It is well known that the business of healthcare is unlike any other business and, until recently, the business aspect of it was commonly overlooked. However, as we move into this new era and take a closer look at the financial aspect of modern medicine, it is important for doctors, especially those in private practice, to become well-versed in how to do business better.
One aspect of the ever-changing business of healthcare that has become overwhelmingly important in just the past five years, is collecting fees for service directly from the patient. This is quite different from the past 30 years when most of the financial responsibility was held in the hands of the insurance companies and patients were only responsible for a small copay. But now, over 50% of health plans are high deductible plans and out of pocket expenses have risen over 230% in the last 10 years!1.
While patient financial obligation is at its highest, there are still many doctors who routinely waive copays and deductibles, not even bothering to send statements. This happens for many reasons from staffing, to poor book keeping, and the belief that the patients will not pay for the services rendered even if the statement is sent. Not only is this bad business - leaving over $30,000 on the table annually - but routinely waiving patient financial responsibility carries legal implications as well2.
Many physicians are likely aware that federally funded insurance, such as Medicare, carry rules that stipulate payment not only from the insurer, but also the patient. It has been argued by the Office of the Inspector General (OIG) that waiving fees falls under the Anti-Kickback Statute (AKS) and is misrepresentative of actual charges and is considered as an offer to pay on the patient's behalf, which could be considered fraudulent. Furthermore, the OIG has concluded that waiving copays and deductibles removes the distinction of utilization, which can increase payor costs3. For example, grandma might be more inclined to visit the doctor for minor issues that can be easily treated at home, if she knows that her out of pocket copay of $25 will be waived.
Conducting this practice is punishable by law and the sentence is no joke. The result may be monetary penalties of up to $11,000 per service provided or up to 5 years in jail4. If a physician is ever audited by Medicare, it then becomes important to have proof that statements have been sent in an attempt to collect payment.
Not only is the legality of attempting to collect patient financial responsibility a Medicare issue, but commercial payors also have their rules and regulations. Under the Employment Retirement Income Security Act (ERISA), which is a broad set of federal laws that govern health insurance, payors such as Cigna and United have sued hospitals and physicians alike for routinely waiving copays and deductibles. It has been argued that commercial insurance involves a contact that establishes mutually agreed upon deductibles and copay amounts. If the provider waives these, they are effectively reducing the covered lives contractual and legally binding financial obligation. Therefore, by waiving these fees, the provider is interfering with the contract and is at risk to be sued for damages5.
Not only is it good business to send out statements, but it's also illegal not to. Having a good system to do this routinely and in a way that tracks the attempt to collect will be key in avoiding any legal penalties.
1 The Kaiser Foundation
2 6th Annual Report in Healthcare Payments
3 OIG.HSS.GOV
4 CMS.GOV
5 Becker's ASC Review