ADA Cautions Dentists About Using Groupon and Offering Referral Incentives

Attracting new patients and generating more dentistry are priorities for many dentists in 2012, following what has been another difficult year for the majority of U.S. dental practices. In an attempt to recharge their practices, many dentists are considering internet-based marketing programs like Groupon and/or offering incentives for new patient referrals. In response to this growing trend, the American Dental Association’s Legal Division recently issued a strong note of caution in a ten-page memorandum to the ADA’s constituent state dental associations (Legal Issues in Marketing a Dental Practice: Referral Gifts and Groupon Discounts).

The memo addressed questions about the potential legal concerns associated with offering and awarding Groupon discounts to new or existing patients, advertising Groupon or other discounts in connection with dental services, and offering and awarding gifts to existing patients in exchange for new patient referrals. The legality of such actions largely depends on what state the dental practice is in and whether the dentist provides services payable under a federal health care program, such as Medicare, Medicaid, TRICARE, etc. The purpose of the ADA memo is to warn constituent dental associations that some dentists may be prohibited under state and/or federal law from offering Groupon-type discounts and/or referral gifts.

Groupon Marketing

Dentists who use Chicago-based Groupon to offer discounts to new patients must give Groupon a portion of the revenue generated from the Groupon promotion. When a promotional discount is offered, Groupon customers (potential dental patients) pay the fees directly to Groupon. The dentist is then paid a percentage of the fees collected. Splitting the revenues with Groupon may pose a legal problem for dentists who practice in states that have laws prohibiting fee splitting between a dentist and a third party - and many states have such laws.

Following a review with the Oregon Department of Justice, the Oregon Dental Board (ODB) recently released a statement announcing that, “The Board has preliminarily determined that these [Groupon-type discounts for potential patients] may violate the unprofessional conduct rule (OAR 818-012-0030[3]) which prohibits offering rebates, split fees, or commissions for services rendered to a patient to any person other than a partner, employee, or employer.” The Board sent a postcard to every licensed dentist in the State of Oregon informing them of the decision. Until such arrangements can be fully reviewed by the Board, licensees should proceed with caution and seek legal counsel or contact the Board if they are considering this type of marketing program. Conceivably, dentists disciplined for fee splitting could lose their licenses. According to ODB Executive Director, Patrick Braatz, his staff has already opened two investigations following the release of the Oregon Board of Dentistry’s policy statement.

Groupon’s biggest competitor, Washington-based Living Social, has changed its model for healthcare professionals to a flat fee marketing program to bypass this conflict of interest. A letter is posted on the Oregon Board of Dentistry’s website from Braatz to Seth Brown, Assistant General Counsel of Living Social, acknowledging its new flat fee marketing program for healthcare providers. Braatz asserts that, “The ODB is not approving a specific contract but is approving a model, which includes an agreement between the practitioner and Living Social that all fees paid by the customer will be passed through to the practitioner and the practitioner will pay an advertising fee directly to Living Social.”

In addition to the recent decision by the Oregon Dental Board, the ADA's memo highlights several other states that also have laws prohibiting fee splitting, which could conflict with Groupon-type marketing. These include the following:

The Michigan Public Health Code prohibits, “dividing fees for referral of patients.” Under the Texas Board Rules, a dentist may not offer or give cash to a third party for securing or soliciting patients. The Texas Board Rules include a “safe harbor” for remuneration for advertising, marketing, or other services but only if the remuneration “is set in advance, is consistent with the fair market value of the services, and is not based on the volume or value of any patient referrals.” New Jersey law states that services advertised as complimentary, free of charge, or for a discounted fee must be offered equally to all patients identified as eligible in the advertisement. For example, if the free service or discounted service is offered to new patients, it must be offered to all new patients - even those with dental reimbursement plans. While the Illinois Dental Practice Act provides that dentists may advertise or offer free examinations/evaluations or free dental services, it also states, 'it shall be unlawful, however, for any dentist to charge a fee to any new patient for any dental service provided at the time that such free examination or free dental services are provided.'

Potential Conflicts with Federal Law

Groupon-type marketing is also problematic for dentists who treat patients covered by Medicare or Medicaid. The federal anti-kickback statute (AKS) prohibits any person from knowingly and willfully offering or paying cash to any person to induce the person to refer a patient for services for which payment may be made under a federal healthcare program. Although the federal anti-kickback statute provides a safe harbor for certain marketing, it specifically states that a payment from a healthcare provider to a referral service cannot be based on the volume or value of any referrals and must be based solely on the cost of operating the referral service. A violation of the AKS can be a felony and result in fines, imprisonment, and exclusion from federal health plans.

