The Marketing Deal That Can Turn an Independent Clinic Into a Patient Brokering Case

The pitch arrives by email, usually on a Tuesday, and it sounds like the best offer a small practice has heard all year. A marketing agency will build the ads, run the funnels, staff the phones, and fill the schedule. There is no retainer and nothing due up front. The agency takes 20 percent of the revenue from every new patient it brings in, and if it brings in no one, the practice owes nothing. For a two-physician clinic in Ocala that has watched three hospital-employed groups open within ten miles, this reads as the one growth arrangement that carries no risk.

It carries a great deal of risk, and most of it is criminal rather than financial. The same structure that makes the offer attractive, payment that rises and falls with the number of patients delivered, is the structure Florida’s Patient Brokering Act was written to punish.

What Section 817.505 Actually Says

The Patient Brokering Act, codified at Florida Statute 817.505, makes it unlawful for any person, including any health care provider or facility, to offer or pay a commission, benefit, bonus, rebate, kickback, or bribe, directly or indirectly, in cash or in kind, to induce the referral of a patient. It is equally unlawful to solicit or receive one in return for referring a patient. Subsection (1)(d) then reaches everyone else in the room by making it a crime to aid, abet, advise, or otherwise participate in that conduct. The agency that proposes the arrangement and the physician who signs it are exposed under the same section.

The penalties scale with head count. A violation involving fewer than 10 patients is a third-degree felony with a fine of up to $50,000. Ten to 19 patients makes it a second-degree felony and $100,000. Twenty or more patients is a first-degree felony, punishable by up to 30 years in prison and a fine of up to $500,000. A marketing agency that is doing its job well will pass 20 patients in its first quarter.

Two features of the statute matter more for an ordinary clinic than the penalty schedule. The first is that the Act applies regardless of who pays the bill. The federal Anti-Kickback Statute reaches only claims to Medicare, Medicaid, and other federal programs. Florida’s statute reaches commercial insurance and cash-pay patients as well, which means a concierge practice or an aesthetic clinic that has never billed a federal program is fully inside its scope. The second is the safe harbor language, and here the history matters.

The 2019 Amendment Closed the Door Most Practices Thought Was Open

Before 2019, the Act exempted any payment practice “not prohibited by” the federal Anti-Kickback Statute or its regulations. Because the federal statute does not reach private-pay patients, a reasonable lawyer could argue that a private-pay marketing deal was “not prohibited by” federal law and therefore fell outside the state statute too. Several did argue exactly that.

House Bill 369, effective July 1, 2019, replaced that language. The exemption now covers only payment practices “expressly authorized” by the federal statute or by the safe harbor regulations at 42 C.F.R. 1001.952. The practical effect, as Holland & Knight’s health law group observed at the time, is that an arrangement affecting only commercially insured or cash patients can violate the Florida statute even though it could never violate the federal one. The burden moved. A practice no longer needs to show that its arrangement is not forbidden. It needs to show that its arrangement is affirmatively blessed by a federal safe harbor.

A percentage-of-revenue marketing contract cannot make that showing. The relevant federal safe harbor, the personal services and management contracts provision at 42 C.F.R. 1001.952(d), requires that the aggregate compensation be set in advance, be consistent with fair market value, and not be determined in a manner that takes into account the volume or value of referrals or business generated between the parties. Compensation that is defined as a percentage of revenue from the patients the agency produces fails all three tests at once. It is not set in advance, it has no relationship to the market cost of the labor, and it is nothing but a function of volume. The Office of Inspector General has said for years, most directly in Advisory Opinion 08-19, that advertising arrangements present low risk when the vendor’s fee has nothing to do with whether a prospect ever becomes a patient. The percentage deal is the exact opposite of that description.

There is a further problem for a physician who assumes good faith will carry the day. In State v. Kigar, decided by the Fourth District Court of Appeal in 2019, a defendant facing more than 100 patient brokering counts argued that he had relied on written legal opinions obtained before he began. The court held that patient brokering is a general intent crime, that the State need only prove the defendant intended to make the payment, not that he intended to violate the statute, and that advice of counsel is not a defense. A letter from a lawyer saying the contract is fine does not protect the person who signs it.

The Second Exposure Comes From the Board of Medicine

Even a prosecutor who never opens a file leaves a physician with a licensure problem. Section 458.331(1)(i) makes it grounds for discipline to pay or receive any commission, bonus, kickback, or rebate, or to engage in any split-fee arrangement, in any form, with a person for patients referred to the licensee. The Board of Medicine has been interpreting that language through declaratory statements for nearly forty years, and the pattern is consistent. In its 1990 Zeterberg statement the Board identified marketing services paid on a percentage basis as a red flag for illegal fee splitting. In the 1992 Green Clinic matter it called a 54 percent revenue retention arrangement “classic fee splitting” because the percentage bore no relationship to the actual cost of the services. In Bakarania in 1997 the Board rejected a management contract that paid actual costs plus a fixed annual fee plus 30 percent of net collections, and it stated that payment of a percentage of the revenue that management and practice enhancement services generate is not permissible. The Board also read “referral” broadly enough to include the networking and contracting activity that produces patient flow, which is a fair description of what a marketing agency does.

