Waiving Your Way into Trouble – Writing Off Patient Co-Pays Is Costly

May 31, 2016 by Antonio Arias, MBA, CHBME

Topics: Practice Management, Medical Billing Company

Freebies and discounts are a time-honored American business tradition. In many industries, throwing in something “on the house” is a sound marketing tactic or a built-in aspect of business as usual (at least for mattress salesmen waiving the cost of the bed frame when you buy the deluxe model, or for lawyers and accountants who usually charge $120 an hour, “but in your case…”).

Doctors, however, aren’t privy to such strategies. In the old days of medicine (before the institution of health insurance in the U.S.), it was normal for physicians to discount their services or waive patient costs at their own discretion. The physician’s intent – whether to assist a patient who’s struggling financially, to provide a professional courtesy to another MD, or simply to do something nice – was irrelevant.

But that world of free-for-all freebies is a relic of the past. Due to the involvement of insurers in the medical billing and revenue cycle process, the physician’s intent when offering something gratis is very relevant – and very hard for insurers to make peace with. It may seem like a harmless favor to waive a patient’s financial responsibility for a given encounter, but it’s actually anything but.

Why so? In our current healthcare environment, high-deductible plans are becoming the most common kind, and patients are responsible for a ever-increasing portion of their own healthcare costs. Insurers are highly mindful of this in the post-Affordable Care Act landscape; now that all Americans are required to secure health insurance or face monetary penalties (thanks to the so-called “individual mandate”), patient cost sharing is viewed by commercial and government payers as an important way to hold down the rising cost of medical care.

By waiving co-pays, physicians throw that balance out of whack. That’s why many insurers – private and public – pack their contracts with clauses requiring that providers to collect all patient co-pays and deductibles.

Those clauses also keep providers accountable to another payer concern: what constitutes “usual and customary.” In the eyes of insurers, if a physician routinely waives the patient portion of his fee, his “usual and customary” rate is really a percentage lower than what was contractually agreed to by both parties. As such, systemic fee-waiving amounts to more than just breach of contract – it’s fraud, and physicians can be taken to court for it.

Another consideration is the federal Anti-Kickback Statute (AKS). As the Department of Health & Human Services’ Office of the Inspector General outlined in an informational resource for providers, 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."

Of course, all of the above isn’t to say that waiving co-pays is always entirely out of the question. Discretion is allowed on an individual basis in cases of patient hardship – but physicians should be careful to institute a clear policy on their criteria for writeoffs and to document each instance diligently, ideally with a standardized form logged with all medical billing information.

Ultimately, physicians never put on-the-house offers on the table in instances of anything other than undue financial hardship. If not because of the potential legal consequences, then simply because it’s unwise. With insurers paying less and patients paying more, following in the footsteps of other industries’ freebie “traditions” can take a major chunk out of providers’ bottom lines.

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