Patients are clamoring for discounts amid rising deductibles and copays, but doctors could pay a steep price for offering them in spite of their good intentions, experts warn. In addition to the obvious hit to revenue, discounting can present a legal minefield as payers increasingly challenge the practice.
Geoffrey Booth, MD, offers discounts to patients in financial distress. Doing so is generally considered acceptable, but he has noticed payers scrutinizing any financial relief to make sure it is valid.
One patient, a man in his 60’s with an addiction disorder, has several medical problems Booth is treating along with the addiction, including pulmonary and cardiac issues. The patient is insured, but can’t afford his share of the costs, so Booth has reduced his professional fees for the addiction treatment and has been helping the patient find in-network care for his other health problems.
“When I first began seeing him, I was shocked at the number of things he needed but hadn’t received, like an EKG and a cardiology exam,” says Booth, a Malibu, California, internist. The addiction itself played a role in his lack of treatment, but out-of-pocket costs also were a factor, he says.
Discounting fees for financially strapped patients may be laudable from a humanitarian standpoint, but practice and legal experts recommend sharpening up policies on charity care and adopting written guidelines for prompt-pay and other discounts.
“We all know there are times you will come across patients who can’t pay,” says Booth. “Insurers are making it clear it’s illegal to just continually waive copays and that if you do, they will come after you. It’s a pretty daunting thing, because we know as physicians we can’t just discount because we like the patient or we’ve had them for 20 years.”
Last November, New York health and financial services regulators wrote to physicians in that state, reminding them of copayment rules. “A physician may understandably and rightly waive a copayment or coinsurance for an indigent patient, for example, or decide that prosecuting a patient for a copayment or coinsurance is not cost effective,” regulators say.
Routinely waiving payments could constitute insurance fraud, however, as can billing an insurer for a waived patient’s obligation. Physicians found to be doing so “may be subject to professional misconduct penalties, including, but not limited to, revocation of his/her medical license,” the letter warns.
State laws vary widely regarding patient discounts, so the New York letter is a general reminder to physicians in all states to check out their current statutes and make sure their discounting procedures are legal.
Calls for help with rising deductibles
Melissa Lucarelli, MD, president and medical director of the Randolph Community Clinic in Randolph, Wisconsin, and member of the Medical Economics editorial advisory board has mostly avoided discounts for insured patients. In some cases, though, she has offered them to patients electing procedures not covered by their insurance.
Increasingly, she says, insured patients are asking for discounts as their deductibles have soared. “To them, it feels like they are paying the whole bill, but to me, I’ve already taken a 25% hit because the price has been negotiated down by the insurance company,” she says.
Some physicians give patients the option of paying a discounted self-pay rate, but the patient can’t have the charges count against his or her deductibles. Payers have challenged this practice, though it is typically difficult for them to discover it is happening, attorneys say.
Discounting has been growing over the last few years, experts say, and insurers are pushing back. Many of them now factor discounts into their utilization review process.
“It’s been getting enormous attention as insurance companies are waking up to the opportunity to deny payment on the basis of a provider’s discounting,” says Harry Nelson, JD, managing partner of Nelson Hardiman, a Los Angeles-based law firm.
Historically, reimbursements were strong enough so that some providers could forego copays and deductibles because doing so would increase patient volume and the high levels of reimbursement would in effect cover the discounts, Nelson says.
Today, however, both public and commercial payers are enforcing stricter utilization control, the practice of shifting greater financial responsibility onto patients in
order to discourage unnecessary services.
With reimbursement shrinking and revenue cycles lengthening, along with payers’ stricter standards, discounts are being scrutinized more than ever, he says.
“If you are giving out widespread discounts, or advertising them, you’re going to get into trouble, because it can be seen as constituting fraud and abuse,” Nelson warns.
Physicians can, however, take some steps to make sure their business practices are legal and effective, experts say.
Define financial hardship
First, adopt a specific, written policy covering financial hardship cases, and make sure patients are notified about the details, Nelson says.
