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The Problem With Referral Program Incentives

By July 13, 2011 January 28th, 2021 No Comments

IT DOESN’T MATTER WHAT BUSINESS YOU’RE IN—INCLUDING DENTISTRY… We all love referrals, right? And patient referrals can be one lifeblood for a dental practice. The great news is that, typically, patients who come to your practice as referrals from existing patients are more loyal, better prepared, and longer-term patients than those who become patients through coupons or loss-leader efforts.

Over the next several months, there are a number of topics related to generating referrals that we would like to address. However, today we are focusing on one narrow component of this important discussion.

You CAN Offer Gifts to New Patients, But NOT as an Inducement For Referrals

Although every state’s laws differ, as a rule, payments for referrals are unlawful.

Kathleen Johnson at Trojan Professional Services (consultants to the dental industry) recently published the following helpful information:

“According to the Business and Professions Code Section 650 (California):
‘… the offer, delivery, receipt, or acceptance by any person licensed under this division. of any rebate, refund, commission, preference, patronage dividend, discount, or other consideration, whether in the form of money or otherwise, as compensation or inducement for referring patients, clients, or customers to any person, is unlawful.’

Compensation includes ‘thanking’ your patients with gift cards, credits on their accounts, or other items of value that are intended to reward them for their referrals of patients to your dental practice. A dentist cannot tell patients, or advertise to patients and the public, that he or she will compensate them—in the form of money or otherwise—for a patient referral.” (you may read Kathleen’s full post here).

If you’re interested in more legal jargon from an attorney about this issue, watch the video below. Although most of this information is specific to Michigan laws, it’s likely similar to laws in your state.

Although many of our valued clients ask us to help them develop referral promotions that include incentives, we are not able to assist them. HOWEVER, there are lots of other great ways that a true “social practice” can encourage, cultivate, and generate referrals!

Do you have an opinion on this topic? We’d love to hear it below.