Professional Courtesy Discounts

William R. Pupkis, CMPE, Healthcare Consultant

congressTraditionally it has been common-place for courtesy discounts among medical professionals. However, this practice has been impacted by congressional action into a potentially illegal act with significant civil monetary and criminal penalties. Forgiving co-payments or writing off deductibles are no longer choices that a provider may make without seriously and carefully considering the repercussions.

An understanding of a provider’s options and the related liabilities is crucial to operating an efficient, legally-compliant medical practice. In regard to professional courtesy discounts, the primary issues involve The Health Insurance Portability and Accountability Act (HIPAA) of 1996, the Anti-Kickback Statute, Stark legislation, contractual considerations, and the effects of legislation on the provision of discounts.

The Health Insurance Portability and Accountability Act of 1996

With the passage of HIPAA, federal law regarding the submission of a false statement or committing fraud changed in two significant aspects: (1) some federal fraud and abuse provisions which formerly applied only to Medicare and Medicaid were extended to include all federal health plans, and (2) certain federal fraud and abuse issues are now being pursued legally on behalf of private health care plans. In other words, monitoring fraud and abuse activities in respect to Medicare and Medicaid beneficiaries is no longer enough. Private commercial carriers and all federal health plans now enjoy the same protections.

The extension of these fraud and abuse provisions to private carriers significantly increases the likelihood of detection and prosecution, even in instances in which “intent” to defraud is questionable. The private health carriers now have an incentive to identify and publicize efforts to curb fraud and abuse. Many “explanations of benefits” now carry a standard message regarding fraud and abuse detection, including an 800 number for beneficiaries to report suspect activities. Even where no fraud or abuse exists, disgruntled patients or employees have avenues through which they can voice their frustrations and concerns with the health care system.

To demonstrate the seriousness of such offenses, the U. S. Department of Health and Human Services and the Office of the Inspector General (OIG) made submitting false statements or committing fraud criminal offenses, carrying five- and ten-year prison sentences, respectively, along with significant civil monetary penalties. More specifically, HIPAA, in sections 242 to 246 created four new categories of health care offenses which apply to claims submitted to private, commercial payers:

- Health care fraud;
- False statements;money
- Obstruction of a health care offense investigation; and
- Money laundering

What is fraudulent about offering a discount to a professional associate? The reasoning is...

If you submit a claim for services totaling $200.00 to an insurance carrier, receive payment of 80% of that amount ($160), and write off the balance ($40) as a professional courtesy, the insurance has grounds to argue that the actual fee was only $160, since that is the amount for which the patient is being held liable. Under this circumstance, the insurance argues it should owe only $128 (80% of the actual patient-liable fee of $160). The insurance contends it has issued an over payment of $32.

In this example, a criminal case could be brought for health care fraud and false statements. The fraud issues revolve around the knowing and willful attempt to defraud a health care plan and/or obtain money or property by making a false or fraudulent representation.

The false statement issues are substantiated by the claim form, which demonstrates a knowing and willful falsifying of a material statement or representation. By representing the charge to be one amount but only holding the patient accountable for a lower amount, the provider is making a false statement. In addition to fines, false statements carry prison terms up to five years for each offense.

Of particular relevance to a discussion of professional / courtesy discounts are the following safe harbors:

(1) Discounts - The price of a service can be reduced in order to induce a buyer to purchase that good or service. For example, some states allow prompt pay discounts if the specific policy is available to all patients.

(2) Waiver of Beneficiary Coinsurance / Deductible – The Office of the Inspector General (OIG) has supported waiver of deductibles and copayment in individual cases of indigence. The financial circumstances justifying the waiver must be well documented, and good faith collection efforts also will justify excusing a debt.

However, some feel that sending two or three monthly statements, then writing off a balance as uncollectible justifies the action. Consequently, they may tell their fellow professionals simply to ignore the bills. If a provider routinely refers his accounts for outside collection or legal action, sending a few statements will hardly satisfy the intent of the law or the curiosity of the auditor.

Office of the Inspector General’s Fraud Alerts

A fraud alert concerning “waiver of co-insurance” was issued in 1991. At that time, it applied only to Medicare providers who routinely waived coinsurance and deductible amounts. The OIG stated that a provider who routinely waived coinsurance and deductible amounts after billing Medicare for the full charge was filing a false claim.

