Professional Courtesy for Healthcare Services

Professional courtesy, the provision of care without charge or at discounted rates to physicians and their immediate families, has a long history in the medical profession, but is relatively rare in today’s complex healthcare payment environment. This once-commonplace practice was intended to foster amicable relationships among health care providers. By the mid-20th century, professional courtesy was often extended to additional medical personnel and employees. As health care insurance became more prevalent, professional courtesy often took the form of waiving co-payment or other out-of-pocket expenses (so-called “insurance-only billing”).

These days, such practices risk running afoul of anti-fraud and abuse laws and payer contracts. Practice management consultants and risk management advisers warn physicians about this practice, particularly when government-financed health care is involved. The penalties for violating these laws, such as the Federal False Claims Act, Anti-kickback Statute, Civil Monetary Penalties Law, and Stark II Regulations, can be severe.

Government Healthcare Payers

The US Department of Health and Human Services (HHS) has issued a “Special Fraud Alert,” which clarified the government’s position that physicians who routinely waive portions of their fees, such as co-payments and deductibles, are, in effect, submitting false claims.

The HHS emphasized that physicians forgiving financial obligations for reasons other than genuine financial hardship and without “good faith” attempts to collect those obligations may violate the Anti-Kickback Statute. The HHS explained that by waiving co-payments and deductibles, a physician effectively makes medical services free to the patient, encouraging the patient to excessively utilize medical services, which are then paid by Medicare or other government entities. In this fashion, the fee waiver by the physician unlawfully induces the patient to purchase services from the physician. Additionally, waiving fees from a physician-patient also may create the appearance of an unlawful arrangement by which the physician-patient is induced to refer business to the treating physician.

Private Payer Contracts

Even if the potential recipients of professional courtesy have no relationship with Medicare, Medicaid, or other governmental health insurance, professional courtesy arrangements may be problematic.

In their contracts with practices, many private insurance companies specifically require that providers collect co-payments and deductibles. A policy of waiving these fees for some patients, such as other physicians, may constitute a breach of the contractual agreement with the insurer. If the practice is in breach of the contract, the insurer may refuse to pay the claim (or even potentially all pending claims) and/or may drop the practice from the plan.

In addition to these consequences for breach of contract, professional courtesy also might constitute insurance fraud. In some states, the insurance company might sue the practice directly for fraud.

Similarly, some states deem that the practice of waiving copayments and deductibles as professional courtesy has been expressly outlawed, except in cases of financial hardship.

Summary

The precise legal risks involved in providing free or reduced-rate medical services as professional courtesy remain somewhat unclear, but the potential fines and penalties are substantial.

While some physicians may believe that the practice tradition outweighs the legal risks, they would be prudent to seek legal advice to structure a professional courtesy program that meets the complex requirements of applicable federal and state laws.

Financial Hardship Waiver Policies

Several of the laws that restrict professional courtesy and waiver of fees specifically permit waiver of some fees on a limited basis in cases of “genuine financial hardship.” Any such program should include the following elements:

Consistent and Confidential Policy

• Application: Trained, responsible staff member(s) should handle financial hardship waiver decisions discreetly and in a manner that guards patient and family privacy and dignity. Designating and training specific staff members to manage the financial hardship waiver policy can improve consistency.
• Documentation: The financial hardship waiver policy should be formalized into a written document. Decisions made should comply with the policy and be supported with documentation, such as an application form requesting financial waiver and should be retained in the patient’s billing records.
• Consistent financial standards: Waiver policies should be based on specific, objective financial criteria, such as the government poverty level.
• Standardized application form: The practice should make reasonable efforts to verify that the patient meets the financial standard adopted in the policy. A printed form that includes financial information can provide evidence of the physician’s efforts to verify genuine financial hardship.

For a model financial hardship policy, see the HRSA’s National Health Service Corps references on Sliding Fee Discount Programs. Note that while much of the language is intended to apply to uninsured patients, there are also sections of the policy that apply to insured patients.

Disclaimer: This information is general in scope and educational in nature. It is not intended as legal advice. If you require legal advice, contact an attorney.