AMARILLO, TX – Medicare beneficiaries have an obligation to pay a copayment…normally 20%. A common question arises: When is it proper for a DME supplier to waive or reduce a copayment?
The DME supplier must make a “reasonable effort” to collect copayments. Essentially, what this means is this:
- When the product is delivered to the beneficiary, the supplier will ask the beneficiary to pay the copayment.
- If the beneficiary says that he cannot pay the copayment, the supplier will ask the beneficiary to pay it over time.
- If the beneficiary says that he cannot pay the copayment over time, the supplier will have the beneficiary complete a Financial Hardship Application Form.
- In completing the Financial Hardship Application Form, the beneficiary will disclose his financial condition.
- Based on the information provided by the beneficiary, the supplier will decide whether to waive all or a portion of the copayment.
At the end of the day, notwithstanding that the DME supplier may have a comprehensive copayment collection/waiver policy in place, the facts need to show that the supplier is collecting most of the copayments.
In 1991, the OIG issued a Special Fraud Alert (“SFA”) that states that routinely waiving copayments (i) results in the submission of false claims, (ii) violates the federal anti-kickback statute (“AKS”), and (iii) results in excessive utilization of products and services. The SFA points out the following as suspect marketing practices:
- Advertisements that state “Medicare Accepted as Payment in Full” or “No Out-of-Pocket Expense.”
- Routine use of a Financial Hardship Application Form with no good faith attempt to determine the beneficiary’s actual financial condition.
- Collection of copayments only from beneficiaries with Medicare supplemental insurance.
The SFA further points out that “[a] provider, practitioner or supplier who routinely waives Medicare co-payments or deductibles is misstating its actual charge.” For example:
- A supplier claims that a charge for a piece of equipment is $100, but routinely waives the copayment; the actual charge of the equipment becomes $80.
- Medicare should pay 80% of $80 rather than 80% of $100.
The OIG makes it clear that the supplier that routinely waives copayments is being paid more than a reasonable charge. One may argue that routinely waiving copayments helps Medicare beneficiaries. The OIG’s response is that routine waivers lead to excessive costs and excessive utilization. According to the OIG: “When providers, practitioners, or suppliers forgive obligations for reasons other than genuine financial hardship of the particular patient, they may be unlawfully inducing that patient to purchase items or services from them.”
State law is not consistent regarding waiver of copayments for non-Medicare patients in general. The waiver of copayments is prohibited by commercial insurance contracts, including those associated with Medicare Advantage Plans (“MAPs”). In the case of non-contracted or out-of-network suppliers, there is less guidance. State laws regulating insurance fraud and deceptive trade practices have been used by both state regulatory agencies and private parties to act against providers/suppliers that routinely waive copayments. Many lawsuits allege breach of contract claims and unjust enrichment. Allegations of fraud are also common, the rationale being that when a supplier submits a claim that does not reflect the actual discounted charge, the supplier materially misrepresents the transaction.
Steps to Reduce Risk
CMS and the OIG have identified steps that will reduce the risk that a DME supplier will engage in routine waiver of copayments:
- The supplier should adopt written policies and procedures that prohibit personnel from (i) advertising discounts and waivers of copayments and (ii) advising Medicare beneficiaries that they are not liable for copayments.
- The supplier should understand industry guidance regarding “good faith collection efforts.”
- The supplier should adopt written criteria for determining a patient’s financial need. Such criteria can be tied to a multiple of the Federal Poverty Guidelines (“FPGs”). Financial need is not limited to “indigence,” but can include reasonable measures of financial hardships. Examples are cost of living, a patient’s income, assets and expenses, the patient’s family size, and the scope and extent of the patient’s medical bills.
- The supplier should issue an invoice to the party responsible for the copayment. If the invoice is not paid, the supplier should contact the responsible party, issue subsequent invoices, make phone calls, and send collection letters. If the invoice remains unpaid for 120 days, the supplier may presume that the debt cannot be collected. The supplier should (i) save copies of letters and invoices to the patient’s file and (ii) note telephone calls and personal contacts.