Discounts can be set on a sliding scale. A family of four earning $24,300 a year is at the federal poverty line, so you may set price breaks for families earning more, up to a cap at a multiple of the poverty line, Nelson says. He also suggests creating application forms for patients who want to apply for financial hardship discounts and have them ready and available in the office.
A surprising number of medical practices stop there, without instituting a consistent way of verifying patients’ income, so Nelson also recommends requiring some form of proof of income.
“A lot of doctors are reluctant to go as far as asking for tax returns or pay stubs, but if you haven’t been doing anything you may need to take a page from hospitals’ playbook,” he says.
Prompt pay as a safe harbor
Beyond indigent patients, there are others who can legally receive discounts. Prompt-pay discounts are an effective way to boost collections and reduce the hassle and paperwork of multiple rounds of patient billing reminders. State laws vary regarding this practice, however, so it is another topic to consider exploring with a health law
“Providers are subject to major collection risk as their revenue cycle slows down, so offering some reasonable amount for prompt payment is a valid practice,” says Nelson. As long as practices are acting in good faith and not issuing blanket discounts they are typically on firm legal ground, again subject to individual state laws, he says.
However, many payer contracts stipulate that an insurer will pay the lesser of usual and customary charges or the actual prices charged to patients, so that if prices are reduced for any patient, that price becomes the usual and customary for all patients in the practice covered by that payer, notes Heather Bettridge, CPC, associate vice president for practice management services with the Texas Medical Association.
Maintaining an updated policy manual spelling out the precise circumstances that qualify a patient for a discount will help keep the practice in compliance with federal and commercial contracts, she says.
“If you have a prompt-pay discount, when does it apply, in full at the time of service? Does it only apply to cash? The details need to be spelled out,” Bettridge says. And once you have these written down, notify patients through signage and office handouts what the policies are.
Use a consistent collections strategy
Setting, but not forgetting, a firm collections policy is another way to effectively manage a discount program.
At Lakeland Medical Associates in Athens, Texas, primary care physician Douglas Curran, MD, says the 14-physician practice generally handles its own collections, even if it means taking patient payments that are only a tiny portion of what the patient owes.
“We let patients know we will work with them, even if they can only pay a few dollars at first,” says Curran, who believes that asking patients for even token payments makes them more invested in the practice, which ultimately strengthens patient relationships, he says.
Other patients actively ignore bills, betting that after the third notice goes unheeded, a practice will typically start discounting the amount they owe.
And the discounts can be large—up to 50% if the patient pays immediately—says Bettridge. Though it’s usually a last-ditch effort to collect any money possible, this type of discounting is generally allowable (subject to individual state prohibitions) if it is offered to all patients who fall behind on their payments.
Another way practices are attempting to get around prohibitions on discounting fees is through third-party finance firms such as CarePayment and ClearBalance, which offer no-interest loans to patients and are, in effect, another form of discounting.
Avoid a haphazard approach
The key to all these practices is consistency, applied to specific types of patients, says Elizabeth Woodcock, FACMPE, an Atlanta-based consultant with Woodcock & Associates and author of The Physician Billing Process: Avoiding Potholes in the Road to Getting Paid.
“Physicians tend to use discounts haphazardly,” she says. Doing so is problematic, particularly when the discounts are applied to insured patients.
Deductibles do help control utilization, and payers want patients to think about whether a trip to the emergency department is really in order or whether an office visit later will do, she says. “If you take that away through discounting, you have now impacted the payer’s utilization strategy, which is why they don’t want you to do it.”
Payers often are ambiguous as to just what qualifies for allowable discounts, however. Woodcock recommends never having a policy that offers discounts to everybody, regardless of income.
Instead, have a written protocol for potential hardship cases, keeping it flexible enough to include a range of incomes and individual circumstances. Just beware of discrimination, she says, as these rules aren’t designed to benefit friends and family.
“Everybody is flying blind on this because there are no hard and fast rules on financial hardship,” she says.