Groupon, similar sites target medical services for deals

A practical look at information technology issues and usage

By — Posted March 7, 2011.

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Sean Doherty, MD, a plastic surgeon at Boston Plastic Surgery Associates, said his group wanted to attract new patients by introducing them to easy-to-perform procedures and treatments. So it did what a lot of restaurants, shops and vacation destinations have done: It offered a deal through the online site Groupon.

Chicago-based Groupon was the first in a growing number of Internet companies offering daily deals designed to be "too good to pass up" for people looking to try a new product, restaurant, hobby or vacation destination. In recent months, the growing list of services has included medical and health procedures.

Here's the way it works: A company offers a deal -- generally at least 50% off -- on the Groupon site, but only if a predetermined number of people agree to buy the service. Numerous online sites -- Living Social, Daily Dibs and Zulily, among the largest -- offer similar "daily deals" by e-mail or a website link. Many sites offer geographically targeted deals or personalize deals based on a customer's profile.

Buyers of the Boston Plastic Surgery Associates deal could get laser hair removal, skin-rejuvenation treatments or 50 units of Dysport, an injectable wrinkle remover. The best deal was laser hair removal for $129, regularly priced at $800.

Scott Lorenz, president of Westwind Communications, a public relations and marketing firm that works with numerous clients in the medical field, recently has seen an uptick in the number of clients interested in this type of marketing. In February, a dental client ran a deal in Groupon for a second time after the initial offering last fall was successful.

The February deal was somewhat unique, Lorenz said, because it was for dental implants -- a procedure that is more invasive and expensive than most deals offered on group purchasing sites. The deal was for 50% off the normal $4,000 price. The group also offered a teeth whitening package at half off.

Other recent deals offered across the country include Lasik surgery, laser hair removal and skin rejuvenation treatments.

Chad Nason, spokesman for Groupon, said that although he could not provide details on the percentage of Groupon's offerings that are health-related, he could confirm that it's a growing segment of the company's business.

"At our core, we're always going to be a company that wants to get people off their couches and out of their houses to get out and try new things," Nason said. "But obviously, with the popularity and the incredible group buying power, you've seen things, like Botox, that the medical professionals want to use to get new customers, which certainly can work."

Nason said most of the Groupon clients look at offering the deals as a marketing expense. Each deal is negotiated on its own terms, but generally the company and the client offering the deal split the revenue received from the deal in half. If the service is being offered for 50% off the normal rate, most clients walk away with one-quarter of the normal per-unit-of-service revenue.

The medical deals offered so far through Groupon and similar sites have been for noninsured, cash-paying services. Does it make sense for, say, a family physician, internist or pediatrician to use such online sites?

Legal issues for physicians

David Harlow, an attorney from Newton, Mass., said the service is not for everyone. Physicians need to be careful of the line between elective, out-of-pocket services and those covered by traditional or federally funded insurance. Crossing the line could violate anti-kickback laws, he said.

Because of the split of revenue between the physician and the advertiser, like Groupon, revenue would vary based on volume of business, "and that is basically a no-no if the payer were a federal health care program," Harlow said. Even if it's a federally covered individual paying for the treatment out of pocket and the physician is enrolled in a federally funded program, there could be legal risks, he said.

In addition, private insurers always want to get the best possible deal, and there could be stipulations in their contracts guaranteeing that they have the best price. In a worst-case scenario, the physician could be forced to offer all services at the reduced price offered on the group buying site, attorneys said.

If done properly, offering services through an online group discount site could be a way to fill empty slots in the calendar or build word-of-mouth referrals and volume -- if it's OK with you to offer the service for half price, he said. But the question is whether the one-time deal would be a blip on the radar or whether it would help build your practice.

If done incorrectly, offering such a deal actually could harm your business if you're not equipped to deal with the increase, experts said. Stories abound of businesses overwhelmed by people who bought deals online and had trouble collecting their products or services.

Nason said part of Groupon's negotiation process is a consultation to ensure that the business is prepared to meet the demands. "We take a lot of pride in making sure everything is on the up-and-up." He said Grouponturns away seven businesses for every one it accepts.

Dr. Doherty's group set a limit on each discounted service so that the practice wouldn't be overwhelmed. Although his practice hasn't lost money on the deal, the full benefits have not been realized, because many of the purchasers have not come in yet. The hope is that when those patients arrive, they'll be happy enough with the practice to come back.

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