Don’t Get Caught in a Copay Conundrum

In the current environment of increasing patient deductibles and copays, the billing and collection of the patient portion of the services you provide is top of mind. In the Department of Health and Human Service’s report dated May 23, 2017, Alabama’s average monthly health insurance premium amounts increased 223 percent from 2013 to 2017, versus the national average increase of 105 percent. In real dollars, average monthly premiums jumped from $178 to $575.

With deductibles and copay amounts increasing as well, it’s becoming more difficult to collect the patient’s portion of the bill. As a provider, you are more than aware of these financial hardships your patients are facing, especially your sicker patients who absolutely need care. You might routinely waive the patient portion of your services because you sense a financial issue. Maybe you treat other physicians or colleagues and write off their portion of the bill as a professional courtesy. You might even provide care to your team of employees at a reduced rate as a perk of their job. But did you know all three of these scenarios can land you in hot water?

These practices, while intended to be a gesture of goodwill, professional courtesy, or “it’s just the way we’ve always done things,” could put you and your practice at risk of violating federal anti-kickback statutes and violating contracts with insurance carriers – not to mention impacting your practice’s financial bottom line.

According to the Office of Inspector General, the federal Anti-Kickback Statute (AKS) is “a criminal law that prohibits the knowing and willful payment of ‘remuneration’ to induce or reward patient referrals or the generation of business involving any item or service payable by the federal health care programs.” Violating the federal Anti-Kickback Statute can lead to criminal penalties and administrative sanctions. The penalties for physicians who pay or accept kickbacks can be up to $50,000 per kickback plus three times the amount of the remuneration in question as well as imprisonment and exclusion from future participation in federal health care programs. The HHS’s A Roadmap for New Physicians: Avoiding Medicare and Medicaid Fraud & Abuse states the following:

“…Where the Medicare and Medicaid programs require patients to pay copays for services, you are generally required to collect that money from your patients. Routinely waiving these copays could implicate the AKS, and you may not advertise that you will forgive copayments.” In this case, the HHS would determine a practice is violating the AKS if their standard practice is to waive copays. Patients would become the referral source and would be receiving the benefit of a waived copay.

From a commercial insurance carrier’s point of view, if you routinely write off patient’s copays and deductibles, you are in essence decreasing the total charge for the service you are providing. A $100 visit with a $20 copay that is routinely waived has now become an $80 visit.

Commercial insurance carriers can view this as a breach of contract, and they have recently been cracking down on enforcement of collections. Commercial carriers can stipulate that copay portion is required to be paid in order to reimburse the practice its portion. If they find out you have been waiving the patient portion for services, they can come back and seek repayment of funds they’ve already paid for those patients.

Profit margins for services are getting smaller and smaller, and as a medical practice in today’s post-ACA world, your bottom line can’t afford the consistent waiver, or poor collection of these copays and deductibles.

To navigate this issue, we recommend you review/update or implement policies and procedures guided by these best practices:

1. Immediately stop any current practices of routinely waiving or reducing copays and deductibles.
2. Where financial need is an issue, develop a policy with outlined procedures to document a patient’s financial hardship. Having a patient merely sign a document stating they have a financial hardship is not enough to substantiate the patient’s inability to pay. Have a designated staff person/financial counselor document the patient’s financial need. You need to perform due diligence with the patient to prove they are unable to pay. The HHS’s Roadmap for New Physicians states, “… you are free to waive a copayment if you make an individual determination that the patient cannot afford to pay or if your reasonable collection efforts fail.” Train front desk and billing staff on these policies and procedures to ensure consistent enforcement.
3. Bill copays and deductibles and make adequate attempts to collect from the patient. We recommend at least three statements and a phone call as a best practice. Document all communication and collection efforts in the patient’s file to provide an adequate audit trail, should you need such information in the case of an audit.
4. If these three practices bear no fruit, you can write off the patient’s copay or deductible.

As you can see, justifiable circumstances of financial hardship or need are situations where you can discount or waive patient copays. Use these best practices to implement consistent and reasonable policies and procedures. Steer clear of routine waivers and discounts of copays, and you shouldn’t find yourself in a copay conundrum.

The Do’s and Don’ts of Deductibles and Copays

What you should do…

• Always bill the full amount.
• Make a reasonable effort to collect from the patient.
• When a patient states an inability to pay, establish policies and procedures to determine financial need and keep adequate documentation.
• Work out a payment plan with a patient, or agreement for paying a certain amount each visit.
• Collect up front rather than later. Each statement sent costs you time and money.

What you should not do…

• Routinely or systematically write off copays or deductibles.
• Advertise that you will forgive copays.
• Accept the “in-network” copays if you are an “out-of-network” provider.
• Devalue your services by waiving or reducing the copay and deductibles due.

The information in this article is not intended as tax or legal advice. Please contact your lawyer or CPA for specific information regarding your individual situation.

Article contributed by Jenna Roton, CPA, with Jackson Thornton CPAs and Consultants, an official partner with the Medical Association.