QUESTION: I'm trying to understand what I can collect from my patient when insurance is involved. Do I have to accept the amount allowed by the plan, or can I collect up to my billed amount? (Please note I am not a member of any insurance plan.)
This contract is not with the provider; the straightforward explanation is that insurance is making a payment toward the services provided on behalf of the patient. This payment generally is not for the full amount of services, but is based on the contract, which may have a deductible and a percentage of coverage payment.
Percentage of Payment
Payment is made on behalf of the patient and is applied toward the services provided. Very rarely does an insurance plan pay 100 percent. This percentage of payment is the most misunderstood concept regarding payments made by insurance.
For instance, a provider verifies the plan pays 80 percent and assumes the payment will be 80 percent of the billed amount. Not so fast: That 80 percent is not necessarily 80 percent of what was billed, but what the plan allows. If you bill $100 worth of services, but the plan only allows $75, that means the insurer will pay 80 percent of $75 or $60, leaving a non-paid balance of $40.
(All plans pay based on a reasonable and customary fee; even if you have a plan that states it pays 100 percent, it is still limited to what it deems as reasonable. If you billed $500 for a CMT, no plan would pay that amount; the plan would pay the percentage determined as reasonable for service.)
And this, of course, is where the confusion lies. Based on the example above, can you collect the full $40 that was not paid, or are you limited to collect only $15, which would be 20 percent of the $75 allowed rate? The answer is you may collect $40, as there is no contract between the provider and the insurance to limit what the provider may charge or collect.
This amount, referred to as "co-insurance," is the patient's share of the costs of covered services. When a non-contracted provider charges a rate higher than the allowed rate of the plan, the patient is liable for the entire difference. This is balance billing, meaning you may collect any amounts not paid by the plan. You need not "write off" any amounts of your fees, as you have no contract to collect less than your billed or usual and customary amount.
In fact, routine write-off of billed amounts, when not contracted, is a violation of the Anti-Kickback Statute. To be specific, this is what the Office of Inspector General indicated in its Advisory Opinion 8-03:
"If a physician's office routinely fails to collect the patient's portion of the care, it is considered a violation of both the Anti-Kickback Statute (AKS) AND the False Claims Act. OIG and the Department of Justice recognize that there are cases of financial hardship and make allowances for those unable to pay. They also recognize when a physician makes a reasonable effort to collect from a patient, but does not receive payment. It is the routine waiver of the patient responsibility that can cause serious consequences."
Thus, it is not only reasonable to collect the balance of your billed amount; non-collection is a violation.
Contract Limitations
The above discussion assumes you are not contracted with the plan. When you are contracted, you have limitations as to what may be collected or billed. This could be a co-payment, which is a fixed dollar amount the patient is liable for when they seek care with a contracted provider.
For instance, you bill $100, but as a contracted provider, the insurer allows only $50 with a $15 co-payment. In this example, the plan pays $35 and the patient $15, for a total payment of $50. The $50 difference for the billed is not collectible, as your contract rate limits the amount you may collect from the plan and the patient.
This may be why a person may seek care from a contracted provider, as it requires less out of pocket to the patient. In fact, contracted or PPO plans encourage their insureds to use participating providers by having less out-of-pocket costs for co-insurance, co-payments or deductibles.
Since you are not participating in any plan at this time as a contracted provider, the patient is liable for any amounts not paid by their plan. The good news is there are benefits paid by the plan, and I assume your rates are fair and reasonable based on your cost of business. When you bill $100 for a service and the plan pays $50, the patient should be satisfied that they are getting this valued $100 service and only having to pay $50 out of pocket.
Before Joining Any Plan
Before you join any plan, do the simple math of your costs to provide the service. PPO or contract plans may pay as little as $25 per visit, which are often inclusive with any co-payment. Ultimately, the question you must ask yourself is: Can I provide and deliver this service at this rate and maintain my practice financially?
A practice cannot survive in the long term doing $100 worth of services for $25 unless they can be delivered in such an efficient manner that the office sees four times the amount of patients. PPO contracts generally only work well for the provider when services can be provided at a higher volume to make up for lesser reimbursement of said services.
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. Your question may be the subject of a future column.
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