WAIVING OR DISCOUNTING PATIENT
COINSURANCE BY
OUT-OF-NETWORK PROVIDERS: A SLIPPERY SLOPE
Sheryl Tatar Dacso, J.D.,
Dr.P.H.
Most physicians at some time in his/her career have been presented
with the situation where they find themselves providing services to
patients who are covered by managed care plans in which the particular
physician does not participate as a contracted “in network” provider. In
order to avoid imposing significant financial hardship on these patients,
some of these physicians offer to discount or waive those amounts that are
the personal responsibility of the patient. This is to be distinguished
from the situation where the physician makes a conscious decision to treat
each patient as “private pay” where there is greater flexibility in
structuring payment arrangements without creating legal liability. As
discussed in this article, the routine waiver or discounting of a patient’s
coinsurance may violate state and federal law.
There are two principles that should be considered when assessing the
situation related to discounting or waiving coinsurance. The first
situation concerns the appropriateness of waiving or discounting patient
copays and deductibles, where the provider is “out” of network. The second
concerns the effect of private pay arrangements on government program
billing and reimbursement.
Discounting or Waiving Patient
Copayments and Deductibles
As a general rule, a provider should not generally waive co-payments
or deductibles. In the context of Medicare and Medicaid patients, this is
prohibited in the absence of demonstrating financial hardship of the
patient.
Waiver of co-payments and deductibles by an “out-of-network” provider
may be viewed as a potential kickback, insurance fraud or grounds for
disciplinary action against the physician who waives the co-payments,
co-insurance or deductible. In fact, the provider’s waiver of co-payments
or deductibles may also affect the provider’s rights to collect insurance
from the payor based on State law related to acceptance of assignment. In Texas,
the Attorney General has made it clear that “the payment of benefits under
an assignment does not relieve the covered person of contractual
responsibility for the payment of deductibles and copayments. A physician or other health care
provider may not waive copayments or deductibles by acceptance of an
assignment.” [Emphasis added][1] This means that when the physician
accepts assignment from the patient, he is not relieved from seeking
payment from the patient of the applicable co-payments and deductibles.
Although the Opinion does not impose a mandatory obligation on the
collection of co-payments and deductibles, it does suggest that telling the
prospective patient that these will be waived may be interpreted as an
“inducement” for the patient to use the facility. In cases cited by the
Attorney General, these may be deemed an unfair trade practice or violate Texas illegal
remuneration laws.
Under the legislation creating the Health Insurance Portability and
Accountability Act (HIPAA,) it is considered mail fraud, to have a scheme
intended to “defraud any health care benefit program” which is a crime
under federal law.[2]
This interpretation was corroborated in an OIG Advisory Opinion in
1997 with the finding that the proposed non-collection of co-payments from
patients with employer-sponsored Medicare complementary coverage by an ASC
would constitute grounds for sanctions under section 231 (h) of HIPAA (42
USC §1320a-7a(a)(5) or under Section 1128B (b) (relating to payment of kickbacks)
under the Social Security Act (42 USC §§ 1320a-7b(b) and 1320a-7(b)(7))
Some providers take the position that there is a difference between
writing off and discounting the patient portion of the payment. We believe
that the same exposure exists for the provider who consistently discounts
the patient portion of the payment as it does for writing off that portion.
Provider Strategies for
Minimizing Legal Exposure
For commercial payor contracts, the following list represents a range
of approaches that have been used by providers for handling patient
discounts on co-payment and deductibles. It should be noted that the common
theme is to not “game the system” by charging at the higher level (usual
and customary) and then discounting the patient portion of the payment to
“in-network” levels. It also includes an element of disclosure to the payor
and patient of this practice. These approaches include:
1. Not waiving or
discounting co-payments or deductible amounts at all;
2. Discounting patient
co-payments and deductibles to the same extent that the provider offers a
discount to insurers/payors. This should be disclosed to the payor or with
the claim;[3]
3. Reducing the
co-payment or deductible amount so it is based on the total payment that
the provider expects to receive and not based on usual and customary
charges[4];
4. Discounting
co-payments and deductibles should be available to only a very small
percentage of patients or on an individual case-by-case basis based on some
showing of financial hardship;
5. To avoid the risk of
insurance fraud and tortuous interference of contract between the payor and
the enrollee, the provider may want to notify the payor regarding the
discount offered to the patient. The payor may seek a similar discount on
its payment to the provider. To refuse may place the provider at risk for
illegal pricing allegations based on charging different amounts to the
patient and the insurer;
6. Determining an
“in-network” charge and agreeing with the payor on that amount while disclosing
the practice to the patient.
There is one other area of exposure to providers who discount or
waive co-payments and deductibles that may not be readily apparent. This
concerns the potential interpretation by Medicare that the amount being
charged to it is higher than that being charged to other payors. This
implicates the Medicare billing rules and may be deemed a violation of
Medicare.
Summary and Considerations
There is no dispute that physicians who participate in managed care
plans must comply with the terms of the provider agreements. Waivers or
discounts of copayments or deductibles by in-network providers should be
made only on the basis of demonstrated patient financial need. Medicare
prohibits the routine waiver of copayments and coinsurance to Medicare
beneficiaries. Medicare views
discounts and coinsurance waivers as inducement to patients to choose a
particular provider, especially if the discounts are offered at or before
the time of service.[5]
The only way to offer discounts to Medicare beneficiaries without
incurring increased risk is to meet the following criteria.
1. The waiver is not
offered as part of any advertisement or solicitation;
2. Waivers are not
routinely offered to patients;
3. The waiver occurs
after determining in good faith that the individual is in financial need;
or
4. The waiver occurs
after reasonable collection efforts have failed.[6]
Recent guidance from the Office of the Inspector General indicates
that discounts to patient with no insurance are permissible and
encouraged. However, discounts to
insured patients, including Medicare patients, may be suspect unless they
are non-routine and related to genuine hardship. The OIG specified that “we do not believe
it is appropriate to apply inflated income guidelines that result in
waivers for beneficiaries who are not in genuine financial need.[7]”
Where a physician is not a participating provider and engages in
routine waiver of copayments or deductibles but accepts assignment of benefits
for direct payment from the payer, both the patient (who made the
assignment) and the physician (who accepts the assignment) are expected to
follow the terms of the policy. Disclosure of your proposed discount
program to the payor could mitigate against this, but it will depend on the
payor’s appetite for seeking legal action.
There is always a risk that a payor will complain to the State
Attorney General or to the OIG regarding the practice of waiving or
discounting co-payments. This is an area that has not yet been fully
explored in case law since it also implicates that patient as a
co-conspirator in the process.
The following are added as additional considerations:
1. When informing a
payor of a discount to a patient’s co-payment or deductible, request that
it contact the provider if it objects to the discount.
2. The provider should
carefully track receivables from any payors to whom a discount is applied
to determine if there is a delay in payment.
3. If there is a delay
in payment, follow-up with the payor to assure that the delay is not a
result of the payor’s refusal to pay bills due to any discounts provided.
4. Understand that if
the provider later brings a claim against a payor for refusal to pay or for
some other reason, there is a risk that the payor will attempt to use the
discount as an excuse to bring a counterclaim against the provider (e.g.
recoupment.)
5. The provider should
not advertise to patients that it will waive or discount co-payments or
deductibles.
6. The provider should
keep up with legal developments related to discounts and waivers of
co-payments and deductibles.
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