Don't Write Off Patient Copays

It comes naturally to want to help your patients; especially the ones struggling to get by on a meager income or retirement. At first blush, it may make sense to waive the patient portion of a medical bill after the insurance has paid. But before you waive a patient's financial responsibility, consider the legal consequences of doing so. Nowadays, patient discounts, if given incorrectly, can run awry of insurance regulations or even violate federal anti-kickback statutes.

John Meigs, Jr., has practiced as a solo, family physician in rural Alabama for over 30 years. During that time he says the business of medicine has changed drastically. Prior to the institution of health insurance, physicians would often discount their services for patients who struggled to pay or even give free care for the worst cases. Now, however, waiving the patient portion of a physician's fee could potentially land a kind-hearted physician in hot water, as failing to collect insurance copays and deductibles could violate contracts with private and federal insurance companies. It could also negatively impact a practice's bottom line.

"To be legal, you can't charge less than what Medicare would pay ... Obviously, if you discounted everybody you couldn't stay in business. You have to collect," says Meigs, who is now an employed physician at Bibbs Medical Associates, a rural health clinic in Bibbs County, Ala. and president-elect for the American Academy of Family Physicians.

LEGAL CONSIDERATIONS

In its "Code of Medical Ethics, Opinion 8.03, Conflicts of Interest" the AMA writes, "Under no circumstances may physicians place their own financial interests above the welfare of their patients. … If a conflict develops between the physician's financial interest and the physician's responsibilities to the patient, the conflict must be resolved to the patient's benefit."

But as a businessman or woman who has also entered into legal contracts with multiple insurance payers and the federal government, this ethical dictate is not always as simple as physicians might wish.

Attorney Michael Sacopulos, founder and president of Terre Haute, Ind.-based Medical Risk Institute, says in the vast majority of cases, the physicians he works with are not intent on defrauding payers or the government. "You've got a group of people that care about others, or they wouldn't have gone into healthcare, and they want to provide services," he says.

But the impulse to help patients by waiving copays is one a physician should resist for several reasons, says Sacopulos. Patient cost sharing is viewed as an important component of holding down the rising cost of medical care by commercial and government payers. The insurance companies reason if patients have more "skin in the game," they may make better informed decisions about when and where to seek medical treatment, and potentially reduce their demands for expensive diagnostic testing and procedures that may not be necessary.

Aside from the fact that collecting copays and deductibles is a contractual obligation for physicians, if a physician were to routinely waive the patient portion of his fee, the insurance company could take that to mean that his usual and customary fee was really “x” percent less than originally stated. There have been cases, says Sacopulos, where insurance companies have sued physicians for fraud and won. "[Payers and physicians] entered into a contract where they said these are the fees you normally charge … and in fact, what you have done is systematically ignored that. And that is a breach of contract … so you've defrauded [the payer]," he says.

Another pitfall that could trip up physicians is violating the federal Anti-Kickback Statute (AKS). There is no lack of news about shady physicians or medical suppliers who exchange money in return for referrals of new Medicare patients. But even physicians who have more altruistic motives could run afoul of federal laws. HHS' Office of the Inspector General (OIG) makes clear in "A Roadmap for New Physicians, Fraud & Abuse Laws" that routinely failing to collect patient copays in any instance other than for individual determination of patient hardship is illegal:

"The kickback prohibition applies to all sources of referrals, even patients. For example, where the Medicare and Medicaid programs require patients to pay copays for services, you are generally required to collect that money from your patients. Routinely waiving these copays could implicate the AKS and you may not advertise that you will forgive copayments."

*Editor's note: Medicare providers may not bill dual eligible beneficiaries enrolled in the Qualified Medicare Beneficiary (QMB) Program for Medicare cost-sharing (such charges are known as “balance billing”). QMB is a Medicare Savings Program that exempts Medicare beneficiaries from Medicare cost-sharing liability. For full details read the MLN Matters Number: SE1128 Revised.

FINANCIAL CONSIDERATIONS

Given declining payer reimbursements, failing to collect patient copays and deductibles could also have serious consequences for practice revenue. Barbara Dunn, president of Houston-based MedRecovery Solutions, a medical billing company, says many practices can't afford not to collect patient balances. "In today's medical environment, [physicians] are really hurting themselves [if they don't collect] because a lot of times the insurance company is paying less than the copay," she says.

