We are often asked for the legality of offering reasonable prices for care to the public. For a long time there has been a popular misconception that our government is not interested in enabling people to get reasonable fees for care, but this is just not true. Yes, there are a number of provisions to a number of regulations that confuse the matter, and such an arrangement serves the insurance companies well as it keeps “list prices” high by default, but he truth is that there have been numerous publications and documents that highlight that people paying directly are allowed to be discounted.

Please allow us to detail the legal case for fair pricing for those that are paying directly. We recommend all providers considering utilizing FairCareMD review this material and discuss it with their attorney.

In addition to state specific prompt pay discount programs, discounted care by class of service policies, the fact that FairCareMD represents an “alternative arrangement” for care, and that by agreeing to pay at the time of service, often through our automated payment system, all provide logical and substantive rationales for provision of reasonable fees to patients seeking them, there have been many federaly published opinions and laws to this effect as well.

On February 2, 2004, the Office of the Inspector General of the U.S. Department of Health and Human Services (“OIG”) issued guidance to hospitals that wish either to provide discounts to uninsured patients or to reduce or waive Medicare cost-sharing amounts for patients experiencing financial hardship. The guidance does not provide any new interpretations of existing law or regulations, but may provide some reassurance to hospitals that they are not violating the law when providing these discounts.

The OIG advised that neither the federal anti-kickback statute (42 U.S.C. §1320a-7b(b)), nor the relevant provision of the OIG’s permissive exclusion authority (42 U.S.C. §1320a-7(b)(6)(A)) restricts hospitals from providing financial relief to their uninsured patients. The OIG also outlined the two existing exceptions to the prohibition against routine waiver of Medicare cost-sharing amounts for hospital services.

1. Discounts for Uninsured Patients Who Cannot Afford to Pay Their Hospital Bills

A. Federal Anti-Kickback Statute
According to the OIG, hospital discounts to uninsured patients do not raise concerns under the anti-kickback statute as long as the discounts are not used to generate business payable under a federal heathcare program. The anti-kickback statute prohibits a hospital from giving or receiving anything of value in exchange for referrals of business payable by a federal heathcare program such as Medicare or Medicaid. As with uninsured patients, discounts for underinsured patients do not violate the anti-kickback statute, although the OIG warned that in providing discounts for underinsured patients, hospitals must be extra diligent to insure that the discounts are not being used to generate federal heathcare program business.

B. OIG Permissive Exclusion Authority
The OIG further counseled that its exclusion authority under 42 U.S.C. §1320a-7(b)(6)(A) does not restrict a hospital’s ability to offer discounts to uninsured or underinsured patients. This statute gives the OIG authority to exclude providers from participation in Medicare or Medicaid if they submit Medicare or Medicaid bills or requests for payment for amounts that are substantially in excess of the provider’s usual charges for the same goods or services. This statute has inhibited hospitals from providing discounts to uninsured patients because such discounts cause the amounts that hospitals bill those services to Medicare or Medicaid to appear to be substantially in excess of the hospital’s charges to uninsured patients.

The OIG also reaffirmed its position, as set forth in proposed regulations issued last September (68 Fed. Reg. 53939) that it would not include “charges for services provided to uninsured patients free of charge or at a substantially reduced rate” when determining a hospital’s usual charges under the statute. The OIG emphasized that it has never excluded or attempted to exclude a provider for offering discounts to uninsured or underinsured self-pay patients, and would continue its practice of allowing these discounts to these patients until it has considered public comments to its proposed regulations and has issued final regulations or has made public its intention not to promulgate final regulations.

2. Reductions or Waivers of Cost-Sharing Amounts for Medicare Beneficiaries

Although the routine waiver of Medicare coinsurance and deductible amounts is generally prohibited and can violate the federal False Claims Act (31 U.S.C. §3729), or the federal anti-inducement statute, (42 U.S.C. §1320a-7a(a)(5)), the OIG explained that there are two existing exceptions to this general prohibition.
A. Demonstrated Financial Hardship

Providers may waive a Medicare coinsurance or deductible amount in consideration of a particular patient’s financial hardship when:

the waiver is not offered as part of any advertisement or solicitation;
the party offering the waiver does not routinely waive coinsurance or deductible amounts; the party waives the coinsurance and deductible amounts after determining in good faith that the individual is in financial need or reasonable collection efforts have failed.

42 U.S.C. §1320a-7a(ii)(6)(A). In determining financial hardship, the OIG advised that hospitals uniformly apply a reasonable set of objective criteria such as the local cost of living, a patient’s income, assets and expenses, family size and the scope and extent of a patient’s medical bills.

It is important to be aware, however, that even if these criteria are met, the routine waiver of coinsurance and deductibles may still violate the anti-kickback statute, if one purpose of the waiver is to generate business payable by a federal heathcare program. (See 63 Fed. Reg. 14393, 14395 (March 25, 1998)).

B. Inpatient Hospital Services

Hospitals may also waive Medicare coinsurance and deductibles for inpatient hospital services. This exception is set forth in the safe-harbor regulations that apply to the anti-kickback statute, the anti-inducement statute and the OIG exclusion authority. 42 C.F.R. 1001.952(k). Under this safe-harbor, a hospital may waive coinsurance and deductible amounts for inpatient services for which Medicare pays under the prospective payment system if:

the hospital does not claim the waived amount as bad debt or otherwise shift the burden onto Medicare, a State heathcare program, or other payers or individuals;
the hospital offers to reduce or waive the cost-sharing amount without regard to the reason for admission, the beneficiary’s length of stay, or the diagnostic-related group for which the claim for Medicare reimbursement is filed;
the waiver is not part of a price reduction agreement between the hospital and a third-party payer (other than a Medicare SELECT plan).

Hospitals that wish to provide discounts to uninsured, underinsured, or Medicare patients should review the guidance.

Federal Anti-Kickback Statute
OIG Permissive Exclusion Authority

This is just a summary but it gives a good overview. Once again, our attorneys want us to clearly state that THIS IS NOT LEGAL ADVICE! Please seek your own counsel.