Fee splitting occurs when a patient is referred by one doctor to another in return for a portion of the fee that the referral doctor receives for treating the patient. Both the AMA and APA consider this practice unethical for a number of reasons; primary among them is that fee splitting undermines patient trust. A patient should be able to rely on his or her physician to make referrals based only on the skill and quality of the physician to which the patient is being referred. Moreover, fee splitting puts a physician at risk for running afoul of federal and state antikickback laws.

Sometimes experienced physicians offer referrals to new physicians with strings attached that might be construed as fee splitting. For instance, a physician may be told that he or she can see patients using an office in the referring physician's facility, but must pay a percentage of the fees received to cover the overhead.

While there is nothing wrong with paying for the use of office space, the cost should not be a percentage of the patient's charges; instead, it should be a flat fee based on what is reasonable and customary for renting such space in that location.

In one case that came to the attention of APA's Managed Care Help Line, the referring physician stipulated that the new practitioner had to use his billing service for the referrals. This practice is acceptable, provided the fee charged by the billing service is reasonable and customary. Within a group practice, members of the group can decide how fees will be allocated, and this does not constitute fee splitting.

Fee splitting is a complex legal issue governed by both federal and state laws. As a general rule, if it looks like fee splitting, don't do it. If you have specific questions about whether a business arrangement you would like to accept constitutes fee splitting, you should consult a lawyer familiar with the laws in your state before making any agreements. ▪