Guidelines for gift-giving in 2020

January 16, 2020
Ericka L. Adler, JD
Ericka L. Adler, JD

Shareholder at Roetzel & Andress

Plans you can prepare, and risks to avoid, this year.

At the end of the year I always receive questions from many of my clients regarding how they can reward employees and contractors for their hard work. Depending on the type of worker to which they are referring, the answer is different. Also, depending on the state in which the client is located, the answer may be different. 

1. In many states, there is a doctrine related to the corporate practice of medicine. This doctrine requires that only physicians be the owner of a medical practice. In those states, non-physicians may not be owners of a medical or professional practice. I have had several instances where physicians have indicated to valuable staff that, should the practice perform well, they would be given an “interest” in the practice. While well meaning, these types of “gifts” are not appropriate based on certain state’s law. 

2. Instead of an ownership percentage, sometimes physician-owners offer the opportunity to earn a percentage of the “profit” or “collections” of the practice for reaching certain targets. This is often written into the employee/contractor’s agreement using language such as: “At the end of each year, you will be provided with 5% of the revenue of the practice.” Sometimes these amounts are tied to year-over-year profit of the practice as a whole or a certain division of the practice. Again, depending on the state in which the practice is located, such an arrangement could constitute fee-splitting, which is a prohibition on physicians sharing profits of the practice with non-physicians.

Read More: Should physicians accept gifts from their patients?

3. The most common inquiry I receive from practice clients is whether a bonus can be paid to somebody based on the volume of business they generated in the prior year. Although some employees may be safe from healthcare laws if they are “bonified employees” as defined under federal law, and therefore can be compensated in any manner the employer desires, I still recommend physicians avoid compensation that rewards employees for generating business so specifically, particularly related to federal patient volume (and even state law may impact payments related to non-federal payors). For example, if you have an employee who is paid a base salary and handles marketing for the practice, resulting in 250 new patients coming to the practice, I would not recommend a per patient bonus amount. Instead, it is typically recommended that a discretionary bonus be paid (not tied exactly to those numbers) or we come up with a flat bonus for meeting certain targets. The risk of any bonus payments to non-employees based on value or volume of business generated is something that should not ever be taken unless specifically reviewed by health law counsel. 

4. Providing discretionary bonuses, gift cards and other gifts to employees and contractors should generally be acceptable. Keep in mind, particularly when it comes to independent contractors, gifts that are actually intended to induce or reward individuals for referrals of business or patients to the business always will be questionable. It is not unreasonable for small gifts, gift cards, and discretionary thank you bonuses to be paid, but  keep in mind that there are state and federal laws that limit the value of gifts given to referral sources and beneficiaries to “de minimus” value, so be careful. Cash and expensive gifts  always should be avoided. 

There are many rules to think about when rewarding employees and contractors who have contributed to the success of your medical practice. I really think the best time to think about this is at the beginning of the year and not at the end, or at the time an employee is hired, so that you can run the proposed bonus approach by legal counsel to be sure you are handling everything in a compliant manner. 

Ericka L. Adler, JD, LLM has practiced in the area of regulatory and transactional healthcare law for more than 20 years. She represents physicians and other healthcare providers across the country in their day-to-day legal needs, including contract negotiations, sale transactions, and complex joint ventures. She also works with providers on a wide variety of compliance issues such as Stark Law, Anti-Kickback Statute, and HIPAA. Ericka has been writing for Physicians Practice since 2011.