By Jeffrey B. Miller, J.D.
Professional courtesy, the practice among many physicians and other professionals of providing free or discounted services to their fellow professionals, their employees and to others, has long been a respected tradition. The practice of professional courtesy has been commonplace, even conventional. Once an American Medical Association ethical requirement, in the more than 200 years that physicians have actively practiced professional courtesy, the practice has become recognized as one of the hallmarks of professionalism and collegiality among physicians and other health care professionals. (Diane M. Gianelli, Rethinking Professional Courtesy, American Medical News, March 8, 1999).
A 1996 W.B. Saunders Company poll estimated that 97 percent of physicians offer some type of professional courtesy in their practices. However, due to an upsurge in government’s efforts to ensure accurate billing of claims, new federal laws addressing physician referral and patient relationships and the novel application of existing laws, the legality of this well-honed tradition has been called into question. Perhaps even more unfortunate, due to the complexity of the laws surrounding professional courtesy and possibly the popularity of the tradition, no one clear viewpoint has arisen as to its continuing legal viability. This article will attempt to provide physicians and other professionals with some information on this modern dilemma through review of the three primary federal laws that are applied to professional courtesy, and some insight into the arguments the government appears to advocate.
The Government’s Historical Position on False Claims
The False Claims Act (Act) provides that any physician who knowingly submits or causes to submit a false or fraudulent claim for payment to the government can be fined triple the government’s damages, plus $5,000 to $10,000 per claim, plus administrative penalties. Moreover, the Act specifically authorizes private individuals such as employees and patients to initiate lawsuits against possible transgressors, and if the lawsuits are successful, to obtain up to 30 percent of the lawsuits’ proceeds. In addition to the False Claims Act, there are other, similar false-claims related statutes that provide other penalties if they are violated, including criminal statutes.
Under the Act, the government has taken the position that physicians who waive their fees through providing free or discounted care submit false claims because they misrepresent their actual charges to government programs. This argument is voiced by the Department of Health and Human Services, Office of Inspector General (OIG) in its 1991 Special Fraud Alert, where is emphasizes that the “routine” waiver of co-payments and/or deductibles is equivalent to misstating the actual charge. A similar sentiment is asserted in section 5220 of the Medicare Carriers Manual, which states that Carriers should investigate physicians’ waivers of co-payments and deductibles where those waivers are provided “routinely and consistently.”
The Government’s Historical Position on the Anti-kickback Statute
The federal Anti-kickback Statute (Statute) prohibits the knowing and willful solicitation, receipt, offer or payment of anything of value in exchange for or to induce a referral of business for which payment may be made by a federally funded health care program. This is a criminal statute, and violations can result in fines of up to $25,000, five years imprisonment, or both. Administrative fines can also be assessed. In its 1991 Special Fraud Alert, the OIG emphasized that physicians who forgive financial obligations for reasons other than genuine financial hardship of particular patients, or without “good faith” attempts to collect applicable debts, may violate the Statute by unlawfully inducing patients to purchase items or services from them, or physicians to refer business to them.
The Government’s Historical Position on the Civil Monetary Penalties Law
The Civil Monetary Penalties law (CMPL) provides that the waiver of co-insurance and deductible amounts, the provision of free services or the provision of discounted services for or to beneficiaries of federal health care programs is unlawful if physicians “know or should know” that their actions are “likely to influence such individuals” to seek the services of those physicians. The only current exception to this general rule is where (1) the waivers are not advertised; (2) the waivers are not routine; and (3) there are good faith determinations of financial need or reasonable collection efforts. Violations of this law can result in monetary penalties including up to three times the payment amounts claimed, plus exclusion from participation in federal and state health care programs.
The OIG recently published regulations relating to the CMPL. Responding to an inquiry about professional courtesy in the commentary that accompanied its regulations, the OIG stated that: “with respect to ‘professional courtesy’, we note that traditionally the term means free care (i.e., no charge is made to anyone), not care provided on an ‘insurance only’ basis. Generally, a routine practice by a physician of waiving the entire fee for services provided to other physicians without regard to the potential for referrals is not a problem under [the CMPL] or the anti-kickback statute. However, waivers of Medicare or other federal health care program co-payments for non-indigent persons, whether physicians or any other groups, are problematic” (Emphasis added).
