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Waiving Copays May Do More Harm Than Good

Published on Fri Jan 12, 2024

An act of generosity could lead to major ramifications.

Healthcare professionals, by their nature, are empathetic and caring. When dealing with a patient who is experiencing financial difficulties, for example, the medical practice might be tempted to waive the fee or copay that was previously agreed upon with the patient’s insurance company. Although this may appear to be a kindly gesture, breaching a contract with an insurer can result in significant consequences.

Read on to learn how you can avoid those consequences.

Look at Copay Waiving From a Compliance Standpoint

“From a payer’s perspective, waiving cost-sharing amounts creates two problems. Payers often contract with physicians or providers based in part on what they usually charge — what they bill insurance. The OIG [Office of Inspector General] has argued that a provider who routinely waives copays is misrepresenting their actual charges,” says Terry Fletcher, BS, CPC, CCC, CEMC, CCS, CCS-P, CMC, CMCSC, CMCS, ACS-CA, SCP-CA, owner of Terry Fletcher Consulting Inc. and consultant, auditor, educator, author, and podcaster at Code Cast in Laguna Niguel, California.

“Payers require copays, especially Medicare, to discourage overutilization and to reduce costs. Waiving copays and deductibles removes the disincentive for utilization,” Fletcher explains.

Payer contracts, as well as state and federal laws, prohibit waiving cost-sharing unless a patient is experiencing a genuine financial hardship.

Know Relevant Laws

There are two laws providers may violate by waiving copays or other patient cost-sharing obligations.

The Civil Monetary Penalties Law (CMPL) prohibits offering or transferring renumerations to federal program beneficiaries if the provider knows, or should know, that it could influence the patient to order or receive items payable by that healthcare program from that particular provider.

Violations of CMPL can mean damages approximating $10,000 per line item in services provided, Fletcher notes.

The Anti-Kickback Statute comes into play as well. In a 1994 Special Fraud Announcement, the OIG warned healthcare entities about the statute, saying:

“Among its provisions, the anti-kickback statute penalizes anyone who knowingly and willfully solicits, receives, offers or pays remuneration in cash or in kind to induce, or in return for:

A. Referring an individual to a person for the furnishing, or arranging for the furnishing, of any item or service payable under the Medicare or Medicaid program; or

B. Purchasing, leasing or ordering, or arranging for or recommending purchasing, leasing or ordering, any goods, facility, service or item payable under the Medicare or Medicaid program.”

There are certain regulatory safe harbors, but violating the Anti-Kickback Statute can result in a five-year prison term, $25,000 criminal penalty, a $50,000 administrative penalty, and exclusion from the Medicare/Medicaid programs, Fletcher says.

Understand ‘Financial Hardship’

If your office shows a pattern of waiving patients’ copays or coinsurance responsibilities, then the OIG would consider your practice to routinely waive patient cost-sharing obligations and may bring enforcement actions against you.

The OIG will not bring enforcement actions against practices in situations where cost-sharing is waived because a beneficiary is experiencing genuine financial hardship. Fletcher notes that some commercial carriers will also honor situations involving financial hardship if they are alerted before the service is provided.

“You have to be able to prove it. You have to be able to say that it was not part of any advertisement or solicitation, that you do not routinely waive copays or deductibles, and you have actual good faith that the patient has financial need, which means you have to have it well-documented,” says Fletcher.

Providers would need to look at the variables affecting each individual patient, like cost of living, income, assets, expenses, family size, and the scope and extent of their medical bills.

Beware “Professional Courtesy” Visits

Some providers get into trouble if they see other physicians who are Medicare beneficiaries, especially referring physicians, and waive their fees as a professional courtesy.

If the doctor refers patients to you on a regular basis, the Anti-Kickback Statute would definitely apply.

As with many situations involving private payers, to make sure you’re meeting your contractual obligations with each payer, you need to check your contracts directly.

“They generally require that the providers collect the copays or deductibles, and failure to do so without the payer’s express approval would violate the contract terms or be breach of contract or payment,” Fletcher says. If you can prove financial hardship and alert the payer before you provide any services, you may be able to waive the patient’s cost-sharing for that encounter.

Covering Costs Is Playing With Fire

Providers aren’t the only entities who need to be careful about patient cost-sharing responsibilities.

In 2020, the Department of Justice (DOJ) announced a $22 million settlement with a pharmaceutical company after the company violated the False Claims Act (FCA) by covering Medicare copays for patients who used its drug via two nonprofit foundations — one of which received millions of dollars in donations from the pharmaceutical company. The copay assistance made those patients’ out-of-pocket Medicare costs less expensive than they would have been if they had been prescribed a competitor’s significantly less-expensive drug.

The DOJ suggested that knowing their copays would be covered significantly altered physicians’ and beneficiaries’ decision-making, leading to more usage of the implicated pharmaceutical company’s product. The DOJ alleged that the company requested patient data from the nonprofit foundation and correlated their donations accordingly.

Why this matters: “Kickback schemes can undermine our healthcare system and lead to higher costs for the Medicare program,” said Phillip Coyne, special agent in charge, Office of the Inspector General of the Department of Health and Human Services’ Boston regional office, in a press release.