Patient rewards and loyalty programs: what a practice can offer cash-pay patients, Medicare and Medicaid patients, referrers and reviewers

Loyalty programs work for coffee shops and airlines, so it is natural for a practice owner to ask whether points, punch cards or a refer-a-friend credit could keep patients coming back. In health care the answer depends on who the patient is, what the reward is, and what the patient has to do to earn it. A points card that is fine for a cash-pay facial can raise a federal question when the same card reaches a patient with Medicare, and a reward for a review can break a rule even when no insurance is involved.

This guide is about rewards programs: points, punch cards, member perks, referral credits and review incentives. Prepaid gift cards and their expiration and fee rules are in our guide to med spa gift card promotions. Recurring memberships and automatic renewal are in our guide to membership auto-renewal rules, and dental savings plans are in dental membership plan advertising. Referral arrangements with physicians and other businesses are in patient and physician referrals. Rides, parking validation and child care for patients are in free rides and patient support perks. Perks for patients who post, speak or refer for the practice are in patient ambassador and peer advocate programs. For pens, mugs and other branded items handed out in the office, see our guide to branded promotional items. Retention without rewards is covered in patient retention strategies.

Start with who the program reaches

The federal rules in this guide turn on whether a patient is covered by Medicare or a state health care program such as Medicaid, and whether the reward is tied to items or services those programs pay for. A med spa that sees only cash-pay cosmetic patients sits in a different position from a primary care or dental office where a share of patients have Medicare or Medicaid. A practice that does both, such as a dermatology office with a cosmetic side, has to think about both groups, because a program advertised to the public reaches both.

State law adds a second layer that can apply to all patients regardless of insurance. Florida is one example used below. Check the law in each state where you practice.

• Use: a short written description of who can join, what they earn, what they can redeem it for, and which services are excluded.
• Avoid: launching a program first and asking later which patients it reached.

The beneficiary inducement law

Under 42 U.S.C. 1320a-7a(a)(5), part of the federal Civil Monetary Penalties Law, a person who offers or transfers remuneration to an individual eligible for Medicare or a state health care program, and who knows or should know that it is likely to influence that individual to order or receive from a particular provider, practitioner or supplier any item or service payable by those programs, faces civil monetary penalties.

The definition in 1320a-7a(i)(6) is broad. Remuneration includes waivers of coinsurance and deductible amounts, and transfers of items or services for free or for other than fair market value. A point that a patient redeems for a free service, a discount on a future visit, or a product handed over at no charge all fit that description. The statute then lists exceptions, covered in the next sections.

The test is about influence on the choice of provider. A reward that is earned by booking visits at your practice and spent at your practice is built to influence that choice, which is the reason these programs need a careful look when Medicare or Medicaid patients can join.

Nominal value: the 15 and 75 dollar figures

In a policy statement dated December 7, 2016, the HHS Office of Inspector General (OIG) said it interprets nominal value as a retail value of no more than 15 dollars per item or 75 dollars in the aggregate per patient on an annual basis. The same statement says the items may not be cash or cash equivalents, and that a gift at or below these thresholds need not fit an exception to section 1128A(a)(5), which is 42 U.S.C. 1320a-7a(a)(5). OIG said it will monitor the thresholds and announce any future increases.

For a rewards program, the annual figure is the one to watch. A points card that adds a small reward per visit can pass the yearly aggregate for a patient with enough visits in a year. The limit is per patient across all gifts from the practice in a year, so the loyalty reward, the birthday gift and the holiday item add up together.

• Use: a per-patient annual tally of the retail value of everything given to patients with Medicare or Medicaid, kept in the same place as the program records.
• Use: rewards that are small items, not credit toward services the programs pay for, when those patients can join.
• Avoid: cash, checks, prepaid cards or anything else that works like cash. The policy statement excludes cash and cash equivalents at any value.
• Avoid: assuming that a reward spent only on cosmetic services is outside the rule. The question is whether it is likely to influence the patient’s choice of provider for covered services too, which is a question for counsel.