So the physician who signs the 20 percent deal has two regulators to answer to, working from two different statutes, and neither one requires that a single Medicare dollar ever changed hands.

Why the Law Reads This Way

The statute was not drafted with a family practice in Ocala in mind. It was sharpened in response to the South Florida sober home crisis of the last decade, in which treatment centers paid recruiters per head to deliver insured patients, and patients were cycled through relapse and readmission because each admission generated a fresh set of billable urine screens. Palm Beach County’s Sober Homes Task Force built its cases on this statute, and the 2019 amendment followed that task force’s work.

The legislature drew the lesson that any payment which rises with the number of patients delivered corrupts the judgment of the person delivering them, whatever the setting. That is the principle that now sits on top of an ordinary marketing contract. The independent physician did not create the sober home problem, but the tool built to fix it does not distinguish between a recruiter in Delray Beach and an agency in Tampa with a good website.

The Iron Triangle, Seen From a Two-Physician Practice

Our August coverage of robotic phlebotomy described William Kissick’s iron triangle, the framework from his 1994 book Medicine’s Dilemmas holding that access, quality, and cost form a triangle in which any one corner can be improved only by giving up ground on one or both of the others. That post was about a device that bent the triangle. This one is about a statute that makes it rigid, and it is worth analyzing the three corners from the point of view of the small practice receiving marketing solicitations.

The contingency marketing deal is offered as a cost solution. The practice has no marketing budget, so it is offered growth with no fixed outlay and payment only from revenue that would not otherwise exist. From the cost corner, it is the cheapest access expansion available. The legislature, looking at the same arrangement from the quality corner, saw a payment that scales with patient volume and concluded that it will, over time, produce patients selected for their revenue rather than their need. That is a defensible conclusion in the sober home context, where the evidence was overwhelming. Whether it holds for a dermatology practice buying Google ads is a different question, but the statute does not ask it.

The result is that the access corner gives way. A physician who understands the exposure has three lawful paths. She can pay a marketing vendor a flat monthly fee set in advance at fair market value, which requires a budget she may not have. She can hire the marketer as a W-2 employee on a salary that does not vary with volume, which the bona fide employment safe harbor protects, and which costs more still. Or she can grow slowly on referrals from colleagues and word of mouth, which is how independent practices grew in 1985 and is not how anyone’s competitors grow now.

Notice who is not constrained. A hospital system runs its marketing department on salary and has done so for decades. A private equity platform with forty practices under one management services organization has an in-house team and a compliance officer who reviews every vendor contract before it is signed. The percentage deal was never on their table because they never needed it. The statute’s weight falls on the one class of provider that had no other way to buy growth, and it falls there at the same moment that consolidation is already pulling independent physicians into employment. In Kissick’s terms, a rule written to protect the quality corner is quietly closing the access corner for independent practice, and the cost corner benefits whoever is large enough to absorb the compliance overhead.

I am not arguing for repeal of the statute, because the abuse it targets was real and it cost lives. I am arguing that physicians should recognize that a law they associate with sober homes is now a boundary condition on how their own practice is allowed to grow, and to plan accordingly.

What Florida Physicians Should Do Now

1. Pull every marketing, lead generation, and management agreement your practice has signed and find the compensation clause. If the vendor’s payment is calculated as a percentage of collections, a percentage of revenue, or a fee per new patient, that agreement needs to be restructured. The exposure does not depend on the vendor’s intent or yours.
2. Restructure to a fixed fee set in advance. The compensation should be a flat amount for a defined scope of work, supportable as fair market value for the labor involved, and it should not change when patient volume changes. Ask the vendor to document how the fee was derived. A vendor who will only work on contingency is telling you what its business model is.
3. Separate advertising from referral. An agency that places ads, builds a website, and runs a call center for a fixed monthly fee, without regard to whether any caller becomes a patient, is doing advertising. An agency paid per patient is doing referral. Keep the contract, the invoices, and the reporting on the advertising side of that line.
4. Assume the arrangement will be judged without regard to payer mix. Do not let anyone tell you that a cash-pay or commercial-only practice is outside the statute. That argument failed in 2019 and it will not be revived.
5. None of this constitutes legal advice, so get the arrangement reviewed by a Florida health law attorney, and understand what that review does and does not buy you. After Kigar, a written opinion is not a defense to prosecution. What a competent review does is keep you from signing a contract that fails the safe harbor in the first place, which is the only protection the statute leaves.

