that that “[P]ayment by or to a physician or health care institution solely for referral of a patient is fee splitting and is unethical.”4

It is important that the psychiatrist is aware of any applicable federal and state laws. Fee splitting arrangements may violate federal and state laws. The psychiatrist should also be aware of any medical board guidelines on this issue to avoid an investigation and potential sanction.

This is a complex issue. If you have specific questions about whether a business arrangement you are contemplating would constitute fee splitting, it is important to consult an attorney before making any agreements.

There are a several risk management tips for psychiatrists to be aware of:

Risk Management Tips

  • Make referrals based upon the training, competence, specific skills, and ethical qualifications of the professional to whom you are referring;
  • If providing office space and administrative support to other health care providers, negotiate compensation as a fixed fee, not related to referral volume or billing revenue;
  • Avoid compensating professional colleagues for making referrals to you if starting your practice;
  • If supervising other psychiatrists or nonmedical providers, negotiate compensation as a set fee, not related to referral volume or billing revenue;
  • Avoid referring to a designated health service in which you or a family member has a financial relationship and only if absolutely necessary, disclose the relationship in writing to the client and to the Center for Medicare and Medicaid Services (Self-Disclosure Protocol);
  • Do not provide a proportion of your fee to an attorney providing your name to prospective clients as an expert witness; payment by or to a physician solely for the referral of a patient is fee splitting and is unethical, whether the fee is split with another colleague or with an attorney; and
  • If covering for a colleague for vacation, ensure that the billing indicates who provided the services, the patient is advised and agrees to the arrangement, and there is no fee splitting.

About the Author

Anne Huben-Kearney has over 30 years of experience in healthcare and professional medical liability insurance experience. She provides risk management consultation to Allied World’s psychiatrists and medical professional policyholders, assisting them to assess and manage their organizational risk. Anne has extensive clinical, managerial, and administrative experience in a variety of healthcare settings as well as expertise in quality improvement, patient safety, and risk management.   A frequent presenter, Anne has experience providing consultative services to physicians, healthcare providers, and healthcare organizations across the country.

1 American Psychiatric Association, Opinions of the Ethics Committee on The Principles of Medical Ethics with Annotations Especially Applicable to Psychiatry 2017 Edition.

2 Id.

3 Centers for Medicare & Medicaid Services, Physician Self Referral: https://www.cms.gov/Medicare/Fraud-and-Abuse/PhysicianSelfReferral/index.html

4 American Medical Association, AMA Principles of Medical Ethics: II, Code of Medical Ethics Opinion 11.3.4.