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Waiving Patient Copays and Deductibles


The waiver of coinsurance and deductibles owed by patients treated by physicians and other health care providers has come under increased scrutiny recently. Although there are no clear legal prohibitions, commercial health insurers have aggressively pursued out-of-network providers who fail to collect or waive amounts owed by their insureds under different statutory regulations.

There have also been several recent settlements by health care providers resolving allegations of violating the False Claims Act for routinely waiving coinsurance amounts for Medicare beneficiaries.

Fraudulent Billing Alleged

In a recent case, Aetna sued Foundation Surgery Affiliates (FSM) and Foundation Surgery Management (FSM) for providing financial incentives, or kickbacks, to doctors to refer patients to Huntingdon Valley Surgery Center (Surgery Center) and for engaging in fraudulent billing practices. A federal appellate court in Pennsylvania agreed with a lower court’s ruling that the defendants cannot be liable under the state’s anti-kickback law because they are not licensed health care providers; however, the court also concluded that there was a genuine dispute of material fact as to whether it was fraudulent for the defendants to bill Aetna without disclosing the fact they had waived the patient’s copay and deductible obligations.

The Surgery Center is not a contracted network provider with Aetna. By waiving the copay and deductible obligations, Aetna members can obtain services at the Surgery Center for approximately the same rate as they would pay at an in-network surgery center.

According to the court, the Surgery Center’s obligation to disclose the routine waiver of a patient’s obligations would arise from the language of the billing forms it submits to Aetna or any contractual agreements with Aetna that require such disclosure. The court found that the billing form asks a provider to list the “total charges” and does not specify whether that term refers to the list prices or to the amounts the provider actually expects to receive.

The court also found that the Surgery Center’s rental network contracts (Beech Street and MultiPlan) through which its claims are processed did not clarify what information is required to be disclosed on the billing form. The court concluded that a lower district court erred in ruling that the Surgery Center’s billing practices (not disclosing that it had waived the patient’s obligation) are not fraudulent under Pennsylvania state law.

The issue of waiver of patient copays rarely arises with respect to the Medicare program because the Office of Inspector General has issued several guidance documents and fraud alerts waning providers against this particular practice. The OIG and other government agencies have articulated a longstanding position that copay waivers inflate the amount Medicare pays for services.

In a 1984 OIG Fraud Alert, the OIG commented “if a supplier claims that its charge for a piece of equipment is $100.00, but routinely waives the copayment, the actual charge is $80.00.” The OIG warned providers in the 1984 Fraud Alert that the routine waiver of Medicare copayments and deductibles can result in False Claims Act and Anti-Kickback Statute violations.

In another recent case, a hematology-oncology physician group practice in New York agreed to pay $5.31 million to settle allegations of routinely waiving coinsurance amounts owed by Medicare beneficiaries. According to the complaint filed by a whistleblower, “the physician group routinely waived copayments, without making an individualized determination of financial hardship or exhausting reasonable collection efforts.” Patients were given a pass because they had high balances, said they could not pay, or were frequent patients. According to the complaint, Hudson Valley often waived the associated copayment even if the patient did not request a waiver. Hudson Valley would note the automatic waiver in its billing system by indicating “9212 courtesy write-off.”

Safeguards for Physicians

These cases are a reminder to physicians and other providers to: 1) implement clear, realistic guidelines for evaluating financial hardship; 2) maintain documentation of financial hardship determinations; and 3) engage in reasonable, documented efforts to collect amounts owed by patients. Providers should consider implementing these safeguards for all types of third-party payers, including Medicare and commercial payers.

The information in this article is intended for informational purposes only, and should not be construed as legal advice on the topics addressed. Clay J.Countryman, Esq.,( is a partner with Breazeale, Sachse & Wilson, LLP, in Baton Rouge, La.

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