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What Is Fee Splitting?

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  • Written By: Mary McMahon
  • Edited By: Shereen Skola
  • Last Modified Date: 06 November 2016
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Fee splitting is the sharing of a payment for professional services with the person who offered a referral. In some professions, particularly medicine and law, this is considered an ethical violation and may be grounds for suspension or license revocation. The concern with this practice is that it could represent a conflict of interest, as it creates an incentive to steer traffic toward a particular service provider. This may not always be in the best interest of clients.

In a classic example of medical fee splitting, a patient might see a general practitioner who determines special attention is necessary for a cardiac condition. The doctor could provide a referral to a cardiologist, who would then provide a payment to the physician in exchange for the referral. This presents clear ethical issues, as the cardiologist might not be the best choice for that patient, or the doctor might neglect to mention other cardiologists because they do not share fees. Patients in this situation are not provided with all the information they need to make an informed decision.

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Some professional organizations dedicated to medical practice frown on fee splitting. They may suspend or expel members who participate in it, and in some cases, it can be grounds for losing a medical license, depending on regional laws. This can create ethical gray areas with situations like referrals within a clinic. Keeping business within a clinic can increase bottom lines, but doesn’t necessarily constitute fee splitting. Doctors with concerns about referrals and ethics can discuss the matter with attorneys or representatives of professional organizations to get specific ethical advice.

Attorneys may also be barred from fee splitting. In some regions, the law specifically prohibits sharing legal fees with non-attorneys, such as paralegals. Additionally, attorneys may not be legally allowed to offer financial incentives to colleagues who provide referrals. This is designed to protect the attorney-client relationship. A client who asks a civil attorney who prepares wills and similar documents for help with locating a criminal attorney, for example, wants the best attorney possible, not the one who provides a kickback.

Similar issues with fee splitting can be seen in some other professions, like the building trades and real estate. Ethical restrictions can vary by nation and specific profession. Some real estate agents, for example, are barred from making such arrangements with colleagues, while others may freely offer and receive fees, as long as they disclose them. In cases where conflicts of interest may arise, there may also be a legal obligation to disclose them to allow the client to make an informed choice. For example, someone working with a real estate agent who works for the same company the seller’s agent does may need to be made aware of this.

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