Posted In: Health Care
By Laura F. Fryan on February 18, 2020
Does your practice give cash discounts? In general, there is no prohibition against discounting a fee for a self-paying patient (a patient who pays out-of-pocket and is not covered by a health plan, including Medicare or Medicaid). However, when instituting a discount policy you need to be careful that it does not affect your Medicare reimbursement rates.
Medicare prohibits a practice from submitting Medicare claims that contain charges substantially in excess of the practice’s “usual charges.” Medicare reimbursement is based on the lesser of the “usual charge” or the Medicare Fee Schedule amount. Most other payors also take the position that a “usual” charge equates to the charge you would bill to a private-pay patient. So if your practice materially discounts its charges for self-pay patients and submits much higher charges to Medicare or other payors, your practice could run afoul of federal law. Furthermore, if your discounted rate constitutes a substantial amount of your business, your “usual rate” for Medicare purposes could be adjusted.
For example, in 2017, Kmart agreed to pay $42 million to the federal government and several states to settle a whistleblower lawsuit that alleged Kmart charged Medicare, Medicaid, and Tricare, as well as private insurers, more for generic prescription drugs than it charged customers who paid cash. According to the whistleblower’s complaint, Kmart sold a 30-day supply of a generic version of a popular prescription drug for $5 to customers who registered for a cash discount program, but Kmart sought reimbursement from the government for $152 for the same drug for Medicare customers, which Kmart claimed was the “usual and customary” price.
The court stated that: “The ‘usual and customary’ price requirement should not be frustrated by so flimsy a device as Kmart’s ‘discount programs…’”
Limit your discounts to a small percentage of your usual and customary charges, and monitor the percentage of your patients that receive a discount. This will avoid claims that your discount is actually your usual and customary charge.
If you have any questions about smart discount policies, contact the Brouse Health Care Practice Group.
This blog is intended to provide information generally and to identify general legal requirements. It is not intended as a form of, or as a substitute for legal advice. Such advice should always come from in-house or retained counsel. Moreover, if this Blog in any way seems to contradict advice of counsel, counsel's opinion should control over anything written herein. No attorney client relationship is created or implied by this Blog. © 2020 Brouse McDowell. All rights reserved.