As the “Great Recession” continues, there is much discussion on medical forums about how to increase cash flow, decrease administrative expenses, and deal with ever-increasing numbers of unemployed and uninsured patients.
Extending discounts to patients who pay at the time of service or pay out of pocket is one effective way of addressing all three of these issues. Exercise caution, because discounts can run afoul of federal and state laws. These include state antikickback statutes, the anti-inducement provision of the Health Insurance Portability and Accountability Act, the Medicare exclusion provision, and state insurance antidiscrimination provisions.
From a legal standpoint, any discount is a kickback of sorts—you are returning part of your fee to the patient—and many laws designed to thwart real kickbacks can apply in such situations.
Take the straightforward case of time-of-service discounts for cosmetic procedures and other services not covered by insurance. You would think such transactions are just between you and your patients, but you need to avoid the appearance of using these discounts as marketing incentives (inducements to attract patients).
Also, a shrewd third-party payer could try to pull a fast one on you. Many provider agreements contain what are often called “most favored nation” clauses, which require you to automatically give that provider the lowest price you offer to anyone else, regardless of what they would otherwise pay. In other words, they could demand that you give them the same discount.
My response in that situation would be that a time-of-service discount is exactly that: It is offered only when payment is made immediately. Third parties never pay at the time of service and are not entitled to it.
Things get complicated if you also want to extend discounts for covered services. Be sure that the discounted fee you charge the patient is also reflected on the claim submitted to the insurer. Billing the insurer more than you charged the patient invites a charge of fraud. Avoid discounting so regularly that the discounted fee becomes your new usual and customary rate.
Waiving coinsurance and deductibles can be trouble, too, particularly with Medicare and Medicaid. You might intend it as a good deed, but the Centers for Medicare and Medicaid Services may see it as an inducement or kickback, especially if you do it routinely. The CMS has no problem with an occasional waiver, especially “after determining in good faith that the individual is in financial need” (according to the Office of Inspector General), but thorough documentation is in order in such cases.
Waiving copays for privately insured patients can be equally problematic. Nearly all insurers impose a contractual duty on providers to make a reasonable effort to collect applicable copays and/or deductibles. They view the routine waiver of patient payments as a breach of contract, and there has been litigation against providers who flout this requirement. As with the CMS, accommodating patients with individually documented financial limitations is acceptable, but when there is a pattern of routine waivers and no documentation, you will have difficulty defending it.
In addition to antikickback laws, some states have antidiscrimination laws that forbid either lower charges to any subset of insurance payers or any noninsurance payer than to any insurance payer. Some states make specific exceptions for legitimate discounts—as in cases of financial hardship, or when you are just trying to pass along your lower billing and collections costs—but others do not. Check your state's laws and run everything past your attorney.
As for how much of a discount you can give, I cannot suggest an amount, but if it is completely out of proportion to the administrative costs of submitting paperwork and the hassles associated with waiting for your money, you could, once again, be accused of offering a discount that is a de facto increase to insurance carriers, and that could result in charges of fraud.
In cases of legitimate financial hardship, the most effective and least problematic strategy may be to offer a sliding scale. Many large clinics and community agencies and all hospitals have a written policy for this, often based on federal poverty guidelines. Do a little homework: Contact local social service agencies and welfare clinics, learn the community standard in your area, and formulate a written policy with guidelines for determining a patient's indigence. Once again, consistency of administration, objectivity in policies, and documentation of individual eligibility are essential.