Can Medical Practices Pay Marketers Based on the Patients or Revenue They Generate?

Medical Answer

Don’t automatically pay a healthcare marketer based on the number or value of patients they generate.

When compensation rewards someone for generating Medicare, Medicaid, or other federal healthcare program business, the arrangement can raise significant concerns under the federal Anti-Kickback Statute.

The Anti-Kickback Statute prohibits knowingly and willfully offering, paying, soliciting, or receiving remuneration to induce or reward referrals or other business reimbursable by a federal healthcare program. That means a compensation formula such as “$100 for every new Medicare patient” or “5% of collections from patients you bring us” deserves immediate compliance review.

The critical distinction is between paying for legitimate marketing services and paying for referrals or federal healthcare program business.

Calling the person a “marketer,” “business development representative,” “consultant,” or even an “employee” does not automatically make a referral-based compensation formula compliant. Before approving a commission, percentage-of-collections arrangement, per-patient payment, or referral bonus, determine exactly what behavior the compensation rewards.

Healthcare Marketing Is Different From Ordinary Sales

In many industries, commissions are routine.

A salesperson sells $100,000 of software and receives a percentage. A real estate agent closes a transaction and receives a commission. A car salesperson sells another vehicle and receives additional compensation.

Healthcare introduces a different concern because federal healthcare programs may ultimately pay for the services generated by that business. If a marketer is financially rewarded for steering federally reimbursed business to your practice, the Anti-Kickback Statute may need to be considered.

Don’t take a compensation model from another industry and assume it can simply be transferred into healthcare.

Start by Asking What the Marketer Is Actually Being Paid For

The job title doesn’t answer the compliance question. Instead, examine the actual activity.

A marketer might legitimately be paid to develop educational materials, manage outreach campaigns, attend community events, build relationships, conduct market research, maintain a CRM, coordinate advertising, manage digital campaigns, or perform other bona fide marketing functions.

That looks different from an arrangement in which someone is essentially told: “Bring us patients and we’ll pay you for every one who shows up.”

Your compensation structure should reflect legitimate services rather than merely the marketer’s ability to generate reimbursable referrals.

Per-Patient Payments Should Raise an Immediate Red Flag

Consider a marketing company that proposes: “Pay us $200 for every new patient we send to your practice.”

That formula should trigger compliance review before anyone signs the agreement. The concern becomes even greater when the marketer knows which patients have Medicare, Medicaid, or another federal healthcare program and compensation is tied to those patients becoming customers of the practice.

Don’t assume the relatively small size of an individual payment eliminates the concern. The better question is: “What exactly are we paying this person to accomplish, and is the payment rewarding the generation of federally reimbursed business?”

Percentage-of-Collections Arrangements Need Careful Review

Another common proposal sounds like this: “You don’t owe us anything upfront. Just pay us 10% of whatever you collect from the patients we generate.”

From a business perspective, that can sound attractive because the practice only pays when the marketing produces revenue. From a compliance perspective, however, you need to examine what is driving the payment.

If more referrals or federally reimbursed services automatically create more compensation for the marketer, the arrangement deserves closer Anti-Kickback analysis. A contract shouldn’t receive less scrutiny simply because the payment is described as a marketing fee instead of a referral fee.

Don’t Assume an Employee Can Be Paid Any Way You Want

The Anti-Kickback Statute has protection for certain payments by employers to bona fide employees for employment in furnishing covered items or services. But simply putting someone on payroll does not mean every conceivable referral-generating compensation arrangement should be treated as automatically protected.

For practice managers, the safest approach is not to start with: “They’re a W-2 employee, so we’re fine.”

Start with: “What are we paying this employee to do, and what behavior does the bonus formula reward?”

A marketer’s employment status is an important part of the analysis, but it shouldn’t replace the analysis.

Independent Contractors Require Particular Attention

Independent marketing companies can present different concerns because the employment protection applicable to bona fide employees doesn’t simply extend to every independent contractor. If your practice contracts with an outside marketer, review the personal services and management contracts safe harbor and other applicable Anti-Kickback requirements when relevant.

Pay close attention when an outside marketer proposes compensation based on patients, referrals, procedures, prescriptions, orders, collections, or another measure closely connected to federal healthcare program business.

The more the compensation formula resembles: More Patients → More Services → More Federal Program Revenue → Bigger Marketing Payment  – the more important careful compliance review becomes.

Don’t Assume a Written Contract Makes the Arrangement Safe

Putting a questionable compensation formula into a professionally drafted contract doesn’t automatically solve the underlying problem. The agreement needs to reflect a legitimate arrangement.

Your practice should understand what services are being purchased, how compensation was determined, what the marketer is expected to do, and how the marketer’s performance will be evaluated.

The contract should also match reality. If the written agreement says the company provides general marketing services but everyone internally describes the company as “the people who send us patients,” investigate that discrepancy.

Be Careful With Revenue-Based Bonuses

A marketer’s overall performance may matter to your business, but revenue-based incentives require careful thought when federal healthcare program business is involved.

