Practice Management Alert

Practices that routinely write off charges to help patients with financial hardships may be exposing themselves to potential litigation and may be threatening the patients' relationships with their insurers. The smart way to assist patients who can't pay their bills is to review the case, require and examine proof that the patient truly is having a financial hardship, and document in the medical record what you are waiving, recommends Steve Verno, CMBSI, NREMTP, practice manager with Emergency Medicine Specialists, a 120-physician practice in North Miami Beach, Fla., and compliance director for the Medical Association of Billers.

Routine waiver of deductibles and copayments can violate several federal laws and regulations, including the federal False Claims Act, antikickback statutes and compliance guidelines for individual and small group physician practices. It also may violate payer contracts, and could result in your removal from a health plan's provider panel.

For example, when a physician fails to collect deductibles, insurance carriers could argue the provider submitted false charges to them and is committing fraud, Verno says. It could also threaten that patient's continued insurance coverage, he adds. For example, with commercial carriers, the patient has a responsibility to pay deductibles and copayments, and the premium the insurer charges for that coverage is based in part on how much the patient pays out-of-pocket. Generally, the higher the patient out-of-pocket costs, the lower the premium. 

Short of alleging fraud, Verno continues, another option is for the plan to demand the same discount given to the patient. Or, the payer may refuse to pay the entire claim, says Toni Revel, CPC, RN, NP, a healthcare consultant based in Warrington, Pa. "You can't routinely waive deductibles and copays because when the patients or the patients' employers purchase the insurance, the understanding is the employees have a financial responsibility, and so does the insurer. That responsibility is supposed to help patients manage their healthcare a little more effectively than running to the doctor for every little problem, and instead only go when it is reasonable and necessary because they are going to have to pay part of the bill," Revel says.

Also, if the provider routinely fails to collect the deductible from a patient and writes it off so the patient returns for treatment, the write-off could be considered a kickback or an illegal inducement to keep that patient, both experts explain.

"You should never reduce your charges," Verno insists, adding that doing so can increase chances of an audit, especially by HCFA. "If Medicare finds out you are charging it something different than a commercial insurer for the same services, you will be investigated to find out if you are making false claims to the government. To keep everything aboveboard, submit the same amount of charges to everyone."

Charges Versus Payments
 
Don't confuse charges with payments, Verno stresses. Although providers should have one charge for a particular service no matter who the payer, they can accept reduced payments from insurers. When practices contract with insurers, including Medicare and Medicaid, they agree to accept payments that may be less than their charges. However, the insured patient still has a contractual responsibility for his or her share of the bill. And, Medicare patients also have a responsibility for their share of the invoice under federal law and Medicare regulations. The responsibility can be waived only if the patient has a proven financial hardship.

Unless a financial hardship is proven, waiving a copayment or deductible aids the patient in violating his or her contract with the insurer, Verno says. When patients don't pay deductibles and copayments, the insurer can terminate its contract with them, and the patients can lose their insurance. Medicare rules require beneficiaries to pay deductibles and copayments, and providers must make reasonable efforts to collect them. The requirement can be waived only upon proof of financial hardship, he adds.

In assessing whether a patient qualifies for a financial hardship, Verno says, providers should ask patients for proof of the following:

Net income, including salary and wages and any court-ordered payments;

Other income, including dividends, interest, payments from property rental, support from family members, pensions, Social Security benefits, veteran benefits, unemployment compensation, trusts and gifts;

Assets, including cash, all bank accounts, stocks, bonds, real estate equity and equity in personal property, such as cars and boats; and

Essential expenses, such as housing, utilities and food.

Practices should request copies of income-tax returns and W-2 and 1099 forms as proof of income to determine whether the patient's earnings meet state and federal poverty guidelines. One of the biggest mistakes providers make is to think that patients qualify for financial hardship because they have a lot of credit-card and loan debts. "When considering financial hardship, don't take the expenses of nonessential or luxury items into consideration. Once you've taken the amount the patient earns and subtracted the amount needed to live, you can determine whether the patient can afford to pay your bill," Verno suggests.

If the patient truly has financial hardship, the provider can write off the amount of the bill that's owed. Make copies of the proof supplied by the patient and place them in his or her file. The physician should write in the medical record that the charge for that particular date of service is being written off due to proof of financial hardship, which is in the patient's file. The determination of financial hardship is applicable to that visit only, Verno says.

To waive a deductible or copayment in the future, the patient would again have to prove financial hardship. "Who's to say that if the patient proved financial hardship today whether that hardship will exist tomorrow? The patient could win the lottery or come into some other money," Verno adds. The patient and the physician should also sign a statement detailing that the practice has reviewed proof of financial hardship, and what bills are being waived, says Liz Jones, MS, CMBS, president of the Medical Association of Billers, based in Las Vegas. The patient and the physician should each have a copy.

Note: See the top of this page for an example of a statement that can document the deductible and copayment waiver transacted between the parties. The completed and signed form should be attached to copies of the financial proof supplied by the patient as evidence that financial information was reviewed and hardship was proved.