The COVID-19 crisis has put many practices under great stress as far as payments as patients lose insurance coverage or cannot cover bills. However, it is essential to remember that the underlying principles in these situations have not changed. Let’s look at a few questions that came in before the crisis to reinforce these basic points.
- I converted my family practice to all-cash last year and it has worked out well in most cases – I offer very competitive pricing and the time I don’t spend dealing with paperwork I can spend with my patients. However, I have one patient who is always behind, and this has continued even on a $20 per month payment plan. I see him at least every three months to follow his diabetes so this is really backing up. He is actually a great patient otherwise – very compliant on his treatment and getting good results – but this non-payment cannot just continue. Can I terminate him now just for non-payment? Can I make payment a requirement for a new appointment?
Yes to your first question but no to your second.
The reason is because what you cannot do is abandon him.
You are doing routine follow-ups spaced months apart so the situation in which a patient is under active care that cannot be suddenly discontinued, which would be what most doctors understand to be abandonment, does not apply here. With enough notice – at least 30 days and longer if you know that it will take more for him to secure alternative care in your area – termination is possible. The doctor-patient relationship is a contract and so must be mutual and as long as you do not breach your fiduciary duty to not abandon your patient you may withdraw for any reason.
However, keeping him in your practice but refusing to see him until he pays is another type of abandonment, referred to as “internal abandonment”. The patient is kept on the rolls of the practice but gets no care. If you keep him on then he is to be treated as any patient would be, regardless of payment status.
You should first actually put termination on the table (and document it of course). It is essential that he understands that in a mutually respectful physician-patient relationship payment is one of his responsibilities and that without it the relationship cannot continue.
If you still have to terminate him, make sure to be scrupulous in your dismissal, including providing prescriptions and emergency coverage for at least the statutory period your state requires.
After terminating you can also enter him into collections.
However, remember that you are only the custodian of his medical information. He cannot be refused a copy of his records and you cannot refuse to speak to his new doctor about him solely because the bill is still outstanding.
- As a small-town doctor I have always been lenient on collecting co-pays and dealing with deductibles when patients really cannot afford them. I put a note in the chart of any patient I don’t collect on explaining the circumstances so I honestly don’t see what the problem is in helping people out. However, I have colleagues who won’t do this because they say that it is a fraud. I just don’t understand that.
First, serious kudos to you for being such a caring physician. That having been said, the way that you are doing this can be very risky for you.
While AMA Opinion 6.12 says that when the share the patient is responsible for “is a barrier to needed care because of financial hardship, physicians should forgive or waive” it, that is an aspirational ethics statement and you are still bound by the payor relationships that you have that bind you to collect.
Let’s start with private payors: Suppose that Insco’s scheduled fee for a treatment is $100 and there is a 20% co-pay. That means that Insco has an 80% share of responsibility. Under that agreement, in order to be “paid in full” you need 20%, or $20, from the patient and 80%, or $80, from InsCo. When you instead do not collect the $20 you are actually saying that you accept $80 as full payment. Insco then only owes you $64, which is 80% of $80. If you actually collect $80 from them then you will be overpaid by $16, which they would then call fraudulent billing. Therefore, if you waive a co-pay, correct your billing to reflect it.
There is also the problem of violation of the Anti-Kickback Statute if you do not collect co-pays or apply deductibles to patients in federal healthcare programs. That is because of the section that says that “Whoever knowingly and willfully offers or pays any remuneration (including any kickback, bribe, or rebate) directly or indirectly…, in cash or in kind, to any person to induce such person to refer an individual [for] any item or service for which payment may be made … under a Federal health care program, … shall be guilty of a felony.42 U.S.C. § 1320a-7b(b).” This applies to any transaction between a practitioner and a beneficiary, and in that setting not charging the out-of-pocket cost can certainly look like a gambit to get patients to come to you. However, the AKS does not apply if there was no intent to induce referrals. This allows doctors like you to act in good faith to help out your patients, but to do so you must meet the OIG’s safe harbor criteria:
- You must try to collect first. This does not mean putting the patient into collections. It means presenting the amount due at the time of service and offering a reasonable payment plan if the patient says that they cannot cover that amount as a lump sum. Waivers should be reserved for those patients who cannot handle a payment plan either.
