Offering Discounts For Cash -- Safely

No title June 2011

One Fee Is Best Practice

You may be of the opinion that as a doctor you can charge what you want to charge. Of course, you should never overcharge, and no one should object to your charging a fair price for rendering your services. And if you want to give someone a break by taking a little less cash from someone who needs your services but who cannot easily pay you just now, that should be fine too. But it isn’t. Depending on the state you practice in, rules may require all patients to pay the same rate. If you charge different amounts depending upon the patient’s ability to pay, use cash instead of insurance, or give a discount for payments rendered at the time of service, you may be heading for trouble. Other payers might object if they found out that you are giving some of your customers a better deal.

If your practice can provide a given service for a certain price, then that should be the cost of the service for all customers. Feeling charitable? You may end up chiseling your bottom line. If a patient has insurance, the contracted rate must usually apply, even if on a given day the patient elects to pay cash. And if you set your rates at a level your cash patients can afford, which is likely to be less than what an insurance company would be willing to pay, you will likely end up leaving some money on the table.

Okay, How Did You Miss This?

So, where did they hang the sign that says what you charge is not completely your own business? It happened gradually as a result of laws designed to protect insurance companies and CMS from vendors who attempt to maintain dual fee schedules as a means of soaking up more money when it is available. Today, it may be considered to be a form of insurance fraud if you charge one fee for insurance and another for cash. You can also get in trouble for attempting to get paid quickly by offering discounts for prompt payment, such as on the day of service. Offering a discounted “try us and see if you like us” first visit? That may be considered an “inducement”, by which you could illicitly capture business from others. In keeping it fair for all, the regulators really mucked things up for patients who want or need to pay cash. And, even if you practice in a state that allows you to discount your fees under certain conditions, federal laws may require you not to do so when you treat a patient who is covered by a federal health plan, or regulated by the Employee Retirement Income Security Act (ERISA). Whatever you do, you do not want to inadvertently trigger an investigation from some entity like the Office of the Inspector General (OIG), when all you intended was to give your patients paying out of pocket a break.

How Insurance Networks

To see how this works, let’s assume that a large number of your patients are covered by a given insurance company, possibly because a big local employer uses that carrier. A healthcare provider who wishes to accept patients who use that carrier will contact the carrier and determine if the rates paid are acceptable. If so, contracts are signed, and the healthcare provider is now a member of that insurers “network of providers.”

The healthcare provider is obligated to accept the rate paid by that network. The difference between the network rate and the usual and customary charge prevailing in the area is the “network discount.” In many cases, consumers find this discount to be one of the undocumented advantages of selecting one carrier over another. They often get the negotiated rate even for items their policies do not cover. Rates paid by one insurer are not necessarily the rates paid by another. This is actually the first crack in the prohibition against having dual rate cards. Instead of a “Fee Schedule,” the office needs to create a “Fee System,” which has room for the rates charged by the various networks that engage that office. Each carrier gets its own fee schedule within the fee system. But this does little to help the cash patient. The doctor is still caught between potentially illegal discounting and having to set a cash rate so low that it hurts the bottom line when negotiating for insurance work. What to do?

A Network For The Rest Of Us

There is a special form of provider network called a Discount Medical Plan Organization (DMPO). Contracting with a DMPO allows doctors flexibility in setting fees. For instance, you might offer a discount for paying cash, since it saves on bank charges. Using a DMPO may help practitioners slice through the hazards of inadvertently creating discounts and inducements. Once transactions are safely inside the network, doctors can offer great flexibility to group members, merely by codifying the desired policies into the DMPO Fee Schedule, which takes its place next to all the other fee schedules in the office Fee System

DMPO Advantages

The advantage of having patients in a DMPO is that it allows you to establish a fee schedule that may not be feasible otherwise. As this information is published in your fee system, network rules apply. For this reason, accepting cash payments with associated discounts for patients that need the help is no longer a problem. Of course, the patient has to be a member of the DMPO, but that is readily achieved.