The OIG’s Compliance Program Guidance for Individual and Small Group Physician Practices
On September 25, 2000 the OIG released its final Compliance Program Guidance for Individual and Small Group Physician Practices (Guidance). In the Guidance, the OIG explained an approach to professional courtesy that had not been readily evident in its prior statements. The OIG stated that there are two factors it generally considers when analyzing professional courtesy: (1) how the recipients of the professional courtesy are selected; and (2) how the professional courtesy is extended. Addressing the waiver of the entire fee for services, the OIG stated that: “a physician’s regular and consistent practice of extending professional courtesy by waiving the entire fee for services for a group of persons…may not implicate any of the OIG’s fraud and abuse authorities so long as membership in the group…does not take into account…the group members’ ability to refer to, or otherwise generate federal health care program business for, the physician” (Emphasis added).
Addressing the waiver of co-payments, the OIG refused to apply a similar standard to the Act or the CMPL, but did apply a similar standard to the anti-kickback statute, stating that: “a physician’s regular and consistent practice of extending professional courtesy by waiving otherwise applicable co-payments for services rendered to a group of persons…would not implicate the anti-kickback statute so long as membership in the group…does not take into account…any group member’s ability to refer to, or otherwise generate federal health care program business for, the physician” (Emphasis added).
In any case, the OIG explained that any waiver of co-payments would implicate the CMPL if the individual for whom the wavier was made was not financially needy. No clarification was provided on the application of the Act, except that the OIG propounded that the legality of any particular arrangement will turn on the totality of the circumstances, and that physicians should address these matters with their attorneys.
So What Does the Government Mean?
Without a single comprehensive statement from the government, it is difficult to determine exactly what the government is asserting. However, it appears that the government is treating waivers of the entire professional fee differently from waivers of co-payments and/or deductibles (insurance-only billing). A review of the government’s statements can be summarized into the following governmental positions:
Waivers of co-payments or deductibles, except where those waivers are based upon individual findings of financial hardship, or occur after reasonable collection efforts, are prohibited by the False Claims Act. Any waivers made with the intent to induce patient referrals or to encourage the generation of additional federal health care program business, whether through referrals or through return business, are prohibited by the Anti-kickback Statute and/or the CMPL. Therefore, when waiving co-payments and/or deductibles, it is always necessary to make individual findings of financial hardship, or to waive only after reasonable collection efforts have failed.
Any waivers of the entire fee made with the intent to induce patient referrals or to encourage the generation of additional federal health care program business, whether through referrals or through return business, are prohibited by the Anti-kickback Statute and/or the CMPL. While the OIG stated in its commentary to its CMPL regulations that the routine practice of waiving the entire fee without regard to the potential for referrals is not a problem, this position appears to be contradicted by the OIG’s statement in the Guidance, where it specifically states that any waiver of co-payments would implicate the CMPL if the individuals for whom the waivers were made were not financially needy.
Finally, for waivers of the entire fee the OIG has stated that the False Claims Act may not be violated where the Anti-kickback Statute and the CMPL are not violated. The connection between the Act, the Statute and the CMPL is not explained, and the reasoning behind the government’s apparent position is not readily evident from review of the laws. Regardless, it may be concluded that the government’s position is that waivers of entire fees are legal so long as the waivers are made without the intent to induce patient referrals, or to encourage the generation of additional federal health care program business, whether through referrals or through return business. How these requirements could actually be satisfied is not clear.
Other Legal Considerations
In addition to the analysis above, physicians should also consider other sources that could limit their ability to provide professional courtesy. The misstatement of the actual charge theory, which is centered in federal law around the FCA, could be applied under state law principles, potentially rendering physicians liable. Furthermore, many private insurance contracts require the collection of co-payments and deductibles (i.e. prohibit “insurance only” billing). Failure to comply could result in a breach of the contract.
What Can be Done?
Due to the zealous approach of lawmakers and government lawyers attempting to ensure the accurate billing of claims, the continued legality of the time-honored tradition of professional courtesy has been called into question. Unfortunately, because several of the applicable laws include intent-based standards, the legality of any particular fee waiver turns on the particular facts and circumstances of each situation. General legal guidance is difficult to provide. This creates a frustrating situation for physicians, who if required to analyze and document every waiver of their fees to be sure that they cannot later be interpreted as designed to encourage referrals of business or continuing business, but simply as gestures of good will and respect, may soon decide to cease the practice of professional courtesy altogether.
Until further guidance is provided by the government, this quandary will continue to exist. Physicians and other professionals who desire more information about professional courtesy, or with questions about particular instances of professional courtesy, should consider discussing same with their medical societies, or with a health care attorney who in knowledgeable on these issues.
Jeffrey B. Miller, J.D., is the Senior Associate attorney emphasizing health care legal and consulting issues at the law firm of Kalogredis, Sansweet, Dearden and Burke, Ltd. in the firm’s Wayne, Pennsylvania office.