Exceptions that come up in rewards programs

The statute and the regulation at 42 CFR 1003.110 list things that are not remuneration. Four of them come up when practices design patient programs. Each has conditions, and a program has to meet all of them to rely on the exception.

Retailer rewards. Under 1320a-7a(i)(6)(G) and 1003.110, remuneration does not include coupons, rebates or other rewards from a retailer, if they are offered on equal terms to the general public regardless of health insurance status, and are not tied to the provision of other items or services paid for by Medicare or a state health care program. The regulation does not define retailer, so whether a medical, dental or chiropractic practice counts is a question for your attorney.

Financial need. Under 1320a-7a(i)(6)(H), items or services given for free or below fair market value are not remuneration if they are not offered as part of any advertisement or solicitation, are not tied to other program-paid services, have a reasonable connection to the individual’s medical care, and are given after a good faith determination that the individual is in financial need. A program that is advertised does not fit this exception by its own terms.

Preventive care incentives. Under 1003.110, incentives to promote the delivery of preventive care services are not remuneration when the preventive service is not tied to other program-paid services. They may not include cash or instruments convertible to cash, or an incentive whose value is disproportionally large compared with the value of the preventive service. The regulation defines preventive care as a prenatal service, a post-natal well-baby visit, or a specific clinical service described in the current U.S. Preventive Services Task Force guide, that is reimbursable by Medicare or an applicable state program.

Promotes access to care. Under 1003.110, items or services that improve a beneficiary’s ability to obtain program-paid items and services are not remuneration if they pose a low risk of harm by being unlikely to interfere with or skew clinical decision making, unlikely to increase costs through overutilization or inappropriate utilization, and not raising patient safety or quality-of-care concerns. A ride to an appointment is a different thing from points toward a free service.

The patient engagement safe harbor is not a marketing tool

Practice owners who hear about the patient engagement safe harbor at 42 CFR 1001.952(hh) may assume it covers loyalty programs. It is narrower. It protects a patient engagement tool or support furnished by a participant in a value-based enterprise to a patient in the target population of a value-based arrangement, and only when all of its conditions are met.

Among those conditions: the tool must be an in-kind item, good or service with a direct connection to the coordination and management of care, must not include cash or a cash equivalent, and must be recommended by the patient’s licensed health care professional. The aggregate retail value per patient per year may not exceed 500 dollars, a figure the regulation says is adjusted each calendar year for inflation, with OIG publishing the new cap after September 30 of each year. Two more conditions matter for marketing: under 1001.952(hh)(6) the tools may not be used to market other reimbursable items or services or for patient recruitment, and under (hh)(8) availability may not depend on the type of insurance coverage.

A program designed to bring in new patients or increase visits is a recruitment program, which (hh)(6) excludes. If your practice is part of a value-based arrangement and wants to give patients care supports, that is a project for counsel and the arrangement’s participants, not for the marketing calendar.

Refer-a-friend rewards

Rewarding a patient for sending a friend raises a separate federal law. Under the Anti-Kickback Statute at 42 U.S.C. 1320a-7b(b)(2), whoever knowingly and willfully offers or pays any remuneration, in cash or in kind, to any person to induce that person to refer an individual for an item or service payable in whole or in part by a federal health care program commits a felony. The statute says any person, which reaches a patient who refers a friend as well as a business that refers a client.

State law can reach cash-pay patients too. Florida Statutes 817.505(1)(a) makes it unlawful for any person, including a health care provider or facility, to offer or pay a commission, benefit, bonus, rebate, kickback or bribe, in cash or in kind, to induce the referral of a patient or patronage to or from a health care provider or facility. Section 817.505(3)(a) exempts practices not prohibited by the federal Anti-Kickback Statute or its regulations, and 817.505(4)(a) makes a violation a third degree felony. Other states have their own versions. Read the full section, and your own state’s law, with counsel before any refer-a-friend offer.

