Dental Patient Referrals: Are referral fees legal in California?
Scenario: A dentist-client (Dentist A) was recently approached by another dentist (Dentist B) to discuss the referral of new patients to Dentist A's practice. Dentist B wanted a commission or referral fee on each patient referred to Dental A's practice by Dentist B. Dentist A declined the offer, believing that this type of arrangement was not conducive to maintaining the high level of trust between himself and his patients. Was the client correct in his judgment?
Answer: Yes, Dentist A was correct in his judgment, both legally and practically. Generally, in California, a dentist may not pay another dentist or non-dentist for patient referrals. This prohibition is codified under California Business & Professions Code §650 et. seq. A violation of this law is also punishable by imprisonment and/or monetary fines up to $50,000.00. See Business & Professions Code §650(g). Dentist A's instinct as to this issue was correct for another reason. Practically speaking, patients are unlikely to trust a referring dentist and/or the treating dentist, where the referral was predicated on a commission and not the general welfare of the patient. A patient wants to believe, as they should, that a dentist's referral of a colleague is due to the treating doctor's reputation and not because the treating dentist pays for his patients' business.
While it is understandable for a dentist/business owner to explore different avenues to increase revenues, it is always advisable to consult with an attorney on the legal and practical results of such arrangements.