Zocdoc and Anti-Kick Back Laws

With the increasing number of people seeking doctors each year, the process of finding a suitable physician and scheduling an appointment has become more and more difficult. We not only have to check for the doctor’s availability, but also whether he or she is covered by our insurance plan. On numerous occasions, we have been asked to wait over a countless number of phone calls as the individuals on the other side confirm whether or not they can accept our medical insurance. There are also numerous forms we have to fill out before finally walking in and having the doctor examine us. It was tiring procedures like this that spurred the appearance of services like Zocdoc, an online medical appointment booking service.

Zocdoc enables patients to search for doctors based on their location and insurance plan. The service displays each doctor’s availability, user ratings, and allows users to fill out any waiting forms online beforehand. These services enabled both the patient and doctor to work through the appointment process more smoothly. For the healthcare providers using the service, Zocdoc charged them an annual subscription fee, regardless of the number of patient referrals the doctor received through Zocdoc. However, as it was recently announced, this pricing model is about to change. Rather than charging doctors a flat rate fee, doctors would now be charged based on a per patient referral basis – meaning that doctors would be charged for each booking they receive through the service. For users registered with the service, ZocDoc has stated on its website that the new pricing model is intended to “fairly reflect the number of bookings each practice receives from Zocdoc,” but this has not sat well with all doctors. When Zocdoc was reached out for a comment on the situation, they replied with, “We take compliance with federal and state laws, including New York’s, seriously. For more details on our new pricing model’s compliance, please read our FAQ: https://www.zocdoc.com/about/pricingupdate/ny/.” On their website, the company writes, “... we worked closely with the governor’s office and regulators at the New York State Department of Health (DOH), as its Office of Professional Misconduct (OPMC) is responsible for enforcing the laws and regulations that govern the practice of medicine by physicians and most other similarly licensed professionals… After careful review, DOH agreed that our new pricing complies with the relevant state laws and regulations governing the practice of medicine and professional licensure, including the State Education and Public Health Laws, as Zocdoc's Marketplace does not make ‘referrals’ and our new pricing model does not constitute a ‘fee-splitting’ arrangement with licensed providers, as these terms are understood under these laws.”

Physicians at Highline Orthopaedics have expressed that the new pricing model is against the the Anti-Kickback State law and that it is unethical to charge on a per appointment basis. Below is a written statement from the physicians at Highline Orthopaedics expressing why the new pricing model will not work:

To most laymen, tech developers and their platforms are mystifying. The value of technology platforms, is determined by the users that populate it (the exposure or reach they have). The greater number of users, the more valuable. One group of developers, set up in New York’s trendy SoHo neighborhood, has decided they are above Federal Law, and can swindle unknowing doctors, taking advantage of the disorganization in the healthcare industry, by charging doctors a commission for each patient they bring in. Like club promoters counting heads.

In July of 2007, the medical appointment-scheduling platform ZocDoc was a gift to both physicians and patients. As a patient, I didn’t want to log onto my insurance website (or worse, call), enter the password I definitely forgot, find my plan, scroll through a list of doctors who seem to be in no particular order, find a phone number, call it, wait on hold, maybe get an appointment, maybe not, they have an opening for two (2) weeks from today. I’ll see if other doctors are available sooner, I’ll call back, then call around, no one is. Call back the first office only to be told that that appointment was taken. Make one for a later date. Show up and find that they don’t take my insurance plan. No. With ZocDoc, you saw the physicians credentialed through your insurance plan, their specialties, schedule and availability, and reviews, all in one place, and could easily schedule and get seen right away.

Somehow, instead of advancing and expanding this platform, ZocDoc decided it was switching gears and began implementing a commission-based business model. What does that mean? Instead of charging physicians an annual fee as they were--in their so-far-successful 11 years--they will be charging PER APPOINTMENT. In the middle of last year, but confirmed last week, providers were sent an email saying ZocDoc would be changing their business model. ZocDoc would begin taking a piece of every single appointment. OpenTable has a similar policy, they charge one ($1) dollar per diner. What does ZocDoc feel is fair? $80. EIGHTY, yes.

The 1988 Ethics in Patient Referrals Act: The Stark Law and the Practice of Medicine, based entirely on the American Medical Association’s Code of Ethics, describes a violation as: “a medical referral of a patient between physician and at least one other ‘outside’ entity; such as a physician and a hospital, or two physicians not in the same group practice, where a prohibited financial, or compensation arrangement exists between them.

A commission-based business model does not work for healthcare. Would it be wrong to refer a patient to a doctor I knew was bad, simply because he paid me to refer patients to him? It is also illegal. Recently, the Seventh District Court of Appeals ruled on a case involving a physician who was referring his patients who required homecare to a specific homecare company that was paying him for the referrals. When a physician or entity is a “gatekeeper” to care and payment. Even with no formal record or contract (all payments were made in cash), Dr. Patel was fined over $30,000, 200 hours of community service, and faces eight (8) months in prison. Let’s hope ZocDoc’s executives are ready.

Originally, ZocDoc’s emphasis was on Value-based-Care (vs. Fee-for-Service model), which encouraged professionals to engage with patients, offer care that’s apposite for the individual, invest in technology, and incentivize providers for coordinated and effective care services.  It also presented a centralized way of pairing physicians with patients who needed care. They charged physicians a yearly fee of several thousands of dollars and that was that. They seemed to be expanding nicely; slow and steady wins the race. Apparently, too slow, and too steady.

After 11 years, far from their first $3 million Series A in 2008, the founders are likely tired and want to sell. Traditionally, we operate under the assumption that the more products you sell, the more money you make. And while this is technically true, more product output doesn’t always equal better long-term profitability. This is especially true for tech startups. Most (not ZocDoc) have a culture that prioritizes platform development over product innovation. Think UBER. An product is very limited in what it can do, a platform’s value is determined by the users that populate it and can easily be morphed into something else down the road. Its value is how many users it has. Every physician they alienate devalues the company more and more until you have few patients and even fewer physicians and become irrelevant.

References:

https://www.zocdoc.com/about/newpricing/

https://www.oig.hhs.gov/compliance/physician-education/01laws.asp

Sherry Chow