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Check contracts before charging fees

A column examining the ins and outs of contract issues

By Steven M. Harrisis a partner at McDonald Hopkins in Chicago concentrating on health care law and co-author of Medical Practice Divorce. He writes the "Contract Language" column. Posted Oct. 4, 2004.

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If you're thinking of charging patients administrative fees to cover extraneous paperwork or other nonmedical activities, think hard. Notwithstanding how this may affect your relationship with patients, you need to ensure that your Medicare and private plan contracts don't bar you from charging extra fees.

Administrative fees have not been specially defined by state or federal regulation. But the Health and Human Services Office of Inspector General recently issued an advisory about which services physicians can attach a fee to. The OIG says physicians risk substantial penalties and expulsion from Medicare and other federal programs if they charge fees for services already covered. Private health plans also make clear that physicians cannot charge patients extra for services already included in a contract.

The idea of administrative fees has grown at physician offices nationwide as doctors find themselves squeezed by lower reimbursements or reimbursements that aren't keeping up with expenses, and by the rapid rise in liability insurance premiums.

While administrative fees for returned checks or missed appointments have been widely accepted, physicians have considered charging patients for completion of insurance paperwork that extends beyond health claims filing, telephone and e-mail consultations, and other services. Or some physicians have told patients they will have to pay an annual fee to cover all anticipated administrative work.

But in its alert, the OIG cautioned doctors that extra contractual charges beyond Medicare's deductible and coinsurance could be a potential assignment violation.

Participating physicians can charge Medicare beneficiaries for items and services not covered by Medicare. For example, physicians can charge beneficiaries for Medicare deductibles and coinsurance without violating the terms of their assignment agreements. But when physicians request other payment for covered services, they are liable for substantial penalties and exclusion from federal health care programs. Nonparticipating physicians also are subject to penalties for overcharging beneficiaries for covered services.

The OIG gave an example of a physician who presented a "Personal Health Care Medical Care Contract" to patients, including Medicare beneficiaries, which required patients to pay an annual fee of $600.

This doctor characterized the services as "not covered" by Medicare. Included in this contract were the "coordination of care with other providers," "comprehensive assessment and plan for optimum health," and "extra time" spent on patient care.

The OIG alleged that at least some of these contracted services were already covered and reimbursable. Therefore, each contract given to Medicare patients constituted a request for payment for already covered services (other than the coinsurance and deductible) and was a violation of the assignment agreement. To resolve these allegations, the physician agreed to pay a settlement amount to the OIG and to stop providing these contracts to his patients.

If you decide to charge patients for noncovered services under Medicare and Medicaid, the government requires you to tell patients before items or services are actually furnished.

Private insurers might view extra fees as a breach of contract and a violation of insurance rules. Before charging extra fees, you should review your contracts to identify covered and noncovered services. As with Medicare and Medicaid patients, discuss extra charges with privately insured patients before you charge them. Send a letter to patients explaining the extra fees, and those nonmedical or noncovered services for which you will seek payment.

Steven M. Harris is a partner at McDonald Hopkins in Chicago concentrating on health care law and co-author of Medical Practice Divorce. He writes the "Contract Language" column.

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