Kick back and Fee splitting in Private Practice

In 2019, just before the pandemic, a company from Indonesia approached me. They claimed that they represented a group of women who had problems conceiving. They wanted me to be the adviser for their group and said that they would refer their cases to me for a percentage of my charges.  I told them that I could be an adviser at no cost to them but that, I was  not prepared to share my fees as  it was  unethical and illegal.  The pandemic came and I never saw them again.

I have been in private practice for about 28 years now and over the years, there have been a number of such proposals. Offers such as these have come from an insurance agent who tells me that he will send all his clients to me for a small fee or from organizations who want to be paid for a referral. They tell me that they have many doctors doing this and are perplexed as to why am I am hesitant. I have at all times refrained from such temptation and have up to now, never paid a single person for  patient referral.

What is a kickback? The dictionary describes it as an illicit payment made to someone in return for facilitating a transaction or appointment. Fee splitting is the practice of sharing fees with professional colleagues, such as physicians or lawyers, in return for referrals.

In the guideline of the Malaysian Medical Council MMC Guideline 005/2006
It was written that the definition of fee splitting in the Private Healthcare Facilities and Services (Private Medical Clinics or Private Dental Clinics) Regulations 2006 is as follows:

“Fee Splitting” means any form of kickbacks or arrangements made between practitioners, healthcare facilities, organizations or individuals as an inducement to refer or to receive a patient to or from another practitioner, healthcare facility, organization or individual. As defined above, the basis of referral or acceptance of patients between practitioners must be based on quality of care (and not on considerations of monetary benefits). Fee splitting, which implies that a practitioner makes an incentive payment to another practitioner for having referred a patient to him, is unethical practice. Fee sharing between two practitioners managing a patient is permissible; the basis for such sharing being that the practitioners must have direct responsibility and involvement in the management of the patient.

Some private hospitals take a share of the doctor’s professionalfee claiming this as a “service” or administrative fee. This is one form of fee splitting, but prior consent must have been given by the practitioner for this arrangement. Some private hospitals have formulated their own fee schedules, based on which payment is made in full to the doctor, who is then separately charged the so-called service or administrative fees. The acceptance of this arrangement will depend on the doctor himself.

The above statement is directed to all doctors in Malaysia. Does this apply to private hospitals? Competition between hospitals has become so intense that many hospitals are willing to pay a fee for patient referrals. This could be to agents within or in a foreign country or even insurance agents and insurance companies in Malaysia. Is this considered ethical and legal?  Is this considered kickback or fee splitting? Are hospitals exempted from this practice compared to individual practitioners? The law is very strict with doctors but it is much more lenient  with private hospitals.

What about medical laboratories? Giving part of their fees to doctors for sending their patients’ specimen to them is almost exclusively practiced by most private laboratories so much so that if you don’t give these incentives to a doctor they will never get specimens from them. This is extra income for the practitioner.

Lets go further to insurance companies insisting on discounts on medical bills. This is again a norm in most hospital. If the hospital does not give a discount than the insurance company will not list them in their panel. The discounts go all the way down to doctors’ fees, which is already highly regulated. Is this a violation of Section 83: Contracts between private healthcare facility or service and managed care organization of the Private Healthcare facilities and services act 2006 which states the following:

(1) The licensee of a private healthcare facility or service or the holder of a certificate of registration shall not enter into a contract or make any arrangement with any managed care organization that results in –

(a) a change in the powers of the registered medical practitioner or dental practitioner over the medical or dental management of patients as vested in paragraph 78(a), and a change in the powers of the registered medical practitioner or visiting registered medical practitioner over the medical care management of patients as vested in paragraphs 79(a) and 80(a);

(b) a change in the role and responsibility of the Medical Advisory Committee, or Medical and Dental Advisory Committee as provided under section 78, the Midwifery Care Advisory Committee as provided under section 79 or the Nursing Advisory Committee as provided under section 80;

(c) the contravention of any provisions of this Act and the regulations made under this Act;

(d) the contravention of the code of ethics of any professional regulatory body of the medical, dental, nursing or midwifery profession or any other healthcare professional regulatory body; or

(e) the contravention of any other written law.

I am always confused with all this legal jargon but by insisting on discounts, this can be construed as fee splitting and managed care organisations are actually affecting the way a medical practitioner treats his patient. This in my mind is unethical and illegal.

And then there is the situation of splitting the fees of a procedure between the doctor and the hospital. For a procedure such as gastroscopy, the total fee is decided and the fee is then split: for example 30% goes to the doctor and 70% to the hospital. Is this also considered fee splitting? Again this is practiced in many hospitals. Is this ethical? Although this appears like an obvious case of fee splitting, the above statement from the Medical Act states that if the doctor has agreed to this term than it is considered legal. In my mind, doctors’ fee, which is already determined in the Private health care act, should be completely separated from the hospital portion so the patient and the insurance provider is clear on the demarcation but this is not practiced in many hospitals in this country.

Another grey zone is insisting that doctors’ give discounts to patients. It could be a private hospital’s policy to show the public that they are cheaper than their competitor. Is this considered fee splitting or kickback even if the poor young doctor agreed to this term when out of desperation to get a job he agreed, when he signed a contract with the hospital?

There are many grey areas in the private sector with regards to kickbacks and fee-splitting. One needs to know this before signing a contract with a private hospital.

So what advice can I give doctors joining private hospitals?

  1. Be aware of what terms you are signing to, when joining a private hospital. Sometimes you have no choice but being aware is important. It is better to be honest and law abiding than fall for short term gains
  2. Never be tempted to break this law especially when insurance agents or other agents ask you to pay them for sending their clients to you. It is unethical and illegal.
  3. Talk to your hospital management and owners of the hospital when there appears to be a grey zone when it comes to kickbacks and fee splitting.
  4. Be united as doctors in the hospital. The insurance companies need you more than you need them. It would look bad for the insurance companies if the hospital is not on their panel and they have to explain to their clients.
  5. The KKM has a division for regulation of fees and you can appeal to them if you are dissatisfied with the potential fee charges.



I would like to thank;

My wife Sarojini Palany for editing this article

Dr Gunasegaran and Dr Kuharaj for reading through this article and giving good suggestions.


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Dr. Selva

Dr. Selva

Dr S. Selva (Sevellaraja Supermaniam) is a Consultant Obstetrician and Gynaecologist and a subspecialist in Reproductive Medicine at a private hospital in Melaka, Malaysia. He heads the O&G unit and the IVF Centre at the hospital.

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