The 5 Most Dangerous Compliance Traps & How to Avoid Them

As a medical compliance specialist, I’m often asked, with all the rules and regulations that we face in health care, what should I worry about the most. My advice is to concentrate on these five compliance traps and how violation of them might occur in your office, then put policies and procedures in place to minimize or eliminate the likelihood of occurrence. That is a lot more productive and more effective than worrying.

What Are the Five Most Dangerous Compliance Traps?

Let’s review these one by one to see how they might show up in your office and learn what the potential risks are and steps you can take to avoid them.

  1. Dual Fee Schedules

What is a Dual Fee Schedule?

Simply put, it means charging more to an insurance company or a third-party payer than you do to a cash patient for the same services.

What are the Risks?

The risks include potential violation of state rules and regulations, violation of provider agreements, and creation of inducements as well as potential complaints to your board of examiners or other authorities. In many states, there are specific rules and regulations against this practice. Insurance companies and attorneys on PI cases are known to call providers and pose as patients in order to determine if a doctor has a dual fee schedule. As a result of these calls, doctors’ fees are cut and some are reported to their Boards of Examiners. Even in states where there are no such rules, there is the problem of perception by the patient. Think about it, when you are taking care of a cash patient and charging $50 for a visit, and three months later, the patient is in an auto accident, he sees your actual charges on the EOBs, often for the first time. The reality is it simply doesn’t look right in the eyes of the patient. This actually happened to me years ago, and I was reported to the Attorney General. The good news is we didn’t have law at that time against the practice, but it was an eye-opener for me, and it started me on the path to solve this problem in my practice.

You must also be careful to avoid violating your provider agreements. I’ve reviewed agreements that contain what is considered “most favored nation” language from major insurance carriers that basically says, if you charge ANYONE less than the fee schedule you agreed to with that carrier, you MUST report it and your fees will be reduced as a result. Read your agreements and be careful what you sign.

Finally, risks exist when offering discounts to federally insured patients. In a Special Alert Bulletin, the OIG warned that giving away anything of value, defined as more that $10, or a total of $50 in a year, would be considered an inducement. That is a very low threshold. One free exam, or not charging for therapy or rehab, could land you in hot water. Here’s a little-known fact. This OIG Special Alert also said not charging “fair market value” is considered an inducement. So, if you are billing $20 dollars for a procedure to payers and you only bill $5 or $10 to others covered under these rules, that is clearly not fair market value, and you risk fines of $10,000 per occurrence.

Avoiding the Risk of Dual Fee Schedules

This one is easy. Don’t do it. Have ONE fee that you charge all patients, regardless of who is paying the bill, and only offer discounts under the following circumstances:

  • You participate in their health plans as a provider, like Blue Cross Blue Shield, Aetna, or Cigna.
  • They have mandated fee schedules, such as Medicare, Medicaid, or PI/WC in some states.
  • They are part of a Discount Medical Plan. These plans typically have a membership fee that entitles patients to discounts similar to insurance patients. (Discount Medical Plans are entities typically regulated by the Departments of Insurance in most states. Some plans dictate the discounts you must offer while others allow you choose your own level of discounts.)
  • They elect a pre-payment plan that may include a bookkeeping discount if that type of payment plan is permitted in your state. Keep in mind that if bookkeeping savings are offered, they must be truly reflective of the bookkeeping costs.
  • They qualify for your written financial hardship plan. These plans must be based on verifiable need and are often tied to state or federal poverty guidelines and should not be open-ended.
  1. Improper Time-of-Service Discounts

What is an Improper Time-of-Service Discount?

Time-of-service discounts or prompt-payment discounts are discounts that by definition should reflect the actual bookkeeping savings passed on to patients who pay at the time of service. According to most consultants and CPAs, the cost of billing usually ranges between 5% and 25%. The OIG issued an opinion for a hospital that indicated 5% to 15% would be considered reasonable. If you are offering a time-of-service discount, it should be defensible, meaning it should be reflective of your actual booking cost or in the range of known costs. Many doctors offer routine discounts in the range of 40%–50%, which may far exceed their actual costs. They could be considered improper time-of-service discounts or de-facto dual fee schedules.

What are the Risks?

Improper time-of-service discounts may include the same risk as dual fee schedules if the discounts are not defensible.

Avoiding the Risks of Improper Time-of-Service Discounts

You can avoid this risk by simply knowing the cost of doing your billing, or use the general guideline of 5%–20%, which falls in line with opinions of many consultants and the OIG.