Changes in the law under the 1996 False Claims Act create a violation anytime this waiver of deductible or coinsurance occurs in connection with ANY payor. So, a physician who bills an insurance carrier for one amount then extends a courtesy discount, forgiving part or all of the remaining balance, would be guilty of filing a false claim and subject to a civil monetary penalty of up to $50,000 per claim. Providers who believe this provision of the law will never be pursued should carefully review a wide range of articles appearing in healthcare journals detailing such cases and penalties. While not submitting a claim to a payer would avoid the pitfalls of the False Claims Act, it might not escape scrutiny under the unlawful financial benefit in exchange for referrals provisions of the Anti-Kickback Laws.

Penalties

While the Health Care Financing Administration develops the regulations under Stark, it is the OIG which has the authority to impose the civil monetary penalties for violations. Stark violations include civil money penalties of up to $15,000 per claim and up to $100,000 for each referral-inducing financial arrangement.

Resistance to change

After having been forced into many less-than-equitable managed care contracts and having been bureaucratized by endless restrictions and directives, providers might dismiss the relevance, applicability, and urgency of changing the way in which they extend professional courtesy discounts.

Attitudes such as these are unfortunate, not only for the physician but also for the staff member who may unsuspectingly be promulgating illegal activity inside the practice. It also may be these same staff members who pursue “qui tam” actions against their employers when they become educated in the applicability of the various laws.

With the accelerated rate of mergers and down-sizing in medical practices across the nation, the level of discomfort and discontentment of employees has increased. Being concerned about external auditors randomly targeting one’s practice is much less of a concern than being reported by a disgruntled employee or dissatisfied patient. Add to this situation the fact that under current whistle blower rules, the reporting person retains a percentage of the recouped funds, shifting the incentive for reporting fraudulent practices.

Even when the provider decides to stop or revise the discount policy to become compliant, the reaction of the local medical community might be negative. Once a benefit has been extended, removing it is difficult. Consequently, it is important that providers in communities across the nation begin an active discussion of the issue and take action to correctly apply discounts in accordance with the laws, regulations, and contracts.

Developing a Reasonable Solutionsolution image

The government is serious about its fraud and abuse programs. By almost doubling its funding of such initiatives and by logging repeated successes in the litigation arena, the message is clear: zero tolerance of fraud and abuse in the medical practice must become the norm, not the exception.

Developing a compliance plan will not insulate a group from prosecution, but it serves as a powerful defense against willful and intentional disregard for the law. The existence and effective operation of a compliance plan is essential. It should be a written professional courtesy discount policy which integrates elements of the compliance plan with specific guidelines, forms, and letters relating to professional courtesy issues.

The policy should address:

Written Standards. These should incorporate billing methods for Medicare, managed care carriers, and national standardized claim form filing instructions. In addition, there should be a written directive regarding the action to be taken if violations are discovered.

Internally-Designed Monitoring Tools. Proof that the tools which an employee needs to discern fraudulent activity demonstrate a genuine effort to monitor, correct, and improve billing accuracy.

Training Mechanism. Employees at all levels should be trained not only in the appropriate methods of billing, but also in the applicable regulations. Once the initial professional courtesy discount policy has been written, develop an in-service in which each item in the policy is reviewed and discussed.

Performance Appraisals. Evaluations of employees should incorporate elements of the organization’s compliance plan to demonstrate that the plan plays an active role in the work place.

Audit Mechanism. Regular, systematic audits should be conducted to ensure compliance.

Consistent Action Plan. When violations occur, there must be immediate corrective action taken not only to correct the error, but also to correct the system which allowed the error to occur.

Compliance Officer. While the person who assumes this role may be the administrator, it is imperative that someone with authority to initiate corrective action ultimately bear the responsibility for ensuring compliance.

Board’s Role. The Board of Directors must share in the responsibility of the compliance plan’s implementation and monitoring.

Communicate with Providers in Bottom-Line Terms. Present the civil monetary penalties and prison terms in “visual” images.

Calculate the number of $50,000 false claim settlements it would take to bankrupt the organization. Present the total number of claims filed each year to demonstrate the on-going need for vigilance and billing integrity.

Counsel the providers on how to respond to requests from patients for discounts.

Adopt a standard written response or notification letter to be used with patients who request (or may expect) a professional courtesy discount.

Using the procedure code used to write-off professional courtesy discounts now, pull a report of the last 25 discounts, by provider, listing the reason for the discount. Ask the provider whether the discount truly was necessary and what the actual reaction would have been from the patient had the legal ramifications of the patient’s request been explained.

Insist that providers never write-off balances on patients for whom a professional liability issue is likely to be raised. Malpractice suits occur regularly, and a provider’s defense is weakened when a courtesy or insurance-only discount has been applied.

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This entry was posted on Tuesday, October 8th, 2013 at 6:45 pm and is filed under Practice Management. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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