The Risks of Waiving Patient Balances
In the healthcare industry, it’s unfortunately common for medical providers, whether in-network or out-of-network, to waive or reduce patient cost-sharing responsibilities. This practice is often used to attract more patients, as they may be more likely to seek care if they believe they won’t have to pay their usual coinsurance, deductible, or copayments.
Some healthcare providers may waive or discount patient balances to help alleviate the financial burden of treatment. However, this approach can be very risky for the provider. Health insurers require patients to pay their deductibles, coinsurance, and copays to prevent the overuse of medical services. Health plans, whether fully insured or self-funded, typically mandate that patients be billed for their share of the costs. Most insurance policies include clauses requiring members to pay their deductibles, coinsurance, and copays, and this is also emphasized in Medicare rules and guidelines.
Why is this important? Providers who regularly waive patient cost-sharing obligations can face severe legal consequences under both state and federal laws. If a provider routinely forgives these balances, the insurer may take legal action against them for interfering with a business contract or even for committing insurance fraud.
Commercial insurers frequently audit healthcare providers to ensure that patients are being billed for their share of costs. These audits may involve patient questionnaires or phone interviews to verify that patients are indeed being billed for and paying their required costs. Insurers invest millions each year in their Special Investigation Fraud Units, which are highly profitable for them.
If a commercial insurer suspects that a provider is consistently waiving patient cost-sharing, they may conduct audits, request documentation, and ultimately demand refunds for all payments made to that provider, potentially going back several years. These refund demands can reach into the millions of dollars.
Similarly, the Centers for Medicare & Medicaid Services (CMS), which oversees Medicare and other federally funded health programs, takes an even tougher stance on what they call “fee-forgiveness.” Federal prosecutors often file lawsuits against providers, citing violations of the False Claims Act, federal Anti-kickback statutes, and other federal laws. Violating these laws can lead to both civil penalties and criminal charges, including possible jail time for the provider.
How Can Healthcare Providers Avoid These Compliance Issues?
- Avoid Waiving or Discounting Patient Cost-Share Responsibility unless the patient is facing extreme financial hardship.
- If offering waivers or discounts due to financial hardship, ensure you have a written policy that is based on objective criteria (not inflated income guidelines), applied consistently to all patients. Consider factors such as local cost of living, the patient’s income, assets, and expenses, their family size, and the scope of their medical bills.
- Document all discounts and retain supporting documentation.
- Do not routinely waive or discount patient cost responsibility under any circumstances.
- Exercise caution when offering discounts based on professional courtesy or prompt payment.
By adhering to these guidelines, healthcare providers can help protect themselves from potential legal and financial consequences.