Suppose your marketing employee earns a $50,000 salary plus 5% of the collections generated by patients attributed to the employee. The practice may view that as a normal sales incentive.

But the formula directly connects the employee’s compensation to the value of healthcare business generated. That is exactly the type of arrangement that deserves specialized review rather than being copied from a conventional sales-compensation plan.

You may have other ways to evaluate legitimate marketing performance without simply paying for the volume or value of federally reimbursed business.

Consider Broader Performance Measures

A practice may be able to evaluate a marketer on legitimate job responsibilities that don’t function simply as payment for referrals.

Depending on the role, performance measures could include the quality and completion of marketing activities, compliance with an approved budget, execution of campaigns, appropriate CRM documentation, completion of compliance training, responsiveness to referring offices, adherence to approved marketing policies, timely completion of assigned projects, or other legitimate responsibilities.

The point isn’t to create meaningless KPIs merely to disguise a referral commission. The compensation should reflect the real work being performed.

If the only performance measure anyone actually cares about is how many federally reimbursed patients the marketer delivers, changing the name of the metric doesn’t solve the underlying concern.

Examine How Marketers Interact With Referral Sources

Compensation isn’t your only compliance concern. You also need to know what marketers are doing in the field.

A compliant-looking salary arrangement can still create problems if your marketer offers referral sources improper benefits, expensive entertainment, free services, cash, gift cards, or other incentives to generate business.

Give marketers clear rules about what they can offer, promise, purchase, or provide on behalf of your practice.

Don’t wait until an expense report shows an unusual $2,500 dinner to ask what your marketer has been promising referral sources.

Give Marketers Compliance Training

Marketing employees are often on the front line of referral relationships, yet practices sometimes exclude them from compliance training. That is backwards.

Your marketers should understand why healthcare marketing is different from ordinary sales. They need to recognize potentially problematic statements such as: “Send us five patients and we’ll take care of you.” They should also know when gifts, meals, free services, discounts, reciprocal referral arrangements, and other benefits require approval.

Train them to escalate unusual requests instead of improvising.

Watch for Reciprocal Referral Arrangements

Remuneration doesn’t necessarily have to be a check. A problematic arrangement could potentially involve exchanging valuable referral opportunities.

For example: “We’ll send all of our patients who need Service A to you if you send all of your patients who need Service B to us.”

Not every professional referral relationship is prohibited. Physicians and practices obviously need to refer patients to other appropriate providers. The concern arises when the referral relationship is structured as an exchange of value designed to induce federal healthcare program business.

Your practice should distinguish clinically appropriate referrals from referral trading.

Don’t Let Marketers Promise Free Services Without Approval

A marketer may believe a free service is simply a good promotional tool. In healthcare, however, free items and services can have compliance implications depending on who receives them, their value, their purpose, and their relationship to federally reimbursed business.

Marketers shouldn’t independently decide what your practice can give away. Establish an approval process for free services, gifts, meals, discounts, screenings, entertainment, and other benefits before they are offered.

Fair Market Value Doesn’t Automatically Fix a Referral Problem

Practices sometimes believe an arrangement is safe because the marketer’s compensation is consistent with what other marketers earn. That’s not necessarily enough.

OIG has emphasized that fair market value does not independently protect an arrangement from the Anti-Kickback Statute. An arrangement involving fair-market-value remuneration can still raise concerns depending on the facts, circumstances, and intent.

So don’t stop at: “Is this a reasonable marketing fee?”

Also ask: “What is this payment intended to purchase?”

Those are different questions.

Use the MARKET Test before approving marketer compensation.

1. M — METHOD: How is compensation calculated?
2. A — ACTIVITY: What legitimate services is the marketer actually performing?
3. R — REFERRALS: Does compensation rise with the number or value of referrals, patients, procedures, or collections?
4. K — KICKBACK RISK: Is Medicare, Medicaid, or other federal healthcare program business involved?
5. E — EMPLOYMENT STATUS: Is the marketer a bona fide employee or an outside contractor, and what legal protections or safe harbors may apply?
6. T — TRAIN AND TRACK: Has the marketer received compliance training, and are you monitoring what the marketer actually does?

If you cannot clearly explain why the compensation is being paid, don’t approve the formula until it receives appropriate review.

Real Practice Example

A growing specialty practice hires an outside marketing company. The proposed contract sounds appealing: the practice pays nothing upfront. Instead, the marketing company receives 12% of collections from every patient attributed to its marketing efforts. Management likes the arrangement because there is no fixed marketing expense.

Before signing, however, the practice examines the formula. The marketer’s compensation increases every time attributed patients generate additional reimbursed services, including services paid by federal healthcare programs.

Instead of assuming the arrangement is acceptable because it is labeled “performance marketing,” the practice pauses implementation and obtains appropriate compliance review. The process becomes: Proposed Marketing Arrangement → Identify Services → Analyze Compensation → Identify Federal Program Business → AKS Review → Restructure if Necessary → Written Agreement → Training → Monitoring

That is far safer than discovering the issue after thousands of claims have already been submitted.

Can We Pay a Marketer $100 for Every New Patient?