- This is not something that you do routinely, and you only do it after determining real financial needs. An ad hoc note about why you did not collect is not enough. You should have a written policy in place, showing that in each case, you consider factors such as the patient’s income versus the cost of living in the area and the extent of their medical bills.
- The waiver is not part of marketing your practice or any solicitation for business. (In fact, it would be a good idea to tell patients to not spread this around informally because you do not want that construed as trying to get a reputation for this that will induce referrals.)
Following the rules with both private and governmental payors should let you keep on helping your patients without risk to yourself.
- How come a hospital can get a patient set up with Medicaid so they can get paid but I can’t pay a premium on a patient’s insurance so that it doesn’t lapse so that I can get paid?
You cannot pay for a policy under which you will benefit from the insurer paying you. Think of a mechanic paying your car insurance premium so that he can bill the insurer for the work he does and the conflict of interest is clear. This does not apply when an employer or a family member or a friend pays for the insurance because they do not benefit from the payment made by the insurer under that policy.
Doing this would actually put you at great risk because CMS issued a memo on this issue back at the time that the ACA was new and doctors were concerned about being left without recourse if the patient defaulted on their new insurance – it instructed insurers to refuse any such payments and warned physicians that paying the patient’s responsibility could “elicit regulatory scrutiny.”
Professional societies also weighed in. For example, the Texas Medical Association issued an opinion that paying a premium is an ethical practice only if the physician does not directly or indirectly receive a benefit. What this means is that you can pay out of pure generosity to help someone in need but not a patient whom you will be billing that payor for.
The hospital, by contrast, is not making a payment and is just assisting the patient to obtain access to what they are eligible for. Obviously the hospital would like the process to go through because then they can bill under the program, but all that they are doing is submitting the application. You could certainly do the same or assist the patient in applying for private insurance (of course, you could not bill for that time – this would have to be gratuitous assistance) but, as with the hospital, it cannot go further than that.
One last caution: do not try to be clever and “loan” the patient the money for their premium. Not only are financial transactions that personally indebt a patient to their doctor considered unethical, but this would also be a very obvious attempt to beard an impermissible act because, of course, during the time that the “loan” is extant you will be billing the insurer that you indirectly paid to keep active.
Either just defer costly care if possible until the patient can re-establish coverage or work out a payment plan with them.
- When patients don’t pay me and I end up writing off the unpaid amount can I send them a 1099 for the value of the treatment that they got from me for free?
You are using a colloquial term for what you are doing but in tax law, a “write-off” only occurs when you voluntarily deduct from your fee. This could be, for example, when you give a patient a discount or when you accept patients paid for at a lower rate by a charity.
What you are describing is a bad debt, which is a sum that you never agreed to waive but were still never paid. This has consequences as far as 1099 reporting.
The IRS (Service Center Advice 1998-020) says that “individuals or entities not required…to file Form 1099-C may nevertheless voluntarily file such forms in appropriate circumstances.” However, two criteria must be met:
- The issuer has actually canceled a debt as uncollectible.
- The issuer has taken a bad debt deduction.
The first is to prevent an angry business from going after a non-payer by issuing a 1099-C for a falsely high amount or just issuing a 1099-C without even trying to collect. The second requires that the issuer must themselves have taken a tax-cognizable loss in order to attribute that as again to the non-paying individual.
The latter is where you are likely to hit a block because, like most medical practices, you probably do cash basis accounting under which taxable income only accrues when you actually receive it. The effect of bad debt in this setting is to reduce your total reportable income for the year. The bad debt itself is just a payment that never happened and so it is not deductible.
The answer to your question is therefore that unless you do accrual-based accounting, under which expenses and revenues are recorded when the transaction occurs even though they will be paid in the future, creating an estimate of the business at that given point in time, and so can qualify for bad debt as a deduction, sending a 1099-C is not an option for you.
Of course, the patient is supposed to report the unpaid amount themselves since it was not intended as a gift, but it is very unlikely that they will do so.
The only alternative for you is to put the debt into collections but that may not be worthwhile for small amounts. You, therefore, have to decide whether the effort of collections exceeds the reduced tax burden of a lowered reportable income.
If you actually do qualify for sending out a 1099-C also bear in mind that it is only possible to claim losses from what you actually billed per case or spent in addition to that (such as renting a specialized piece of equipment) that you were not reimbursed for. You cannot, for example, include a percentage of overhead that you could not have billed for.