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Legal Services

By Dan Schulte, J.D.
MDA Legal Counsel
From the December 2011 issue of the Journal

Question: Many dentists in my area are marketing through Groupon to attract new patients. I am told this involves offering patients discounts and maybe splitting the fee. Can you explain how this works? Are there are any legal issues involved in using this as a marketing tool?

Answer: Unfortunately, the legality of Michigan dentists and other licensed health professionals using Groupon to attract patients is far from certain.

Groupon is an Internet-based purchasing program. A dentist retains Groupon to advertise the fact that he or she is willing to perform a service or services for a discounted fee. Groupon advertises the discounted service or services on the Internet, targeting the ad geographically and otherwise using its proprietary methods. Patients willing to purchase the service(s) pay the discounted fee to Groupon. The dentist only becomes obligated to provide the service(s) at the discounted fee if a pre-determined number of patients decides to purchase it (i.e., the group of patients purchasing the service(s) is large enough to make it worthwhile to the dentist). Assuming enough patients purchase the service(s), Groupon remits the discounted fees collected less an agreed-upon percentage to the dentist. The patients then appear in the dentist office with their “Groupon” and receive the service(s) from the dentist.

The potentially problematic aspect of the Groupon arrangement is the percentage of the dentist’s discounted fee retained by Groupon. How will the amount retained by Groupon be characterized? Is it: (1) a legal payment by the dentist to Groupon in consideration of Groupon’s Internet advertising, payment processing and other administrative services in carrying out the arrangement; or (2) an illegal division of the discounted fee paid to Groupon in consideration of its referral of patients?

Michigan’s Public Health Code (MCL 333.16221(d)(ii)) makes it illegal for a dentist or any other licensed health professional to divide fees for the referral of patients. Whether this law is violated by a dentist entering into the Groupon arrangement is debatable. Dentists using Groupon will obviously argue that the amount paid to Groupon is not for referrals but instead is only compensating Groupon for its advertising, fee processing, and other administrative services. They will also argue even though the Groupon fee is a percentage of the amount of the dentist’s discounted fees, it should not be considered as a payment for referrals.

Alternatively, it could also be argued that Groupon’s fee is based largely on the amount of the discounted fees paid to the dentist and that Groupon earns little or no fee if the pre-determined number of patients do not purchase the discounted service(s). Thus, the fee, or at least a part of it, can only be construed as a payment by the dentist to Groupon for its referral of patients.

No certain answer can be given unless and until the Michigan Board of Dentistry or a Michigan court issues guidance on the matter.

You should carefully review all of your network and other contracts with insurers and payors prior to offering discounts through Groupon. For example (as I have discussed in this column in the past), Delta Dental’s Uniform Requirements of Delta Dental Premier Participation state that Delta Dental is obligated to pay the lesser of three amounts: (1) the submitted fees; (2) the lowest fee regularly charged, offered or received by a dentist; or (3) the maximum fee that Delta Dental approves. Could your publicly offering a discounted fee on Groupon for a particular service(s) cause Delta Dental to deem this to be the lowest fee you regularly charge for the service(s)? If so, Delta Dental could reduce the fee it pays you for service(s) provided to non-Groupon patients.

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