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% copay 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 copay 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 physician’s 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 physician’s allowable reimbursement schedule to the discounted price.