Adding another wrinkle, new high-deductible health plans are making it harder for patients to afford services. Patients may feel unable or unwilling to pay their copays and/or deductibles or skip out on necessary treatment or testing, says Meigs. When patients do not pay their insurance premiums, health exchange insurance companies are asking physicians for refunds for services already rendered, Dunn says, leaving practices to collect from patients who have already demonstrated that they cannot pay.  

In cases of true financial hardship, practices can discount treatment. The key, Dunn says, is not to make it a regular practice; it must be an isolated incident that is documented in the patient chart. "As long as you bill out the full amount, you can discount anybody's bill. Just document that the patient has a hardship, and therefore they would discount the patient portion by ‘x’ number of dollars," she says.

HOW TO DO IT RIGHT

To protect your practice's revenue stream, comply with contractual obligations, and make your front-desk/billing staff's job easier, it is vital to establish a clear financial policy that spells out provisions for collecting patient copays and deductibles and establishes your policy on patient discounts and charity care.

It doesn't need to be "page and pages in a policy manual," says Sacopulos. "But, I think if [practices] are ever intending to waive off copays and deductibles, it should be done pursuant to a policy with documentation." He says many consultants can provide a template that practices can adopt for their own use.

Here are a few guidelines to follow when creating your own financial policy:

• Develop, publish, and train staff on your practice's financial policy.

Establish the circumstances and qualifying criteria when your practice will discount patient care, and disseminate that information to staff. By outlining your policies on helping low-income patients, patients without insurance, or cancer patients who may need expensive treatments such as reconstructive surgery, for example, staff will have a consistent policy to follow and will treat all patients the same. This will also protect your practice from embezzlement disguised as waived copays or discounts to staff friends and family members.

• Develop a system for establishing and documenting financial hardship in the patient chart.

Many physicians are uncomfortable with discussing money and often pass that task off to front-desk staff. But it shouldn't be done willy-nilly. "If you are going to have someone on your staff deal with it, then you need to give them the guidance and the tools to do that in a fair way," says Sacopulos. He gives his clients a form to use to document patient financial hardship. Because Meigs' practice is designated as a rural health clinic, he says they use a sliding fee schedule for patients who can demonstrate financial need, usually by supplying a tax return.

• Make sure that a section is devoted to your policy on professional courtesy.

It used to be a common occurrence to extend discounts to physician colleagues as a professional courtesy, says Meigs. But given contractual obligations to collect patient copays that tradition has fallen by the wayside for many practices. The key, says Dunn, is to make sure that waiving copays is not a routine policy. "More times I see that [practices] will take that patient portion and discount it. And that discounted part is a professional courtesy, but there is still a balance that is billed to the patient," she says.

• Institute a system to consistently make a fair effort at collecting outstanding patient accounts.

A typical policy is to send out three patient statements, says Dunn. If there is no patient response, follow statements with a phone call and/or a collection letter and document your efforts in the patient chart. If done properly and consistently your practice may safely write-off uncollectible copays and/or deductibles, or turn them over to a collections agency. And if the practice is ever audited by Medicare or a private payer, you will have a paper trail easily retrieved from the patient chart.

DISCOUNTING STAFF TREATMENT

Providing practice staff with "insurance only" medical care (waiving the patient copay and accepting the insurance reimbursement as payment in full) would likely violate the practice's insurance contracts. However, practices do sometimes discount staff care as a professional courtesy or an employee benefit. While the custom is well-meaning, it can be problematic, according to Michael Sacopulos, a healthcare attorney. "I think [discounting care] is an employee benefit; I've not seen anyone have trouble with that. … The question is do you have to report it as compensation? Technically you are giving them the value of [treatment]," he says.

One way for practices to help staff with medical expenses and avoid running afoul of the IRS is to fund a financial vehicle like a Medical Expense Reimbursement Plan (MERP) that reimburses staff for a portion of their out-of-pocket medical expenses like copays and deductibles, say experts.

Erica Spreyis associate editor for Physicians Practice. She may be reached at erica.sprey@ubm.com.

This article was originally published in the March 2016 issue of Physicians Practice.