Why You Shouldn’t Waive Patient Copays

The past two years have brought financial and emotional hardship for millions of people.  It is natural, as a physician, to want to empathize with patients by providing lenient policies on payments. Especially for those struggling to get by on a limited income or those who are dealing with the financial fallout from the pandemic. Initially, it may seem like a good idea to waive the deductible or copay portion of a medical bill. But hold on – before you do that you need to consider the consequences.

Legal Ramifications of Waiving Copays

Before you go down that road, there are legalities you need to understand. The first is that most physicians have entered into legal contracts with private insurance companies, as well as the federal payers – Medicaid and Medicare. Entering into these contracts makes it an obligation to fulfill the terms and asks that providers collect copays and deductibles, Also, should a provider waive the patient portion consistently, without the payer’s permission, the payer could logically assume that the practitioner’s fees are “x” percent less than originally stated, breaching the contract.  An example of this would be, if the patient has a $10 co-pay, then insurance would pay $90 on a $100 charge. However, if the copay was waived, the patient’s bill is only $90 total, not $100.

This would give a payer grounds to file a suit for fraud. If it is Medicaid or Medicare, you could be charged under the False Claim Act and be found guilty of a felony, owing financial penalties, be permanently barred from participation in government insurance programs, and could also spend time in prison!

Other laws that could also trip you up are the Anti-Kickback Statute (AKS), which pertains specifically to government program patients.  You hear stories all the time about unethical providers or medical suppliers who trade money for referrals of new Medicare patients. But even if the practitioner’s intentions are good, you could still run into trouble with the federal government. It has been made clear in “A Roadmap for New Physicians, Fraud & Abuse Laws” from the HHS’ Office of the Inspector General that consistently failing to collect patient copays in any instance, other than a well-documented case of financial hardship, is illegal.

Also, thanks to the Affordable Cares Act, AKS violations are subject to further penalties under the False Claims Act, as mentioned above, so you can keep getting deeper and deeper in trouble.

If that wasn’t enough, you could also be seen as breaking the Civil Monetary Penalties Law (CMPL), with a Medicare patient, if the arrangement is seen as influencing a patient to order specific services or medical items from your practice or another provider your office has a relationship with. Understanding that multiple laws, both federal and state, govern a practitioner’s engagement with government healthcare programs, as well as private payers, is critical to the health of your practice.

Financial Ramifications of Waiving Copays

In addition to the legal ramifications, there are financial ones. First of all, when you waive copays and deductibles you are undervaluing your services.  With payers paying less and less, not collecting patient copays and deductibles can also have negative consequences on your practice’s cash flow.  With the increase in high deductible healthcare plans, sometimes the payer is paying less than the copay or deductible for a service as the majority of the cost of the visit is the patient’s responsibility.

To compound the loss of revenue, legal fees can run into the thousands or even hundreds of thousands of dollars. And should you lose, the financial penalties can be substantial.

Doing It the Right Way

In order to ensure your revenue stream, make sure you comply with all contractual obligations. Also, make it easier on your staff by establishing a financial policy that clearly spells out provisions for collecting patient copays and deductibles as well as clearly stating your policy on patient discounts and charity policies. Establishing these rules and guidelines with all staff will help protect your practice.

Some other ways to help ensure that your revenue stream stays positive and that you are following all legal rules and contractual guidelines are:

• Set up a system for establishing and documenting financial hardship in a patient’s chart – It is hard to talk about money but giving your staff the tools and guidance will help ensure this is done correctly. Just having a patient sign a form isn’t enough. You need to have someone on your staff perform due diligence and thoroughly document, in the patient’s file, proof of financial hardship.
• Ensure you have set a policy for professional courtesy – This used to be a common situation, extending discounts to colleagues as a professional courtesy. But with payer contracts, laws, and guidelines you need to be clear about how to handle these situations so as not to put your practice at risk.
• Set up payment plans – Work out agreeable terms for patients to pay off their balance in installments.
• Establish a consistent, fair system for collecting outstanding balances – The industry standard is to send out three statements and if you don’t hear back from the patient, follow up with a phone call or collection letter. If after all of that, you still haven’t received payment, ensure it is documented well in their patient record. If done correctly your practice can then choose what to do including turning it over to collections.

You can certainly help patients struggling with financial hardships, just do it sparingly and make sure you document, in their patient record, that they qualify as a hardship case per your established policy. That is because there are exceptions built into the AKS and CMPL that allow you to forgive copayments providing you can prove the patient’s financial need. But these should be an exception and the rule should be to always collect copays and deductibles.

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Who is Billed Right?

In 2006, two business partners had a vision of creating holistic services that help improve medical billing operations. They started by listening to doctors and building a service model around what doctors need the most. As a result, Billed Right’s Revenue Cycle Management (RCM) model was born. The focus continues to be on solving the problem, rather than selling a product, and hence, Billed Right’s advanced RCM model revolves around personalized service in today’s corporate world, while still cutting costs and improving both patient care and practice revenue.  As a strategic partner, we look to streamline your revenue cycle and operational management thus helping you to grow your healthcare practice.

Contact Billed Right to learn more about how we can become your strategic partner.