Referral fees, also known as commission arrangements, are common in various industries, including healthcare. However, an arrangement where one healthcare professional pays another for referring patients can raise significant legal and ethical concerns. In Australia, practices like this are generally prohibited due to the potential conflict of interest they create, compromising the integrity of patient care. In this article, we explore the obligations of health practitioners and the legal and ethical implications of such arrangements in Australia’s healthcare sector.

Legal Framework

The Health Practitioner Regulation National Law 2009 (National Law) sets the legal standards for health practitioners in Australia. Under this law, accepting or offering referral fees is generally prohibited to ensure that healthcare decisions are made based on patient needs rather than financial incentives.

Legal Considerations

More specifically, under the National Law, ‘unprofessional conduct’ of a registered health practitioner means ‘professional conduct that is of a lesser standard than that which might reasonably be expected of the health practitioner by the public or the practitioner’s professional peers’. It extends to:

Accepting benefits for referring patients to another health service provider.
Offering benefits in return for referrals.

The National Law does appear to leave some scope for referrals in circumstances where the practitioner has a financial interest, provided this is adequately disclosed to the patient.

It will depend on the specific circumstances as to whether the specific arrangement, in theory and practice, amounts to unprofessional conduct. Given the complex interplay between these provisions, it is essential for both parties to consider obtaining independent legal advice to fully understand their obligations and risks.

Ethical Considerations

The Australian Health Practitioner Regulation Agency (AHPRA) Codes of Conduct outline the ethical responsibilities of healthcare practitioners and emphasise the importance of acting in the best interests of patients. The following ethical principles are particularly relevant in relation to referral arrangements:

Conflict of Interest

Conflicts of interest may arise when a practitioner's financial, professional or personal interests may affect or be perceived to affect patient care. Any conflict must be resolved in the patient’s best interests.

In a referral arrangement, the financial incentive for referrals could be seen as compromising patient care, raising significant ethical concerns. Transparency and full disclosure to patients are crucial, but they may not entirely mitigate the perception of compromised care.

Financial and Commercial Dealings

The Code also emphasises honesty and transparency in financial dealings with patients. Practitioners must declare any financial interests that could affect patient care, which we consider would include a referral arrangement. While there may be scope to argue that referral arrangements could be managed with disclosures and agreements, it risks creating an environment where referrals are driven by financial incentives rather than patient needs.

Patient-Centered Care

Referrals should always be made based on the clinical needs and best interests of the patient. Introducing financial incentives into this process risks prioritising profit over patient care, potentially leading to suboptimal treatment outcomes.

Potential Consequences

While referral arrangements appear common in the industry, they are unlikely legal or ethical. Violations of the National Law and/or Codes of Conduct can lead to several serious consequences for healthcare practitioners, such as:

Disciplinary Action:
Regulatory authorities, such as AHPRA and/or the National Health Practitioner Ombudsman, could potentially take disciplinary action against practitioners who accept or offer referral fees. This can include fines, suspension, or revocation of their professional license.
Reputation Damage:
Engaging in unethical practices can severely damage a practitioner's reputation, leading to loss of patient trust and professional relationships.
Legal Repercussions:
In addition to regulatory consequences, practitioners may face legal challenges if their referral practices are found to violate the National Law.

However, we reiterate that this is determined on a case-by-case basis, and the nature and extent of any referral arrangement should be considered.

Recommendations

Given the legal and ethical risks, we would caution against entering referral arrangements in a healthcare setting without first obtaining proper legal advice from a health law expert. Healthcare professionals must always prioritise their patients' clinical needs, and any referral decisions must be based exclusively on what is best for the patient. It may be difficult to prove that this is the case where financial incentives are involved.

If you, as a health practitioner, nevertheless decide to proceed with a referral arrangement, significant caution must be exercised, and safeguards are essential, including:

Informed Consent: Clearly disclose the arrangement to patients, ensuring they understand the financial relationship.

Detailed Agreement: Establish a formal agreement between the parties outlining the terms and responsibilities.
Professional Indemnity Insurance: Consult with insurers to understand potential impacts on coverage.

However, referral arrangements are not recommended and whether or not you enter into one, will ultimately depend on your personal and practice’s risk tolerance and a cost-benefit analysis.

Is There a Way Around the Prohibition?

Referral arrangements in healthcare raise complex legal and ethical issues that can compromise patient care and professional integrity. Healthcare professionals must navigate these regulations carefully, prioritising transparency, honesty, and patient-centred care to maintain the trust and integrity essential to the profession.

The restriction on accepting or offering or giving a benefit as inducement, consideration or reward for referrals is relatively clear. Any attempt to avoid this prohibition could undermine the ethical foundation of the healthcare profession and could ultimately pose significant risks to patient care.

However, we recommend seeking legal advice from a health law lawyer regarding your specific circumstances or proposed referral arrangements to help avoid potential liabilities and ensure you are effectively meeting your legal and ethical obligations.

For specific advice tailored to your medical practice, please do not hesitate to contact us here.

Understanding Referral Fees in Healthcare: Legal and Ethical Perspectives