Practice Management Alert

Question: If we admit a patient to the hospital who has PPO (physician provider organization) benefits at 90 percent coverage and non-PPO at 70 percent coverage, we routinely hold the patient responsible for 10 percent even if we are non-PPO and will be paid by the insurance at 70 percent. The other 20 percent is an "administrative adjustment." Are we in violation of any compliance laws?

California Subscriber

Answer: The first thing you need to determine is if you are part of the PPO. The main issue at hand is whether there is a contract between the provider and carrier or between the patient and carrier. Based on that determination, you can decide whether to collect the 10 percent (PPO) or 30 percent (non-PPO) from the patient.

You say the patient has a PPO contract and a non-PPO contract. The patient is contractually required to pay the amount above and beyond what the carrier pays. The reason for this is that the patient negotiated these rates with the carrier, and the amount of the premium depends on how much the patient is required to pay after the carrier.

If you are doing an "administrative adjustment" (write-off) because all you want to collect is the 10 percent, you could be violating the patient's contract with the non-PPO carrier. You could also be in violation of the False Claims Act (Title 31, USC).

Many carriers are now pursuing the patient for the balance due because the patient violated the terms of the contract, which caused the carrier to lose revenue. The patient is informed that his or her policy is terminated, effective with the first claim, and he or she must pay $___. The carrier also informs the doctor that all payments must be refunded because the physician accepted less than what was required, thus submitting false charges to the carrier.

And, by taking less than you are required to, you could be in violation of Stark and Stark II because your reduction could be interpreted as a kickback and your write-off could be considered an inducement to have the patient return to see you because you routinely write off a portion of what is due.

The following illustrates how the carrier loses money based on premiums charged:

Patient A: Premium $500 = $0 deductible, pays 100 percent.

Patient B: Premium $100 = $100 deductible, pays 80/20, after $10,000 pays 100 percent.

Patient C: Premium $50 = $500 deductible, pays 60/40, after $10,000 pays 100 percent.

Patient A doesn't have a deductible and the carrier pays 100 percent. Patient B pays the deductible and the 20 percent.

Patient C doesn't pay the deductible or the 10 percent.

Patient A isn't paying anything out-of-pocket because more is paid in premiums. Patient B pays less of a premium but pays more out-of-pocket.

Patient C refuses to pay anything but the premium and is getting the same benefit.

So, if a carrier has 10 million subscribers, multiply the $10 difference per person and that amounts to a good number. This is similar to when you get paid less by a carrier.