United States: Offering Discounts (Or Waivers) Of Coinsurance/Copayments To Patients As An Out-Of-Network Provider

Last Updated: December 22 2015
Article by Edward J. Cyran

Commercial payors are actively looking for ways to reduce payments to out-of-network providers. One area of focus is discounts and waivers of patient copayments and deductibles by out-of-network providers. In the eyes of these payors, coinsurance/copayments are essential to incentivizing patients to use in-network providers, and discounts on (or waivers of) coinsurance/copayments by out-of-network providers often result in higher costs to payors.

To challenge these discounts, some payors have denied reimbursement on claims where the patient's copayment/coinsurance has been waived by an out-of-network provider. Others have taken legal action, bringing cases for fraud and other claims, and arguing that they are not required to pay for items or services for which the patient is not billed. There has been a special focus by some payors on instances where the provider "overstates" its charges in order to recoup the discounts or waivers of coinsurance/copayments it offers to patients.

The legal landscape is evolving on this issue; however, there are cases on the docket that may address certain aspects of this issue sooner rather than later. Stay tuned to Fox Rothschild's Physician Law Blog for updates.

In the interim, here are a few tips to keep in mind when considering whether to offer discounts on (or waivers of) coinsurance/copayments with respect to out-of-network plans:

  1. Consider offering the discounts solely in return for prompt payment by the patient. Under the federal Anti-Kickback Statute and other state anti-kickback laws, discounts could be considered remuneration to patients in exchange for purchasing of health care services. However, the U.S. Office of Inspector General (OIG) has acknowledged that discounts for prompt payments of coinsurance/copayments may be permissible if they are not intended to induce purchases of services. Note that the amount of such discounts should correspond to the savings in collection and billing costs of the Practice.
  2. Consider disclosing to payors your intent to offer the discounts to patients. Based on recent case law, if a payor is aware of the out-of-network provider's intent to offer discounts to patients, the payor is less likely to have a case for fraud against the provider. See North Cypress Medical Center Operating Co. v. Cigna Healthcare, 781 F.3d 182, 205 (5th 2015) (available online here: http://www.ca5.uscourts.gov/opinions/pub/12/12-20695-CV0.pdf). However, simply notifying payors of your intent to offer a discount would not address the risk of violating the federal anti-kickback statute and other state anti-kickback laws. In addition, payors could deny your future claims based on the theory that the payor has no obligation to pay where the patient incurred no liability. Therefore, payors should be notified only after discussing all options with your legal counsel.
  3. Avoid overstating charges for services provided. If you offer discounts or waivers of coinsurance/copayments for services provided to patients of payors with which you are out-of-network, avoid charging the payors for the full cost of the services. In addition, ensure that the charges reported to the payor reflect both the amount of coinsurance/copayment paid by the patient and any discount or waiver which you provide to the patient. Overcharging payors may be illegal under your state's insurance laws, and, with respect to federal government payors, may lead to liability under the federal False Claims Act.
  4. Beware of "most-favored nation" clauses in your in-network provider contracts. A most-favored nation clause requires a provider to charge a payor the lowest price it charges to any payor for a service. If you charge payors with which you are out-of-network less to avoid overstating charges, you could also be required by your in-network payor contracts to charge the same rates for services billed in-network.

Finally, offering discounts or waivers of coinsurance/copayments is a complicated and unresolved legal issue. You should consult a knowledgeable attorney to discuss the latest developments before taking any actions.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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