Waiver of Copayments and Deductibles: To Waive Or Not To Waive?

Vicki Myckowiak
Myckowiak Associates, P.C.

Anesthesiologists and chronic pain practices are often faced with a dilemma: hospitals, patients, friends, and colleagues asking them to waive copayments and/or deductibles. Although it may seem harmless to comply with a waiver request, in fact the law is clear that physicians can only waive copayments and/or deductibles in a limited number of circumstances. In fact, the Government has made clear that the routine waiver of copayments and deductibles may be considered fraudulent. What is a practice to do?

THE PROBLEM

The legality of waiving copayments and/or deductibles has been an issue for over ten (10) years. In 1994 the Office of Inspector General ("OIG") issued a Special Fraud Alert on Routine Waiver of Copayments or Deductibles under Medicare Part B. See, 59 F.R. 242 (1994). In this fraud alert, the OIG advised that: Routine waiver of deductibles and copayments by charge-based providers, practitioners or suppliers is unlawful because it results in (1) false claims, (2) violations of the antikickback statute, and (3) excessive utilization of items and services paid for by Medicare.

The OIG reemphasized its concern with routine waiver of copayments and deductibles in its Compliance Program Guidance for Individual and Small Group Physician Practices published on October 5, 2000 (65 F.R. 59434) in which the OIG stated that:

Remuneration for referrals [such as routine waiver of copayments and deductibles] is illegal because it can distort medical decision-making, cause overutilization of services or supplies, increase costs to Federal health care programs, and result in unfair competition by shutting out competitors who are unwilling to pay it. Remuneration for referrals can also affect the quality of patient care by encouraging physicians to order service or supplies based on profit rather than the patient's best medical interests.See, 65 F.R. 59440. In the area of waiver of copayments and deductibles, the Government has been consistently concerned with false claims and violations of the anti-kickback laws.

FALSE CLAIMS

The Government believes that a physician who waives copayments or deductibles is misstating his/her actual charge. For example, if a physician claims that its charge for a service is $100, but waives the 20% copayment, the Government believes that the provider's actual charge is $80. Therefore, a provider who submits a claim for which it has waived the copayment or deductible may be submitting a false claim and may be subject to criminal sanctions under 42 U.S.C. 1320a-7b of a maximum fine of $25,000, imprisonment of up to five years, or both. Additionally, a conviction would lead to automatic exclusion from all federal health care programs.The Government can also proceed under the Civil False Claims Act (31 USC 3729-3733) against a provider who waives copayments and deductibles on Federal health care program claims. Violations of the Civil False Claims Act include fines of up to $11,000 for each false claim submitted, plus up to three times the amount unlawfully claimed. A provider who violates this Act is also subject to possible exclusion from Federal health care programs.

KICKBACK VIOLATIONS

When physicians forgive financial obligations such as copayments or deductibles, they may be unlawfully inducing the patient to purchase items or services in violation of the antikickback statute's proscription against offering or paying something of value as an inducement to generate business payable by a federal health care program. Likewise, when physicians forgive patient financial obligations at the request of a surgeon, referring practice or hospital, they may be violating the anti-kickback statute. The anti-kickback statute makes it a criminal offense to knowingly and willfully offer, pay, solicit, or receive any remuneration to induce referrals of items or services reimbursable by Federal health care programs. 42 U.S.C. 1320a-7b(b). Violation of the criminal anti-kickback statute can lead to a felony conviction punishable by a maximum fine of $25,000, imprisonment of up to five years, or both. A conviction can also lead to exclusion from federal health care programs.

The Government can also choose to proceed civilly for kickback violations under the Civil Monetary Penalties Law (42 USC 1320a-7a). The Civil Monetary Penalties Law prohibits a provider from offering remuneration to a Medicare or Medicaid beneficiary which the provider knows or should know is likely to influence the beneficiary to obtain items or services billed to Medicare or Medicaid from a particular provider. The penalty for violation of this law is a fine of up to $10,000 per item or service, and up to three times the amount claimed. The Government can also seek to exclude the provider from Federal health care programs.

PERMISSIBLE WAIVERS OF COPAYMENTS AND DEDUCTIBLES

Not all waivers of copayments and deductibles are per se illegal. In fact, there are certain circumstances in which the Government will permit the waiver. Each patient's case must be reviewed individually and the waiver must fit the following criteria:

• the waiver is not offered as part of any advertisement or solicitation;
• the person making the waiver does not routinely waive the amounts; and,
• the person making the waiver: (a) determines in good faith that the individual is in financial need; or (b) fails to collect after making reasonable collection efforts.

42 U.S.C. 1320a-7a. Providers should maintain documentation of the need for a waiver in their files.

CONCLUSION

Anesthesia and chronic pain practices may face pressure to waive copayments and deductibles. As this article showed, medical practices that waive copayments and deductibles may risk severe criminal and/or civil sanctions. Physicians must educate surgeons, patients, friends, and colleagues as to the laws surrounding payment of copayments and deductibles. For further information, or to obtain copies of the authorities cited in this article, please contact the author.