• Use: a plain invitation to share the practice with friends, with no reward attached, when counsel has not cleared a reward.
• Use: a thank-you note to a patient who mentions they referred someone, with nothing of value inside unless counsel has cleared it.
• Avoid: credits, cash, gift cards or free services for each new patient a patient sends.
• Avoid: running a referral reward through a third-party app and assuming the app’s terms make it lawful for your practice.

Rewards for reviews

Review rewards are where practices with no Medicare or Medicaid patients still run into trouble. Under the FTC rule at 16 CFR 465.4, it is an unfair or deceptive practice for a business to provide compensation or other incentives in exchange for, or conditioned expressly or by implication on, consumer reviews expressing a particular sentiment, positive or negative.

Google’s policy goes further for reviews on Google Maps. Its prohibited and restricted content policy says merchants may not offer incentives, such as payment, discounts, free goods or services, in exchange for posting any review, or for revising or removing a negative review, and it lists incentivized reviews as rating manipulation that will be removed from Maps. That applies whether or not the review is positive.

If a reward has already been given for a review that appears elsewhere, 16 CFR 255.5 says a connection between the endorser and the seller that might materially affect the weight or credibility of the endorsement, and that the audience would not expect, must be disclosed clearly and conspicuously. Free or discounted products are named in that section as a material connection.

• Use: asking each patient for honest feedback in the same way, with no points, discount or entry attached.
• Avoid: points for a review, a raffle entry for a review, or a discount for changing a review.
• Avoid: asking only patients you expect to be happy. Our guide to replying to patient reviews covers what to say once reviews arrive.

Points and perks for cash-pay services

A med spa or cosmetic practice with no Medicare or Medicaid patients, or one that runs its program only for services those programs do not pay for, still has rules to follow. Section 5 of the FTC Act, 15 U.S.C. 45, prohibits unfair or deceptive acts or practices, so the program terms have to match what the ads say. If the points never expire in the ad, they cannot expire in the terms. If only some services earn points, the ad has to say so where the offer appears.

Two related products have their own guides. A reward issued as a card with a stored value can fall under the federal gift card rules, including the rules for promotional cards described in our gift card guide. A paid tier that renews each month is a membership, covered in our auto-renewal guide.

The points ledger is also patient data. Under 45 CFR 160.103, health information includes information that relates to the provision of health care to an individual or to payment for it, and a ledger that shows which treatments a patient bought and when fits that description. If your practice is a covered entity under HIPAA, keep that ledger in systems you would trust with other patient records, and read our guide to HIPAA marketing rules before using it to target messages.

• Use: written terms on one page of the website, linked from each ad and email that mentions the program.
• Use: a points platform whose vendor has confirmed in writing what it does with patient data.
• Avoid: points that quietly expire, change value, or exclude services the ad implied were included.

A practical plan before launch

• List the patient groups the program will reach: cash-pay only, or also Medicare, Medicaid and other plan members.
• Write down each way to earn a reward and each way to spend it.
• Remove any way to earn a reward by referring a patient or by posting a review, unless counsel has cleared it in writing for each state where you practice.
• If Medicare or Medicaid patients can join, decide with counsel whether to keep their rewards under the nominal value figures, fit an exception, or leave them out, and record the reason.
• Set up an annual per-patient tally if you rely on the nominal value figures.
• Write the terms: who can join, what earns points, what points buy, expiration, changes, and how to leave.
• Have counsel review the terms, the ads and the front desk script together.
• Train the front desk on what they can and cannot say when a patient asks about rewards.

The website and marketing side

A rewards program lives largely on the website and in email and text messages, so the marketing build is where the rules either hold or slip. Put the program terms on a single page, link to them from each place the program is mentioned, and keep the version date at the top. Keep the sign-up form short: the program needs a name and a way to reach the patient, not a medical history.

Ads for the program follow the same platform rules as the rest of your health advertising. Our guide to marketing to Medicare patients covers the wider rules for offers that reach that group, and our guide to chiropractic new patient offers shows how the same questions play out for introductory offers.

