Katharine C. Rathbun, M.D., and Edward P. Richards, III, J.D.
Originally printed in Missouri Medicine 1998;95:18-20
Professional courtesy taking care of the families of other physicians without charge is a tradition that dates back to Hippocrates. The practice served to build bonds between physicians, and to reduce the incentive for physicians to treat their own families. This article discusses the legal issues posed by professional courtesy and discounts for medical care. While the authors believe that, on balance, professional courtesy is good for the medical profession, the congress and private insurance companies have greatly reduced the permissible scope for reducing charges for medical care. Since the penalties for violating these restrictions include denial of the claim, deselection from the plan, fines, and imprisonment, physicians must review their practices to assure that they are in compliance.
Private insurers and the federal government have basic restrictions on how you charge patients for medical care. Neither creates an exception for professional courtesy: in general, if you cannot reduce the cost of care for anyone else in your practice, you cannot reduce it for physicians. As we discuss later, there are also situations where it is permissible to reduce the cost of care for everyone except physicians.
The most common ways physicians reduce the cost of care for patients are waiving the co-pay ("insurance only") and giving the patient a discount on the care. In most situations, both private insurers and the federal government ban waiving the co-pay. (Medicare has some provisions allowing the co-pay to be waived for documented indigency.) They do this because the co-pay is meant to discourage casual trips to the physician. The theory is that making the patient share the cost of treatment will make the patient a more sophisticated health care consumer. The reality is that the co-pay limits access to care for many people. The less care the patient seeks, the less money the health plan has to pay to physicians and hospitals for that care. Both private insurers and Medicare require the physician to make reasonable efforts to collect co-pays that are billed to the patient.
A discount is a reduction in the normal charge based on a specific amount of money or a percentage of the charge. Just as the hardware store can give you $5 off on all tools or a 10% discount on your total purchase, a physician may take $5 off or 10% off of the bill for an office visit or a surgery. However, there are things that the physician must beware of in doing this. The discount must apply to the total bill, not just the part that is paid by the patient. If the patient owes a 20% co-pay on a $25 charge ($5) and you are giving a discount of $5 then the patient pays $4 and the insurance company pays $16. If the patient owes a $5 co-pay regardless of the amount of the charge then the patient must pay $5 and the insurance company pays $15. In this situation, the discount would only benefit the insurance company.
Discounts raise the issue of the physicians customary charges for a procedure. Many private insurance plans and some federal programs have a "most favored nation" clause in the contract with the physician. This entitles the plan to pay the lowest charge the physician bills to anyone. Any systematic pattern of discounts could trigger a reduction in the physicians allowable reimbursement schedule to the discounted price.
As far as the authors have determined, none of the private insurers bans waiving the entire charge for the care. You may also charge for some visits and not for others. Many pediatricians do not charge for the first follow-up visit for otitis media. This increases the likelihood that the child will be brought back for the recheck The insurance company is also getting a free visit, but at least the patient is getting the care.
"No charge" visits are prohibited if they are part of a fraudulent scheme. For example, a no charge visit is still a patient care encounter and must be fully documented. Assume that a patient has severe asthma and is waiting out a one year preexisting illness exclusion in a health insurance policy. If that patient requires treatment a month before the end of the year waiting period, you have to fully document the treatment even if you do not charge the insurance company for it. You cannot use "no charge" to hide medical information.
You may also deliver non-reimbursable care as part of an otherwise justified office visit and bill the company for the authorized part of the visit. For example, if the insurance doesn't cover immunizations, then you could do the immunizations at the time you do an authorized well-child check up, or when the child is in for some other medical condition that is not a contra-indication for immunizations. You cannot, however, bill for an office visit when the only reason the patient is being seen is to deliver care that is not authorized under the policy. It would also be improper to "no charge" as a way to waive a co-pay in order to generate ancillary business for the physicians office lab or other health services business. In other words, you cannot no charge for the visit and bill the insurance company for $100 worth of lab work that it would not have approved as part of a reimbursed visit.
"Kickbacks" and Inducements to Refer Patients
The Federal government, and several of the states, have specific laws governing financial transactions between health care providers. These laws include the Medicare Fraud and Abuse laws and the Stark I and Stark II, which apply to care paid for in whole or in part by the Federal government. These laws prohibit any inducements or kickbacks that could influence the decision of a physician (or others) to refer patients, or affect a patients decision to seek care. Violations of these laws are punishable with fines and imprisonment. They also make any claims submitted for the care of the patients gotten through the scheme false claims.
These laws have been construed very broadly by the courts. Any payment or inducement that might have a tendency to affect referral decisions is prohibited, even if it has other valid purposes. For example, one of the lead cases involved a lab that provided Holter monitor services. The lab charged a fee for providing the monitor and hired outside cardiologists to provide the professional component by reading the record. This was perfectly proper. The lab got in trouble because it allowed the ordering cardiologist to also be the reading cardiologist. There was no allegation that the service cost more or was not properly done it was illegal solely because paying the ordering physician could induce the physician to order the test. The court made it clear that an otherwise proper payment is illegal if it can also have the purpose of affecting referrals.
These laws can prohibit otherwise permissible discounts or "no charges." For example, a surgeon who only gave professional courtesy to physicians who referred her business would clearly violate the law. Professional courtesy based on being on the same hospital staff would raise the same issues, although the link to referrals is more tenuous. Giving professional courtesy to all physicians without conditions would be more defensible, but if the government could show that a disproportionate number of physicians receiving the courtesy were also referring physicians, the court would probably rule that this was a prohibited inducement.
Traditionally, if physicians violated the terms of their contracts with private insurers, the insurer can refuse to pay the claim and/or deselect the physician from the plan. The insurer could also sue the physician for fraud. In extreme cases, the local district attorney or U.S. Attorney could prosecute the physician for mail and wire fraud for using the mail and electronic communications to file the fraudulent claims. The Health Insurance Portability and Accountability Act of 1996 (HIPAA), better known as the Kennedy-Kassebaum bill, now makes it a federal crime to defraud private insurance companies. Violations of the contracts with private insurer are criminal fraud under HIPAA and could result in fines and criminal prosecution.
The Federal government can also refuse to pay the claim and can ban the physician from participation in Medicare and Medicaid. In addition, when the physician files a claim for services that were provided in ways that violate the federal regulations, that claim violates the False Claims Act (FCA). Violations of the FCA are punishable by a $5000 per claim fine and imprisonment. The large financial settlements that have been paid to the Federal government recently, such as the $17.5 million paid by Baptist Medical Center in Kansas City, are based on false claims allegations.
To date, there have been no reported cases, prosecutions, or settlements solely based on professional courtesy to health care providers. Looking at general patient care, rather than just professional courtesy, there have been private insurance fraud actions based on illegally waiving co-pays and/or providing discounts that were not passed on to the insurer. There have been Federal actions for the same violations, as well as for using waivers and discounts to induce Medicare patients to use other health care services.
Professional courtesy means making no charge to anyone, patient or insurance,
for medical care. There are no special exceptions in the law that allow professional
courtesy to physicians in situations where the same courtesy could not be extended
to all patients. Conversely, there are some situations where such courtesy can
be extended to all patients except physicians and other health care providers.
Physicians must examine their professional courtesy policies to assure that
they do not violate either the contractual terms in private insurance policies
or the Medicare/Medicaid laws and regulations. While there may be situations
where it is defensible to "no charge" for services to health care
professionals, the physician should assure that this professional courtesy is
not linked to referrals, either in reality or in appearance.
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