Don’t implement a per-patient arrangement without appropriate healthcare compliance review.

A payment tied directly to generating patients can raise Anti-Kickback concerns when federal healthcare program business is involved. The exact analysis depends on the arrangement, the parties, applicable exceptions or safe harbors, and the facts and circumstances.

Can We Pay an Outside Marketing Company a Percentage of Collections?

Percentage-of-collections compensation deserves careful review when the payment is connected to patients or business generated by the marketer. Don’t assume that describing the arrangement as a “marketing fee” eliminates Anti-Kickback concerns.

What If the Marketer Is Our Employee?

The Anti-Kickback Statute includes an exception related to certain employer payments to bona fide employees, and there is a corresponding regulatory safe harbor. However, practices should not interpret employment status as permission to use any referral-based compensation formula without analysis.

Review the employee’s actual role, compensation methodology, federal healthcare program business, and applicable legal requirements.

Can We Pay Marketers a Fixed Salary?

A fixed salary may eliminate some of the concerns created by a direct per-referral or percentage-of-collections formula, but compensation structure is only one part of the analysis. You still need to examine what the employee is being paid to do and what conduct occurs in connection with referral sources.

Can We Give a Marketer a Performance Bonus?

Potentially, but carefully choose what performance means.

A compliance-conscious approach may consider legitimate job-performance measures rather than simply paying a bonus for each federal healthcare program patient or dollar of reimbursed business generated. Have questionable compensation methodologies reviewed before implementation.

Warning Signs Your Marketing Compensation Needs Review

Pay particular attention when your practice hears statements such as:

• “We only pay when they send us a patient.”
• “They get 10% of whatever we collect.”
• “The marketer makes more for Medicare patients because they’re worth more.”
• “They’re an employee, so Anti-Kickback doesn’t apply.”
• “Their lawyer says the contract is compliant.”
• “The marketing company won’t explain exactly how they generate the patients.”
• “They guarantee a certain number of referrals every month.”
• “We don’t know what they give referral sources—we just pay the invoices.”

Any of these should prompt a closer look at the arrangement.

Healthcare Marketing Compensation Compliance Checklist

Before Hiring a Marketer

• ☐ Determine whether the marketer will be an employee or independent contractor.
• ☐ Define the legitimate marketing services needed.
• ☐ Identify how the marketer will interact with referral sources.
• ☐ Identify whether federal healthcare program business may be generated.
• ☐ Determine how compensation will be calculated.
• ☐ Review any per-patient compensation.
• ☐ Review any per-referral compensation.
• ☐ Review percentage-of-collections compensation.
• ☐ Review revenue-based bonuses.
• ☐ Determine whether an applicable Anti-Kickback exception or safe harbor should be evaluated.
• ☐ Obtain healthcare compliance/legal review when appropriate.

In the Agreement

• ☐ Clearly describe the marketing services.
• ☐ Clearly state the compensation methodology.
• ☐ Define the marketer’s responsibilities.
• ☐ Prohibit unauthorized referral incentives.
• ☐ Address gifts, meals, entertainment, and free services.
• ☐ Require compliance with applicable healthcare laws.
• ☐ Require appropriate documentation.
• ☐ Establish oversight and reporting requirements.
• ☐ Address subcontractors when applicable.
• ☐ Obtain required signatures.

During the Relationship

• ☐ Train the marketer on Anti-Kickback requirements.
• ☐ Monitor marketer communications.
• ☐ Review expense reports.
• ☐ Review gifts and entertainment.
• ☐ Monitor payments against the contract.
• ☐ Investigate unusual referral spikes.
• ☐ Investigate complaints from referral sources.
• ☐ Verify that the marketer performs the contracted services.
• ☐ Review changes to compensation before implementation.
• ☐ Periodically reassess the arrangement.

Bottom Line

Medical practices can pay people to perform legitimate marketing services. The compliance risk increases, however, when compensation begins to function as a reward for generating federally reimbursed patients, referrals, procedures, or revenue.

Don’t assume that a commission is acceptable simply because commissions are normal in other industries. Don’t assume that calling someone an employee, consultant, marketer, or business-development representative automatically protects the arrangement either.

Instead, follow a consistent process: Define Services → Identify Compensation → Identify Federal Program Business → Examine Referral Incentives → Evaluate AKS Requirements → Document → Train → Monitor

The best time to identify a questionable marketing compensation formula is before your first payment and before the resulting claims are submitted.

Key Takeaways

• Don’t assume healthcare marketing commissions work like commissions in other industries.
• Compensation tied directly to patients, referrals, procedures, or collections can create Anti-Kickback concerns.
• The Anti-Kickback Statute applies to more than physicians.
• Remuneration includes more than cash.
• Using an independent contractor doesn’t eliminate Anti-Kickback risk.
• Making someone an employee doesn’t automatically make every compensation formula safe.
• A legitimate marketing service should be distinguishable from simply paying someone for referrals.
• Review compensation before promising commissions or bonuses.
• Written agreements should accurately describe the services being purchased.
• Monitor what marketers actually say and do on behalf of your practice.

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