Florida Doctor Magazine covers the regulatory environment for independent physicians because independence is worth defending. The Patient Brokering Act is not going away, and the physicians who keep their practices are going to be the ones who learned its shape before a state attorney explained it to them.

Frequently Asked Questions

Does Florida’s Patient Brokering Act apply to a cash-pay or commercial-only practice?

Yes. Unlike the federal Anti-Kickback Statute, which reaches only federal health care program claims, Florida Statute 817.505 applies regardless of payer. A concierge, aesthetic, or commercially insured practice that has never billed Medicare is fully within its scope, and the 2019 amendment removed the argument that private-pay arrangements fall outside it.

Is it illegal in Florida to pay a marketing company a percentage of revenue from new patients?

The arrangement fits no federal safe harbor, because the personal services safe harbor at 42 C.F.R. 1001.952(d) requires compensation set in advance, at fair market value, and not tied to the volume or value of business generated. Since 2019 the Florida statute exempts only arrangements expressly authorized by those safe harbors, so a percentage-of-revenue marketing contract carries criminal exposure under section 817.505 and licensure exposure under section 458.331(1)(i). Whether a given contract would be prosecuted depends on its facts, which is why review by a Florida health law attorney matters.

What are the penalties for patient brokering in Florida?

Fewer than 10 patients is a third-degree felony with a fine of up to $50,000. Ten to 19 patients is a second-degree felony with a fine of up to $100,000. Twenty or more patients is a first-degree felony, which carries up to 30 years in prison and a fine of up to $500,000. The statute also reaches anyone who aids, abets, or advises the prohibited conduct.

Does a legal opinion letter protect a Florida physician from a patient brokering charge?

No. In State v. Kigar (2019) the Fourth District Court of Appeal held that patient brokering is a general intent crime and that advice of counsel is not a defense. A lawyer’s review is still worth having, because it can keep a practice from signing a contract that fails the safe harbor in the first place, but it does not shield the physician once the contract is signed.

How should an independent Florida clinic structure a marketing contract safely?

Pay a fixed fee set in advance for a defined scope of advertising work, supportable as fair market value, and unchanged by patient volume. Keep the vendor on the advertising side of the line, meaning it is paid for placing ads and handling inquiries rather than for delivering patients, and document how the fee was derived. Alternatively, hire marketing staff as W-2 employees on salary that does not vary with volume.

This article is general information for physicians and is not legal advice. Consult a Florida health law attorney about your practice’s specific arrangements.

This article was drafted with the assistance of AI writing tools, then reviewed, edited, and approved by Dr. Sean C. Orr, M.D., who holds full editorial responsibility for its content. The header illustration was created with AI image tools.

References

1. Florida Statutes § 817.505, Patient brokering prohibited; exceptions; penalties. flsenate.gov
2. Florida Statutes § 458.331(1)(i), Grounds for disciplinary action (fee splitting). flsenate.gov
3. Florida House Bill 369 (2019), amending § 817.505, effective July 1, 2019. flsenate.gov
4. 42 U.S.C. § 1320a-7b(b), the federal Anti-Kickback Statute, and 42 C.F.R. § 1001.952(d), personal services and management contracts safe harbor. ecfr.gov
5. State v. Kigar, Fla. 4th DCA (2019), holding that advice of counsel is not a defense to patient brokering. Discussed in Holland & Knight, “Thoughts on Recent Amendments to the Florida Patient Brokering Act” (August 2019). hklaw.com
6. Akerman LLP, “Florida Patient Brokering Act Amended: Does it Clarify or Create New Issues?” (2019). akerman.com
7. American Health Law Association, “Significant Changes to Florida’s Patient Brokering Act: Uncertainty Lies Ahead.” americanhealthlaw.org
8. The Florida Bar Journal, “Fee Splitting and the Management of Medical Practices: A History of Board of Medicine Declaratory Statements” (Zeterberg 1990, Green Clinic 1992, Bakarania 1997). floridabar.org
9. HHS Office of Inspector General, Advisory Opinion 08-19 (advertising and lead generation arrangements). oig.hhs.gov
10. Florida Healthcare Law Firm, “When Is Marketing an Illegal Kickback?” floridahealthcarelawfirm.com
11. Jones Health Law, “Healthcare Provider Marketing and Management Arrangements.” joneshealthlaw.com
12. William L. Kissick, Medicine’s Dilemmas: Infinite Needs Versus Finite Resources (Yale University Press, 1994). Penn Leonard Davis Institute summary. ldi.upenn.edu