Medical expenses can be a major financial burden for some of your patients, even those with insurance. Medicare, for example, requires a 20 percent co-pay for most services, and patients on low or fixed incomes may struggle to come up with the cash. In other cases, a physician may not want the perceived hassle of collecting payments from their patients. Although there's no federal law prohibiting the practice, most insurance companies ban it with a few limited exceptions. Making a habit of billing patients' insurance and then waiving fees such as deductibles, co-insurance and co-pays can lead to contract termination, HIPAA violations and perhaps even charges of fraud.
HIPAA Violations, Program Abuse and Insurance Fraud
Although there is no federal law that specifically prohibits waiving fees, the Health Insurance Portability and Accountability Act, or HIPAA, contains provisions that govern how you report your charges to insurance carriers.
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If you bill a patient $100 for a service, and he has an 80/20 plan, you're required to collect $20 from him. Failure to do so can be construed as misrepresenting the actual charge, which can lead to an HIPAA violation.
If you choose to waive a patient's share of the bill, he'll probably thank you for it, but his insurance carrier will likely take a different view. From its perspective, the service for which you billed your patient $100 is actually valued at $80, of which they should only have to pay 80 percent, or $64.
The insurance plan may regard routine write-offs as program abuse and terminate your contract. In addition to the risk of HIPAA violations and program termination, state laws vary on what constitutes insurance fraud -- waiving fees may in fact be illegal in your state. Consult with an attorney for advice specific to your situation.
It's Also Bad for Business
Strip away the Hippocratic Oath, white coats and stethoscopes, and your practice is no different from any other business.
If you want to stay afloat, you have to make a profit. Let's say your practice sees 50 patients a day in a typical five-day workweek, and each has a $25 co-pay.
If you waived even half of those fees, you're letting about $160,000 in potential revenue slip through the cracks in an average year.
As a related point, if you send your patients a bill in the mail instead of asking for payment at the time of service, that can also cost you money, too.
In addition to the costs of postage and administrative labor, the likelihood that you'll see that money drops significantly once a patient leaves your office -- by as much as 15 to 25 percent, depending on the source consulted.
Writing Off Bad Debts
The reality of practicing medicine is that there will always be those patients who can't or won't pay their share of the bill. From a tax standpoint, you may need to write off those bad debts to avoid paying taxes on income you never received. In these cases, you must be able to prove that you made a legitimate attempt to collect that debt, such as turning accounts over to collections, to avoid the appearance of fraud or program abuse.
If you're one of the many physicians who decided to practice medicine for humanitarian reasons, demanding payment from patients who are in dire financial straits can seem heartless.
You may be able to secure exceptions that will allow you to legally waive fees. You could, for example, establish a hardship policy under which you can reduce or waive a patient's obligation, provided that she meets specific income guidelines. Such a case must be documented accordingly in the patient's medical record with proof of her financial status, and you should communicate your intent to her insurance provider when you submit the bill to avoid the appearance of fraudulent activity.