  1. Inducement Violations

What is an Inducement Violation?

Inducement violations can occur when you are offering something to patients that may “induce” them to choose your office over another office. Things such as free exams, free x-rays, and waiving deductibles or co-pays are all considered inducements.

What are the Risks?

The OIG Special Bulletin on Gifts and Inducements advises that anything of value, again defined as more than $10 or a total of $50 in a year, is considered an inducement and is subject to fines of up to $10,000 per occurrence. In years past, when advertising free or reduced services, many doctors would put a disclaimer in their ads stating these discounts did not apply to federally insured patients because then the federal government was the only one with rules against offering inducements. Fast forward to today and you’ll find that many of the federal regulations have been adopted by states as part of their anti-kickback and anti-inducement regulations. In fact, the states are rewarded by the feds for adopting similar guidelines that protect the financial integrity of private health plans just as the OIG regulations protect the financial integrity of the Medicare fund.

Avoiding the Risks of Inducement Violations

These risks can be avoided by making sure your advertising efforts don’t “bribe” or “induce” patients to choose your office over another. Realize that when you advertise freebies or make other offers, the patients are not the ONLY ones who read these ads. Make sure you are collecting deductibles and co-payments and charge for all the services you provide. Not charging for therapy or rehab for Medicare patients is commonplace in our profession but clearly an inducement violation. 

  1. Anti-Kickback Statute Violations

What is an Anti-Kickback Violation?

The federal Anti-Kickback Statute is a criminal statute that prohibits the exchange (or offer to exchange) of anything of value in an effort to induce (or reward) the referral of federal health care program business. Most everyone knows that you cannot pay attorneys for referral of PI cases, and you cannot accept payment from labs or MRI centers for patient referrals. What many do NOT know is that waiving deductibles and co-payments or not charging for services can also be considered anti-kickback violations because patients are receiving something of value rather than a third party.

What are the Risks?

Violation of the Anti-Kickback Statute can result in criminal fines of up to $25,000 per violation and/or prison terms of up to five years. Civil and administrative penalties can include prosecution under the False Claims Act, exclusion from participation in federal programs, potential civil penalties of $50,000 per violation, and civil assessment of up to three times the amount of the kickback.

Avoiding the Risks of Anti-Kickback Violations

Doctors who are involved in business ventures with other entities must be particularly careful to make sure these ventures are structured properly so as to prevent the possibility of kickbacks when patients are referred from one provider to another. Care must also be taken in referral relationships of all types, whether with other providers or attorneys. The general rule is don’t pay for referrals or accept anything for referrals. When in doubt, seek the services of a qualified health care attorney.

  1. False Claims Act Violations

What is the False Claims Act?

The False Claims Act, also called the “Lincoln Law,” is a federal law that imposes liability on persons and companies who defraud governmental programs. In health care, violation most often occurs when doctors falsify their documentation, use improper coding, or engage in other billing practices that lead to higher reimbursements than they should have received. Practices such as up-coding for higher reimbursements as well as down-coding to avoid what we feel could be more scrutiny are both examples of false claims. Some providers consistently use low level exam or CMT codes, thinking they are flying under the radar, when in fact this type of practice is easily detected through the process of reviewing “big data.”

What are the Risks?

There are significant criminal and civil penalties for violating the False Claims Act. Federal penalties can total three times the amount of the claim, plus fines of up to $11,000 per claim. State laws include possible imprisonment in addition to fines of up to $10,000 per claim.

Avoiding False Claims Act Violations 

Preventing violation of this act is simple: document, code, and bill correctly. Do not up-code, down-code, or use a code that is “close” to the service provided. If discounts are offered, they must be reflected on the claims. Billing your full charges on a claim form, knowing you are going to waive a portion of a deductible or co-payment, is a clear False Claim Violation. False Claims violations can be automatically triggered when the Anti-Kickback Statute is violated.

Now that you know the five most dangerous compliance traps and how easily they can occur in your practice, remember these simple suggestions to eliminate them so you can practice with peace of mind:

  • Set one fee for all your services,
  • Charge and report your actual charges to everyone,
  • Collect deductibles and co-pays,
  • Avoid free services,
  • Never offer or accept payment of any type for referrals,
  • Only offer discounts when it’s part of a contractual network agreement or under the circumstances outlined above, and
  • Document, code, and bill correctly, then rest well!

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