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The danger of waiving co-insurance


Despite warnings being issued frequently during the years since 1998, and despite the discussion of this issue during any Medicare training you might attend, there are still healthcare businesses that believe they can get by with waiving co-pays without a policy requiring a hardship evaluation.

Editor’s Note: Welcome to Medical Economics' blog section which features contributions from members of the medical community. These blogs are an opportunity for bloggers to engage with readers about a topic that is top of mind, whether it is practice management, experiences with patients, the industry, medicine in general, or healthcare reform. The series continues with this blog by Carol Gibbons, RN, BSN, NHA, who is CEO of CJ Consulting, which specializes in healthcare revenue cycle management. The views expressed in these blogs are those of their respective contributors and do not represent the views of Medical Economics or UBM Medica.


Over the years, practices have developed many policies about how co-payment and deductibles are collected from patients. In the years that co-pays ranged from $5-$10, and deductibles were $100-$200, practices were much more lenient with patients about collecting that money. 


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Over time, co-payments have increased dramatically and could be more that 30% of the expected payment on a medical claim.  The one thing that has not changed during this transition is the fact that it is against the law to routinely waive the deductible or co-insurance for a Medicare patient, according to a Fraud Alert issued by the U.S. Department of Health and Human Services in 1998.

Despite these warnings being issued frequently during the years since 1998, and despite the discussion of this issue during any Medicare training you might attend, there are still healthcare businesses that believe they can get by with waiving co-pays without a policy requiring a hardship evaluation.  

It was reported in the Poughkeepsie Journal that the U.S. Attorney for New York's Southern District Preet Bharara issued a judgement that collected a $5.3 million fine from a practice for waiving co-insurance and other violations.

“Hudson Valley Hematology Oncology Associates improperly billed Medicare and Medicaid for reimbursement, costing the taxpayers millions of dollars," Bharara said in a statement. "This settlement not only restores those funds, but involves detailed admissions by Hudson Valley and the imposition of safeguards to ensure against fraudulent billing in the future.” 


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In essence, if you are not going to collect co-insurance from a Medicare patient, then your expectation is that the fee schedule is 80% reduced and Medicare only owes 80% of the new amount.

While there was also a billing issue related to the physicians billing a CPT visit code 99212 when the patient was not actually seen by the physician, the process of writing off co-insurance led to the practice having to pay back that 20% on claims where the co-insurance was not collected. The challenge for this practice was there was no process or even attempt to collect the co-insurance from Medicare patients. Practices need to have a process to truly evaluate the financial need for waiving co-insurance of each patient where the co-pay is written off.

Next: How do you develop this process?


How do you develop this process? It is not complicated but can initially be more time consuming for the staff. You will also need to plan chart audits to make sure a finalized hardship form is actually getting into the chart before writing off balances. A hardship form should include the following information: 

               1. The patient’s number of dependents and household income including Social Security,   
                   unemployment, pension or any other source of revenue to the household;

               2. Assets such as home ownership, cash in bank accounts and other personal property;

               3. Expenses such as: housing, utilities, food, child support payments. Non-essential
                   expenses items like credit card payment, cable and phone cannot be
                   considered in this application for hardship.

Once the form is filled out, (there are many examples of this kind of form on the internet) the practice must have a policy for the evaluation of the hardship information. Some practices even request documentation like a tax return or documentation of Social Security payments. This part of the process is driven by how strict you are in the policy development process. The needs of your particular population and location should be considered, as well as the advice of your attorney.


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Next, you need to establish a percentage of the poverty level that you will use as a target for approving the hardship exemption for co-insurance. Most practices set this amount at a percentage of the National Poverty Level  released each year. Some practices will do a sliding scale starting with zero below the national poverty level, 20% of patient balance for 100% of the poverty level, 50% of patient balance for 200% of poverty level and 30% of patient balance for 300% of the poverty level. 

Whatever you decide to use as your standard for approval, it is always a good idea to have the policy reviewed by your attorney to make sure it meets the requirements in the anti-kickback legislation.

Finally, you will need to educate your staff that they must make an attempt to collect all co-insurance and deductible amount for all patients in your practice regardless of their payment source. Statements need to be sent monthly to patients requesting payment on their balances. 

For some patients, setting up a payment plan can be an effective tool for giving them more time to pay. Only when a patient requests a hardship exception or requests a reduction in their balance should your staff give a patient the forms to fill out. It should be reinforced with the patient that this must be approved by management, based on the poverty level criteria.

Next: Protect your practice against fines


Not all patients are going to be approved and some may end up in collection at the discretion of the practice. However, remember that in order to bill the entire fee schedule to Medicare or other providers, you must make every attempt to collect co-insurance and deductible amounts.

The billing staff must be educated to look for the hardship exception form in the chart before writing off any balances due from the patient. If you have made a concerted effort to collect these balances and sent at least three statements to the patient, you then have the discretion whether to write the balance off to bad debt or send the patient to collections. However, Medicare and Medicaid patients cannot be sent to collections for nonpayment of services covered by their insurance company. 


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While this may increase your accounts receivable for a period of time, you will need consistent policies to be followed before you write off balances to bad debt. Do not give patients the idea that if they do not attempt to pay their bill, the balance will be written off. This will leave the same trail in your software that you are not holding patients responsible for their co-insurance and deductible and thus should not be billing the total fee schedule for service rendered in your practice.

Protect your practice against fines that could be levied against your practice by developing compliant hardship polices and educating both the staff and your patients about the policy.  Revise your financial policies and have all patients sign a new form to put into their chart as documentation when problems arise. 

Emphasize to your staff that you are revising your policy to make sure you are compliant with all payment related rules, while at the same time, taking specific patient issues into consideration through the hardship process. 

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