Groupon and Third Party Payer Contracts

The ADA memo further notes that Groupon-type marketing may conflict with the terms of some third party payer contracts. Some contracts require that fees submitted to the insurer reflect any reduced fees (or copayments) charged to the patient or that the dentist also give the insurer the best price that the dentist charges for a particular service.

Groupon and ADA Code of Ethics

The ADA memo also reminds constituent dental associations that ADA members voluntarily agree to abide by the ADA Code of Ethics as a condition of their membership. Offering Groupon-type discounts may violate certain ADA ethical rules, including the rule prohibiting dentists from giving rebates and splitting fees. According to Amy Chase, ADA Associate General Counsel,“While a determination as to whether any of these practices are illegal or unethical has not yet been made, there is clearly a risk in each instance. Dentists are strongly advised to consult a local attorney familiar with such issues prior to offering and rewarding social coupons to new patients.” (ADA News, November 21, 2011)

Referral Incentives—Gift Cards, Movie Tickets, etc.

In addition to the federal anti-kickback statute prohibiting dentists from offering money or other incentives to encourage a person to refer a patient that may be eligible for services under a federal healthcare program (e.g., Medicare or Medicaid), several states restrict the awarding of gifts or rebates as a way to solicit newpatients. The ADA memo cites the following:

The Illinois Dental Practice Act makes it unlawful for any dentist to “offer gifts as an inducement to secure dental patronage.” The Texas State Board of Dental Examiners has declared it illegal for a dentist to “offer, give, dispense, distribute, or make available to any third party any cash, gift, premium, chance, reward, ticket, item, or thing of value for securing or soliciting patients.” Under these regulations, even nominal gifts made to existing patients may be prohibited. Under the Arizona Dental Practice Act, “unprofessional conduct” includes “giving or receiving rebates, either directly or indirectly.” The ADA cautions that referral gifts such as movie tickets or gift cards may be seen as an indirect way of splitting fees or offsetting fees for a referring patient.

Offering gifts for referrals was also addressed in the August 2011 edition of the Journal of the American Dental Association (pgs. 966-967). In the article, What Are The Ethical Issues I Need To Consider When Developing Marketing Strategies For My Practice?, Rod B. Wentworth, DDS, Chair of the American Dental Association’s Council on Ethics, Bylaws, and Judicial Affairs, advises dentists to check their state dental regulations before implementing any marketing plan. He states that giving a patient a gift card may or may not be an ethical choice, depending on how you use it.

According to Dr. Wentworth, the ADA’s Principles of Ethics and Code of Professional Conduct (Section 5.F.4, Referral Services) states that a dentist is generally not permitted to make payments to another person or entity for the referral of a patient for professional services. This also means that it is unethical to pay your current patients to refer other patients to your practice. Dr. Wentworth gives the example of a marketing campaign in which a dentist offers a significant gift to existing patients—for example, a $100 cash card—for each patient they refer. In this example, the dentist has tendered an offer of a gift with value and given the patient making the referral a financial incentive to do so. This could also be considered a rebate, which is prohibited by Section 4.E, Rebates and Split Fees.

However, Dr. Wentworth maintains that this would not apply to an unsolicited cash card that you send along with a thank you note to an existing patient who, on his/her own accord, recommends a neighbor to you. In this case, the patient did not solicit the gift, and the gift card would likely be considered a gesture of thanks with no unethical undertones. The same applies to items routinely dispensed to patients free of charge, such as toothbrushes, floss, etc. These do not create an ethical conflict because they are adjuncts to care.

If a dentist is considering offering some form of cash card or gift card to prospective patients for an initial visit, Wentworth reminds them to take into account the ethical implications as they relate to Advisory Opinion 5.B.1, Waiver of Copayment. This states that “a dentist who accepts a third party payment under a copayment plan as payment in full without disclosing to the third party payer that the patient’s payment portion will not be collected is engaged in overbilling. The essence of this impropriety is deception and misrepresentation; an overbilling dentist makes it appear to the third party that the charge to the patient for services rendered is higher than it actually is.”

Dr. Wentworth further adds, “Simply put, if you discount a fee to a patient, then you must disclose the discount to any third party payer involved. To illustrate, let’s say you simply decide to offer a $100 merchant cash card for a new patient examination, radiographs, and prophylaxis. In effect you have discounted one or more of the procedures and may be obligated to inform the third party payer of the discount.”


Before implementing any marketing plan, dentists need to ensure that their marketing programs do not violate state and federal anti-kickback laws, third party payer contracts, and the ADA Code of Ethics. To help you become familiar with your state laws, we have provided a list of web addresses for each state's dental laws in this issue