The Danger in Doctor Discounts

Jeff Brown, MD

It used to be that doctors waived or reduced fees for patients facing financial hardship simply out of compassion -- now the act requires a second thought. Something as simple as waiving a co-pay is prohibited today by a thicket of federal and state laws. Before you give in to the urge to do the right thing, consider this.

Money and medicine have been uneasy bedfellows since the days of Hippocrates. Since doctors get little or no education on how to run a business, they end up figuring out how to set their fees -- how much to charge for each service, how to adjust fees to suit certain circumstances, etc. -- from on-the-job training. The question of discounting has bubbled up again in offices across the country, since the Great Recession reared its ugly head. So let's talk about it.

Many young physicians aren’t even aware that the old standard was to waive any charge for fellow doctors and their families as a "professional courtesy." That practice was born of necessity, before the advent of high fees and health insurance. And no record or mention was made of it, except a simple, "Thank you." The practice fell away as doctors either obtained health insurance on their own or earned enough to pay the rapidly rising costs themselves.

Along with this time-honored practice was the custom of charging the rich more and the poor less -- a sort of People's Communism, loosely based upon need and means. This informal arrangement was generally universal, a quiet pro bono practice to cover what and who needed covering.

Fast-forward to 2010, where we now have widening health-insurance coverage and an accompanying -- and increasingly impassable -- thicket of regulations and paperwork. Let's call it progress, for want of a better, family-oriented name. But what are we to do with more patients having insufficient insurance coverage, more patients out of work, offices seeing a decline in demand due to the economy, more people requesting discounted fees or no-interest credit? And how are we to manage this at the same time doctors’ practice costs continue to soar?

As an overlay, we already have imposed discounting: This includes our pals at the HMOs, bad debt, declining Medicare reimbursements, the complicated coding barrier, and the insurance industry’s practice of “delay and deny.” In disgust and out of frustration, many physicians have undercoded, waived co-pays, written off bad debt without an effort to collect, or simply not charged a patient in the first place. This form of discounting is sometimes done by the patients’ request and other times it’s done out of compassion -- our implied mission -- or just to avoid another hassle in our already harried day. We think, “We'll just work harder, see a few more patients who might pay and move on.”

Before you give in to this type of discounting, allow me to issue a "Danger, Will Robinson!" warning. There is a thicket of federal and state laws that prohibit discounts on the theory that somehow discounting might be construed as some kind of "kick-back." (This article details how discounting is considered a form of fraud.) I know, I am as incredulous as you are, but many docs have been confronted with audits, threats and prosecutions when they were just trying to do the right thing by their patients. As they say, "No good deed goes unpunished."

So before you give in to the urge to do the right thing, contact your county or state medical society, or check with your national medical organization, and ask if they have a legally reviewed policy or recommendations for fee adjustments for patients in financial hardship. For instance, there are established federal guidelines for a sliding scale means test. Whatever you end up charging, be sure to document the patients’ financial hardship as best you can, creating an objective evaluation and consistent approach. You might want to establish an office policy and review it with your staff.

Doctors should also keep in mind the importance of handling any form of discounting with sensitivity and prudence, or your patients will come to see your good will as an entitlement and you will end up with a financial and public relations nightmare. The insurance companies and regulators will pile on, too, if they become aware of some perceived violation in your effort to help your besieged patients in a difficult economy.

Money and medicine in American society are inextricably interwoven. Their pain is our pain, at all levels, but we do have options. The problem we face now is that reducing fees in specific situations now requires some thought and preparation, whereas they used to be a simple gesture of humanity. I liked the old days better.