Do Yourself a Favor Waiving deductibles and copayments can do more harm than good

by Shellie Pruden, DCMS director of medical practice relations

Waiving the deductibles and copayments for a patient may get you more than a reputation for being a nice guy. It could get you in trouble with the law. A physician's routine waiver of deductibles and copayments could result in false claims, violations of the anti-kickback statute, excessive use of items and services paid for by Medicare, and could be in violation of commercial managed care contracts.

The exception to this prohibition in federal programs is financial hardship. When financial hardship creates a barrier to receiving care, a physician may forgive the copayment; however, the hardship exception may not be used routinely. In all other cases, every effort should be made to collect deductibles and copayments.

Although waiving a deductible here and there likely will not result in going to prison, it could be time to address your office policy. The best approach is to have a uniform policy allowing for a patient's financial hardship to be addressed. Below are a few practices that could get you into trouble:

• Advertising that "Medicare accepted as payment in full," "Insurance accepted as payment in full," or "No out-of-pocket expense."
• Advertisements that promise discounts to Medicare beneficiaries.
• Stating "insurance only" in the chart without indication of financial hardship.
• Routine claims of financial hardship without reasonable effort to determine the beneficiary's actual financial status.
• Charges to Medicare beneficiaries that are higher than those made to other patients for similar services and items. This is used to offset the waiver of coinsurance.

Medicare typically pays 80 percent of its fee schedule amount. This reimbursement cannot exceed the actual charge for the item or service when provided by a participating provider or the limiting charge amount when provided by a nonparticipating provider. In some cases, Medicare will pay the lesser of its fee schedule and the actual charge.

In certain cases, a physician who routinely waives Medicare coinsurance or deductibles could be held liable under the Medicare and Medicaid anti-kickback statute, The 42 US Section Code of Participation 1320a-7b (b). Under this statute, it is illegal to offer, solicit, pay, or receive anything of value as an inducement to generate business payable by Medicare or Medicaid. When physicians routinely waive the portion of the bill owed by a patient, it could be perceived as an inducement to attract patients.

Discounts and professional courtesy may not be appropriate unless the total fee is discounted or reduced. In such situations, the payer (eg, Medicare, Medicaid, or any other private payer) should receive its proportional share of the discount or reduction. This is outlined in the OIG fourth scope of practice compliance protocol for third-party billing agencies, footnote 42 and 43. Regulations specific to physician offices, to be published this summer, are expected to follow the same guidelines. For additional information, the Office of the Inspector General has published a Special Fraud Alert on the routine waiver of copayments or deductibles under Medicare Part B.(1) The Fraud Alert may be found at www.hhs.gov/progorg/oig/frdalrt/121994.html.

The American Medical Association Policy Compendium notes that "Physicians should be aware that forgiveness or waiver of copayments may violate the policies of some insurers, both public and private; other insurers may permit forgiveness or waiver if they are aware of the reasons for the forgiveness or waiver. Routine forgiveness or waiver of copayments may constitute fraud under state and federal law. Physicians should ensure that their policies on copayments are consistent with applicable law and with the requirements of their agreement with insurers."

Many commercial insurance plans include language in managed care contracts that prevent waiving copayments and deductibles. A local contract with significant membership says "Provider shall collect the copayment, if any, required by Health Plan at the time services are rendered to the Covered individual. Coinsurance and deductibles are the responsibility of the Covered Individuals and shall be collected directly from the Covered individual by the Provider."

So much for Mr Nice Guy. The best policy is to collect copayments and deductibles up front. Not only does it keep physicians out of trouble, it helps patients become more conscious of the cost of their medical care.

Reference 59 Federal Register 65373 (1994).