AMARILLO, TX – Historically, DME suppliers have billed CMS directly. This is known as “Medicare fee-for-service” (or “Medicare FFS”). Also, historically, suppliers have taken care of state Medicaid patients and have billed state Medicaid programs directly (“Medicaid FFS”). All of this is changing. Today, about 35% of Medicare patients are covered by Medicare Managed Care Plans (commonly known as “Medicare Advantage Plans”) and about 70% of Medicaid patients are covered by Medicaid Managed Care Plans. These percentages are increasing.
As DME suppliers are being drawn into the Medicare and Medicaid managed care arenas, they are facing a number of challenges. One of the largest challenges is that a managed care plan (“Plan”) may be “closed” to new DME suppliers. Essentially, the Plan says to the supplier that wants to be admitted into the Plan’s network: “We have enough DME suppliers to serve our covered lives. We don’t need you in our network.” When this occurs, the supplier has two choices: (i) it can elect not to serve the patients that are in the network or (ii) it can serve the patients as an out-of-network supplier.
A challenge for the out-of-network DME supplier is that the Plan will pay the supplier less than what the Plan will pay an in-network supplier…resulting in a higher copayment that the patient has to pay. In order to compete with in-network suppliers, the out-of-network supplier may desire to automatically reduce or waive the patient’s copayment obligation. However, this would be ill-advised. As discussed below, routinely waiving/reducing copayments can result in liability to the out-of-network supplier.
Waiver of Copayment: What the Law Says
If the patient is covered by private insurance (not a federally funded health care program), the waiver of copayment obligations may implicate state specific laws protecting against insurance fraud and breach of contract. For instance, the insurance carrier generally has a contract covering each patient that states that the carrier will cover a percentage of the cost of services provided, and the patient will be obligated for the remainder as part of his/her cost-sharing obligation.
When a DME supplier waives a patient’s copayment, that directly interferes with the contract between the carrier and the beneficiary and gives rise to breach of contract and tortious interference claims. For example, in Feiler v. New Jersey Dental Association 191 N.J. Super. 426 (1983), the Superior Court of New Jersey, Chancery Division of Middlesex County held that a dentist committed fraud by misrepresenting his actual charges when billing insurance because he waived cost-sharing obligations for his patients.
When the patient is covered by a federally funded health care program such as Medicare or Medicaid, the waiver of copayments implicates federal laws such as the federal Anti-Kickback Statute (“AKS”), the False Claims Act (“FCA”), and the Beneficiary Inducement Statute (“BIS”).
The AKS prohibits “knowingly and willfully” offering or paying “any remuneration … to any person to induce such person … to refer an individual to a person for the furnishing … of any item or service for which payment may be made in whole or in part under a federal health care program.” However, there is an exception for the waiver of copayments in limited circumstances. The Office of Inspector General (“OIG”) issued an advisory opinion on June 29, 2017, stating that, among other things, “the waiver of coinsurance and deductible amounts are excepted from the definition of remuneration if the person making the waiver: (1) waives the coinsurance and deductible amounts after determining in good faith that the individual is in financial need or (2) fails to collect coinsurance or deductible amounts after making reasonable collection efforts.”
The BIS prohibits knowingly transferring remuneration to any individual who receives coverage under a federal or state health care program, if such remuneration is known to likely influence such individual to order or receive from a particular provider, practitioner, or supplier any item or service for which payment may be made, in whole or in part, by a federal or state health care program. For purposes of the BIS, the term “remuneration” includes the waiver of coinsurance and deductible amounts (or any part thereof).
Lastly, the FCA prohibits: (1) knowingly presenting, or causing to be presented, a false or fraudulent claim for payment or approval or (2) knowingly making, using, or causing to be made or used, a false record or statement material to a false or fraudulent claim. If a claim arises from actions that violate the AKS and/or BIS, then the Department of Justice construes the claim to be “false.”
The waiver or reduction of copayments obligations has the potential to violate a number of different state and federal laws, and therefore requires great caution in all situations.
