Improving Up Front Collections – Collecting from Medicare Beneficiaries

This column has frequently discussed steps a provider or practitioner can take to speed up its collection of Member payments. See for example:  

- Maximizing Collection of Deductibles – 10 Thoughts

- Can you Collect that Consumer Directed Health Plan Deductible Up Front?

Can you use prompt pay discounts to encourage payment at the time of service? What if the patient is enrolled in Medicare or Medicaid? Would that violate the prohibition on accepting kick backs? Last month, the Office of the Inspector General issued an Advisory Opinion describing a health system that wanted to offer prompt pay discounts. Although the opinion contains a disclaimer that it cannot be relied on by anyone other than the party for whom it was written, it does offer some guidance. 

A health system that owns 3 hospitals and wanted to offer discounts to inpatients and outpatients covered by Medicare, Medicaid, other federal health programs and private insurance. (The opinion doesn’t mention offering similar discounts to the uninsured.) The discount would be given for prompt payment of copayments, coinsurance, deductibles and charges for non covered services. It would be offered without regard to the patient’s ability to pay. The discount would be offered according to the following schedule:

                 

Proposed Discount Percentage	If Paid Before Discharge	If Paid within 30 days of discount offer
Balance owed: $0 - $999	10%	5%
Balance owed: ≥$1,000	15%	10%

The OIG determined that, although this arrangement “could potentially generate prohibited remuneration” the OIG would not impose sanctions because, as applied to inpatient services, the discount fit the Safe Harbor for waivers of beneficiary coinsurance and deductibles at 42 CFR § 1001.952(k)(1). The OIG evaluated the discount program for outpatient services and determined it was not a disguised payment for referrals, but a legitimate strategy for more successful bill collection. The OIG found the following features important to its decision:

- The purpose for the discount is to reduce the system’s collection costs and to boost its cash flow.

- The amount of the discount is intended to equal savings to the system from reduced collection costs. 

- The discount will not be publicly advertised, but patients would be informed of its availability at registration, when billing and when making payment arrangements. 

- The prompt pay discount would be disclosed to federal and private payors.

- The prompt pay discount would not be part of a price reduction agreement with a third party payor.

- The system would not claim the discounts as bad debt or “otherwise shift the burden to the Medicare or Medicaid programs or other third party payers or individuals.”

- The prompt pay discount would be offered without regard to the reason for admission, length of stay, DRG or ambulatory payment classification.

OIG Advisory Opinion No. 08-03