- Suppliers may waive copayments if (i) the supplier does not advertise or use waivers to solicit business; (ii) the supplier does not routinely waive copayments; and (iii) the supplier waives the copayment after determining in good faith that the individual is in financial need.
Waiving Copayments for Out-of-Network Patients
A common problem for DME suppliers arises when commercial insurers, including MAPs, close their provide panels…thereby not allowing the suppliers to bill the insurers as in-network suppliers. This relegates the out-of-network supplier to one of two choices: (i) decline to serve the patient or (ii) serve the patient and bill the insurer as an out-of-network supplier.
The challenge with billing as an out-of-network supplier is that the patient normally has to pay a higher copayment than if the supplier was an in-network supplier. This has led some out-of-network suppliers to offer to waive the patient’s copayment if the patient purchases from the out-of-network supplier. As previously discussed, waiving such copayments can set the supplier up for liability. It is not uncommon for insurers to file lawsuits against out-of-network suppliers that routinely waive copayments.
Many of the lawsuits allege breach of contract and unjust enrichment. Allegations of fraud and deceptive trade practices are also common. Claims of fraud allege that suppliers that waive copayments submit claims that do not reflect the actual discounted charge and, therefore, materially misrepresent the transaction.
The DME supplier should adopt and implement a “Policy and Procedure for Collections and Patient Assistance” The Policy should contain the following sections:
- Policy Statement – This states that the supplier is committed to follow the law when it comes to collection and waiver of copayments.
- Purpose – This states that the supplier will follow the Policy before a copayment is waived.
- Definitions – These include (i) Copayment, (ii) FPGs, (iii) Family and (iv) Financial Hardship Waiver.
- Procedure – (i) the supplier will not advertise that it has a Financial Hardship Waiver Program; (ii) when a patient states that he cannot pay the copayment, then the supplier will have the patient complete a Financial Hardship Waiver Application (“Application”); (iii) the Application will be updated every 12 months: (iv) supporting documentation needs to be submitted with the Application; (v) eligibility for a reduction or waiver (often tied to a multiple of the FPGs); (vi) annual review of waivers granted; and (vii) what constitutes a “good faith collection effort.
- Audits – The supplier will conduct self-audits of its collection and waiver of copayments.
AAHOMECARE’S EDUCATIONAL WEBINAR
Employee Retention Tax Credit: What It Means to DME Suppliers
Presented by: Jeffrey S. Baird, Esq., Brown & Fortunato & Allison L. Davis, Esq., Brown & Fortunato
Tuesday, February 28, 2023
1:30-2:30 p.m. CENTRAL TIME
The COVID pandemic was a game changer. It affected all aspects of American life. Recognizing the severity of the pandemic, the federal government passed laws – and issued regulations – designed to (i) expand the provision of health care in the home, (ii) assist families financially, and (iii) provide “safety nets” to businesses. One of the safety nets is the Employee Retention Tax Credit that is designed to encourage employers, that are adversely affected by the pandemic, to keep employees on their payroll. Since its inception in 2020, the Employee Retention Credit has been modified by federal statute and IRS regulations to relieve the ongoing financial struggles faced by employers. This webinar will discuss the history of the Employee Retention Credit, including eligibility and value of tax credits available for wages paid between March 2020 and December 31, 2021. We will also discuss how to retroactively claim the Employee Retention credits and common pitfalls to avoid when the DME supplier is amending its tax filing. Lastly, the webinar will discuss how the DME supplier can avoid the scams that have arisen in conjunction with the Employee Retention Tax Credit.
Registration will soon be posted for Employee Retention Tax Credit: What It Means to DME Suppliers on Tuesday, February 28, 2023, 1:30-2:30 p.m. CT, with Jeffrey S. Baird, Esq., and Allison L. Davis, 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@example.com.