Where programs go wrong

• A cosmetic program advertised on the public site and in the waiting room, where patients with Medicare see it too.
• Points that convert to a credit on the account balance, which works like cash.
• A referral contest with a prize for the patient who sends the largest number of friends.
• Points for check-ins or reviews on Google, Yelp or Facebook.
• Waiving copays or deductibles as a loyalty perk. The statute lists copay and deductible waivers as remuneration, and its exception in (i)(6)(A) does not cover a waiver offered as part of any advertisement or solicitation.
• Terms that change without notice after patients have earned points.
• A vendor app that uses patient purchase data for its own marketing.

Claims to leave out

Section 5 of the FTC Act, 15 U.S.C. 45, applies to the way the program is advertised. Leave out wording that the terms do not support.

• Avoid: “free” for a reward that requires a purchase you do not state next to the word.
• Avoid: “approved by Medicare” or any wording that suggests a government body reviewed the program.
• Avoid: “never expires” unless the terms say exactly that.
• Avoid: “earn rewards for each friend you refer” or “earn points for reviews”.
• Use: “See program terms” with a link, next to each mention of the program.

Illustration: reshaping a points card

This example is invented to show the process. [Practice name] is a dermatology practice with a cosmetic service line and a medical side that sees patients with Medicare. The owner wants a points card: points for each visit, a bonus for each friend referred, and double points for a Google review.

Counsel reviews the plan. The referral bonus and review points are removed. The medical side is excluded, and the program is limited to cosmetic services, with the terms saying so. Because the program is advertised in the shared waiting room, counsel also looks at whether it is likely to influence patients with Medicare in their choice of practice for covered care, and the practice decides to make those patients eligible only for small items within the nominal value figures, tracked per patient per year. The terms move to one web page with a version date, the sign-up form asks only for name, email and phone, and the front desk gets a short script that points patients to the terms page.

Checklist

• We know which patient groups the program reaches.
• No reward is tied to a referral or a review.
• No reward is cash, a cash equivalent, or a credit on the account balance.
• Copays and deductibles are not waived as a perk.
• If we rely on the nominal value figures, we keep an annual per-patient tally.
• Counsel has reviewed the program under federal law and the law of each state where we practice.
• The terms are on one web page with a version date, linked from each mention.
• The ads match the terms word for word on expiration, value and excluded services.
• The points ledger is kept with the same care as other patient records.
• The front desk has a script for questions about the program.

For one-time drawings and sweepstakes rather than ongoing rewards, see our giveaway and sweepstakes guide, which covers free entry, official rules and state filing rules.

How we help

We build websites, local search, patient lead generation and AI front desk tools for independent practices and health businesses. For a rewards program, that means a terms page that is easy to find and update, short sign-up forms, review requests that ask each patient the same way with no incentive, and ads that match the terms. We do not decide whether a program is lawful; your attorney does, and we build what they approve. Our tools are built with HIPAA in mind. We confirm in writing what a BAA covers before any patient information flows through a tool, and if it is not covered, we do not route patient information through it.

Sources

• 42 U.S.C. 1320a-7a: Civil monetary penalties (beneficiary inducement at (a)(5); remuneration at (i)(6))
• 42 U.S.C. 1320a-7b: Criminal penalties for acts involving Federal health care programs (Anti-Kickback Statute at (b))
• 42 CFR 1003.110: Definitions (remuneration exceptions, preventive care)
• 42 CFR 1001.952: Exceptions (patient engagement and support at (hh))
• OIG: Policy Statement Regarding Gifts of Nominal Value to Medicare and Medicaid Beneficiaries (December 7, 2016)
• 16 CFR 465.4: Buying positive or negative consumer reviews
• 16 CFR 255.5: Disclosure of material connections
• Google Maps: Prohibited and restricted content (fake engagement, rating manipulation)
• 45 CFR 160.103: Definitions (health information)
• Florida Statutes 817.505: Patient brokering prohibited
• 15 U.S.C. 45: Unfair methods of competition unlawful

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