In today's heavily regulated health care environment there seems to be little room for the time-honored tradition of professional courtesy. Practiced for hundreds of years, professional courtesy originally referred to the provision of health care to physician colleagues or their families free of charge or at a reduced rate. Many argue, rightfully so, that the Hippocratic Oath even requires this for the patient who is a physician and his or her family. More recently the scope of professional courtesy has been extended to include patients who may face financial hardship, and physicians commonly forgive or waive co-payments to facilitate patient access to necessary medical care.
Because of the government's aggressive approach to ensure that all claims are billed correctly, the once common practice of professional courtesy is now considered illegal. According to the Department of Health and Human Services (HHS), Office of Inspector General (OIG), "It is unlawful to routinely waive co-payments, deductibles, coinsurances or other patient responsibility payments." (67 Fed. Reg. 72,896 (Dec. 9, 2002)). This applies to health care and services paid by Medicare, TRICARE/CHAMPUS, and any other program paid partially or in full with federal funds. It also includes professional courtesy, as well as "take what insurance pays" (TWIP) policies.
Although we know of no prior instance of the OIG or Department of Justice prosecuting a physician’s extension of professional courtesy, arrangements for free or discounted care implicate fraud and abuse laws, including the Federal False Claims Act, and the Federal Anti-Kickback Statute. There have also been private insurance fraud actions based on illegally waiving co-pays and providing discounts that were not extended to the insurer, as well as Federal actions for these violations and using waivers and discounts to induce Medicare patients to use other health care services.
Physicians must therefore be extra cautious in bestowing professional courtesy, including discounts and waivers, so that they are not punished for genuinely good deeds. While there may be situations where it is defensible to not charge for services to health care professionals, the physician should assure that this professional courtesy is not linked to referrals, either in reality or in appearance.
Some physicians may commonly reduce the cost of care for patients by waiving the co-pay. However, waiving a co-payment has been interpreted as a fraudulent misrepresentation of physician charges against all types of payers. For example, under traditional Medicare, physicians are paid eighty percent (80%) of the "allowable amount" or the "actual charge," whichever is less. In the instance where Medicare allows $100, the program pays $80 and the co-payment amount is $20. By the physician accepting "what insurance pays" as the only payment, this is viewed as the physician's having an actual charge of $80, so the resulting payment from Medicare should be only $64. Therefore, by Medicare's rules, the physician has overcharged Medicare.
This has been the subject of attention from the Office of the Inspector General (OIG) of the Department of Health and Human Services (HHS) since at least 1994. The OIG issued a Special Fraud Alert warning about this specific practice that year. OIG Special Fraud Alert (1994) "Routine Waiver of Medicare Part B Copayments and Deductibles."
It was also addressed in OIG Advisory Opinion 97-4 (Sept. 25, 1997) addressing a fact situation posed to it by an ambulatory surgical center (ASC). OIG Advisory Opinion 97-4.
To view an actual letter from SafeGuard Services, LLC (SGS),a Zone Program Integrity Contractor (ZPIC) for the Centers for Medicare & Medicaid Services (CMS) regarding waiving co-payments, click here.
Legally Waiving Co-pays and Deductibles
Under certain circumstances, such as the indigency or financial hardship of the patient, co-pays and deductibles may be legally waived. However, it is crucial that the physician, practice or facility document the circumstances. The OIG has even promulgated forms for this purpose.
Sample forms that may be used to document a patient's inability to pay and the healthcare provider's decision to allow this can be accessed on our website. Sample Financial Hardship Application. Again, we emphasize that this should not be a matter of routine. It should only be done when actual financial hardship and inability to pay are documented.
In the health care industry, a discount is a reduction in the normal charge based on a specific amount of money or a percentage of the charge. To comply with government and insurance policies, the discount must apply to the total bill, not just the part that is paid by the patient. For example, if a patient owes a 20% co-pay on a $25 charge ($5) and the physician applies a discount of $5, then the patient must pay $4 and the insurance company will pay $16.
In addition, private insurance plans and some federal programs have a "most favored nation" clause in their contracts with physicians. This entitles the plan to pay the lowest charge the physician bills to anyone. Any pattern of discounts could result in a reduction in the physician’s allowable reimbursement schedule to the discounted amount.
"Kickbacks" and Inducements to Refer Patients
The Federal government and some states have specific laws governing financial transactions between health care providers, including the Medicare Fraud and Abuse laws and the Stark I and Stark II. These laws prohibit any incentives that influence physicians to refer patients. For example, a physician who only extended professional courtesy to other health care providers who referred him or her patients would violate the law.
These laws have been interpreted very broadly by the courts. Any payment or inducement that might have a tendency to affect referral decisions is prohibited, even if it has other valid purposes. Professional courtesy based on being on the same hospital staff would raise the same issues, although the link to referrals is more tenuous. Giving professional courtesy to all physicians without conditions would be more defensible, but if the government could show that a disproportionate number of physicians receiving the courtesy were also referring physicians, the court would probably rule that this was a prohibited inducement.
In the past, if physicians violated the terms of their contracts with private insurers, the insurer could refuse to pay the claim and/or deselect the physician from the plan. The insurer could also sue the physician for fraud. However, under the Health Insurance Portability and Accountability Act of 1996 (HIPAA) it is now a federal crime to defraud private insurance companies. Violations can result in fines and criminal prosecution.
The Federal government can also refuse to pay the claim and can ban the physician from participation in Medicare and Medicaid. In addition, when the physician files a claim for services that were provided in ways that violate the federal regulations, that claim violates the False Claims Act (FCA). Violations of the FCA are punishable by a $5000 per claim fine and imprisonment.
For more information on waiving co-pays and deductibles, health care discounts, professional courtesy and other billing issues, please visit our website at www.TheHealthLawFirm.com.