Is ‘Insurance Only’ Billing Advisable?

Surgeons instructing billing staff to bill “insurance only” is a scenario that is all too common in orthopaedic practices. In effect, the practice is waiving the patient’s copay, coinsurance, and deductible amounts and accepting whatever amount the insurance company will pay.

In most circumstances, this puts the surgeon and the practice in jeopardy. Medicare pays providers the lesser of the reasonable costs or the customary charges for services furnished to Medicare beneficiaries. So, if a practice charges less than Medicare routinely pays, Medicare reduces the payment to the practice’s customary charge for the service. From Medicare’s perspective, routinely waiving coinsurances without regard to financial need lowers the practice’s standard charge. For example, if 20 percent coinsurance on a $100 charge is waived, Medicare reduces that charge to $80 rather than the normal $100. Medicare can come back and lower the practice’s charge, thus reducing payment.

In addition to reducing the Medicare payment based on the practice’s customary charge, Medicare still deducts the patient’s copay and deductible from the payment to the practice. However, Medicare does allow discounts or write-offs under certain circumstances:

  • Discounts or write-offs for coinsurance, copays, or deductible amounts are allowed for Medicare patients based on financial need as long as they are not advertised or routine.
  • Discounts or write-offs of a Medicare cost-sharing amount (e.g., coinsurance, deductible) after reasonable collection efforts are allowed.

The federal Anti-kickback Statute (AKS) is a criminal statute that prohibits actions intended to induce or reward referrals for items or services reimbursed by federal healthcare programs. AKS prohibits anyone from knowingly and willfully offering, making, soliciting, or receiving any payment in return for (1) referring an individual to another person or entity for the furnishing of any item or service reimbursed by a federal healthcare program, or (2) recommending or arranging for the ordering of any service reimbursed by a federal healthcare program. The statute is extremely broad. Practices that routinely waive copayments and deductibles have been charged with violating AKS. Consequently, discounts or write-offs should never be given to encourage patients to come to a practice.

The guidelines address Medicare beneficiaries. Commercial payers may prohibit waiving or discounting cost-sharing amounts such as copays, coinsurance, or deductibles and may be silent about financial need, so be sure to check your commercial payer contracts. In certain states, routine waivers of copays and deductibles may be considered insurance fraud and may subject a practice to criminal liability.

Professional courtesy

Professional courtesy may be offered to physicians, their immediate family members, or employees if the following requirements are met:

  • The service(s) discounted is one routinely provided by the practice.
  • The professional courtesy is offered to all physicians or the entity’s medical staff or in their medical community without regard to referrals.
  • The practice has a professional courtesy policy in writing, which is approved by the governing body.
  • Professional courtesy is not offered to physicians (or their immediate family members) who are federal health program beneficiaries (e.g., Medicare, Tricare, Medicaid, Indian Health Services) unless there has been a good faith showing of financial need.
  • The courtesy does not violate AKS or any billing or claims submission laws or regulations.

The guidelines are clear: Cost-sharing amounts for a federal health program beneficiary cannot be waived unless the patient has demonstrated financial need, not even under a professional courtesy policy.

But what about offering professional courtesy to a commercial insurance beneficiary? In some states, routine waivers of copays and deductibles as professional courtesy are considered insurance fraud. Routine waivers of copays and deductibles and professional courtesy discounts for commercial insurance beneficiaries also can be considered a violation of the AKS if the recipient or a family member is in a position to refer federal health program beneficiaries to the physician or practice.

Many practices have abolished professional courtesy altogether. Practices that wish to continue offering professional courtesy discounts should consult a healthcare attorney to evaluate applicable state laws and to review practice-specific insurance contracts.

Disclaimer: This article is not legal advice. Practices should consult legal counsel for specific advice.

Cheyenne Brinson, MBA, CPA, is a consultant and speaker with KarenZupko & Associates, Inc. She delivers pragmatic business solutions that boost revenue, streamline workflow, and increase operational efficiency.

Patricia S. Hofstra, JD, is a healthcare partner at Duane Morris, LLP. She represents a broad range of healthcare clients, advising them on day-to-day legal issues, including corporate matters, mergers, transactions, and regulatory compliance.

References:

  1. Department of Health and Human Services: Hospital Discounts Offered to Patients Who Cannot Afford to Pay Their Hospital Bills. Available at: http://oig.hhs.gov/fraud/docs/alertsandbulletins/2004/FA021904hospitaldiscounts.pdf. Accessed December 4, 2018.
  2. Department of Health and Human Services: Medicare Program; Physicians’ Referrals to Health Care Entities with Which They Have Financial Relationships (Phase III). Available at: http://edocket.access.gpo.gov/2007/07-4252.htm. Accessed December 4, 2018.

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