Examples
As part of many insurers’ coverage agreement with enrollees, insurers agree to pay a certain portion of the bills submitted by out-of-network providers/suppliers—leaving the enrollee responsible for the remaining balance. As previously discussed, the enrollee is typically required to pay a higher portion of his/her copayment for an out-of-network provider/supplier than he/she would for in-network providers/suppliers. Regardless, when an insurer is billed for services provided, it assumes that the enrollee is going to be required to pay the provider/supplier the amount that the enrollee is responsible for.
When an out-of-network provider/supplier submits a claim for services to an insurer in an amount that does not take into account the waived or reduced copayment amount to be charged to the patient, that provider/supplier is essentially overstating the charge for its service. For example, suppose a DME supplier files a claim for $1,000 for a particular service, but waives the patient’s co-payment, collecting $800 from the insurer as payment in full. The total amount the DME supplier expected to collect for the service is $800.
As such, the insurer’s obligation is to pay 80 percent of that amount; that would amount to a payment of $640. In Kennedy v. Conn. Gen. Life Ins. Co., 924 F.2d 698 (7th Cir.1991), the court held that the medical provider could not waive cost-sharing obligations. In support of this decision, the court stated that by waiving cost-sharing obligations, the provider had agreed to accept as full compensation what the insurer was willing to pay. As such, if the provider had no intention of collecting the full remaining balance from the patient, then the bill submitted to the insurer should have stated the actual amount the provider intended to collect.
Similarly, in Feiler, the court presided over a case in which a dentist was accused of waiving copayments for his patients. The court held that such practice was unacceptable and contained elements of fraud. Generally, the dentist must set forth his “actual charges” for the service provided. If Feiler performs a procedure for which he tells the insurance carrier he charges $100, then collects $80 from the carrier, [but] forgives the patient’s copayment, he has lied to the carrier. His charge is really $80, so the carrier should only reimburse the provider a percentage of $80—his actual charge. By submitting a claim in excess of the amount the provider intends to actually collect for the item or service, the provider is overstating its charge on the claim.
Thus, if a DME supplier wants to reduce a patient’s copayment obligation on the front end, it runs a significant risk if the reduced expected payment amount is not reflected as the charge amount on the claim. If, instead, the DME supplier intends to collect the full charged amount from the insurer and patient, and on the back end the patient expresses an inability to pay the full amount and can demonstrate a financial hardship entitling him/her to a reduced copayment amount, the risk is substantially reduced.
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Medicare Coding, Coverage and Payment – Manufacturer’s Guide to Launching Home Care Products
Presented by: Cara C. Bachenheimer, Esq., Brown & Fortunato & Jeffrey S. Baird, Esq., Brown & Fortunato
Thursday, March 25, 2021
1:00-2:00 p.m. CENTRAL TIME
Manufacturers are increasingly bringing to market innovative products designed to be used by patients in their homes. In order to successfully launch a new product, manufacturers must understand the impact and role of HCPCS codes, Medicare coverage, and payment rules, as these will heavily influence how manufacturers market the new product. In this program, you will learn how to:
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- Understand the key role that the Centers for Medicare and Medicaid Services (CMS) has in issuing new HCPCS codes, and the responsibilities of the Pricing Data Analysis Contractor (“PDAC”) in assigning products to existing HCPCS codes.
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We will also cover the Medicare program’s new rule on coverage for Innovative Technology, and how this rule provides immediate coverage for “breakthrough devices” upon FDA approval.
Speaker Cara Bachenheimer has 30 years of experience helping manufacturers with HCPCS coding, coverage and payment issues and processes. Speaker Jeff Baird has over 30 years of experience representing manufacturers and DME suppliers on multiple issues, including billing and reimbursement.
Register for Medicare Coding, Coverage and Payment – Manufacturer’s Guide to Launching Home Care Products on Thursday, March 25, 2021, 1:00-2:00 p.m. CT, with Cara C. Bachenheimer, Esq. and Jeffrey S. Baird, Esq. of Brown & Fortunato
Jeffrey S. Baird, JD, is chairman of the Health Care Group at Brown & Fortunato, PC, a law firm with a national health care practice based in Texas. He represents pharmacies, infusion companies, HME companies, manufacturers and other health care providers throughout the United States. Baird is Board Certified in Health Law by the Texas Board of Legal Specialization and can be reached at (806) 345-6320 or [email protected].
