Professional Courtesy and Discounts for Health Care 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 has become relatively rare in today’s complex health care payment environment. This once-commonplace practice was intended to foster amicable relationships among physicians and was sometimes extended to additional medical personnel and employees. As health care insurance became more prevalent, professional courtesy often took the form of waiving copayment or other out-of-pocket expenses (so-called “insurance-only billing”). These days, such practices risk running afoul of fraud and abuse laws and payer contracts.  

The US Department of Health and Human Services Office of Inspector General (OIG) offers guidance on professional courtesy and insurance-only billing in its resource, “Compliance Program Guidance for Third-Party Medical Billing Companies.” According to the OIG, “Billing companies should encourage providers to make a good faith effort to collect copayments, deductibles and non-covered services from federally and privately-insured patients,” warning that insurance-only billing may violate fraud and abuse laws, such as the False Claims Act, Anti-Kickback Statute, Civil Monetary Penalties Law, Stark II Regulations, and state laws. Further, the OIG states, “Discounts and professional courtesy may not be appropriate unless the total fee is discounted or reduced. In such situations, the payor (e.g., Medicare, Medicaid or any other private payor) should receive its proportional share of the discount or reduction.” 

Government Health Care Payers 

In a Special Fraud Alert on the routine waver of copayments and deductibles under Medicare Part B, the OIG clarified the government’s position that physicians who routinely waive copayments and deductibles are misstating actual charges and, in effect, submitting false claims. 

The OIG 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 OIG explained that by waiving copayments 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 Payers 

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 payers specifically require that providers collect copayments and deductibles. A policy of waiving these fees for some patients may constitute a breach of the contractual agreement with the payer and might also 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. 

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: 

• 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 National Health Service Corps (NHSC) resource, “Sample Sliding Fee Discount Program Policy”  

Tips for Pediatricians 

The potential fines and penalties for violating fraud and abuse laws and/or breaching payer contracts can be severe. 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. 

Additional Resources 

• The OIG resource, “Compliance Program Guidance for Third-Party Medical Billing Companies,” discusses elements that should be considered in a billing company’s compliance program and practices identified as risk areas, including discounts and professional courtesy.
• For additional information on its position on waiving fees, the OIG published a Special Fraud Alert on the routine waiver of Medicare Part B copayments and deductibles.
• See the NHSC resource, “Sample Sliding Fee Discount Program Policy,” for a model financial hardship policy, patient application, sliding fee schedule, and public notice signage.
• The American Medical Association (AMA) addresses professional courtesy in “Opinion 11.3.1, Fees for Medical Services,” of its Code of Medical Ethics: “with regard to fees for medical services, physicians should…extend professional courtesy at their discretion, recognizing that it is not an ethical requirement and is prohibited in many jurisdictions.” 

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.