Balance billing a no-no in most cases

A column examining the ins and outs of contract issues

By — Posted Sept. 3, 2007.

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Physicians often inquire if they can bill patients the difference between their billed amount for a service and the payer's covered amount. (AMA policy supports physicians' right to balance billing wherever legal or allowed by contract.) The answer, most often, is no.

Payer contracts often include a provision prohibiting doctors from billing a plan's members for covered services in excess of applicable co-payments. The contract of a prominent payer, for example, generally states that "the provider agrees to accept the payer's network rate as payment in full for covered services and shall not balance-bill the payer's subscribers."

If an in-network physician bills a covered patient in violation of such a provision, the physician could risk termination of the contract and financial penalties.

While some payer contracts may not prohibit the balance billing of patients, doctors under such contracts, and even out-of-network providers, should not assume that the balance billing of patients covered by insurance is permitted in their states.

This is because the laws of many states effectively impute a contract between physicians and payers that prohibits providers from balance billing for services that are covered services. In many cases, that also applies to physicians who are out of a plan's network.

In addition, most government-administered health care programs prohibit physicians from balance billing such programs' subscribers. These restrictions, however, vary across the U.S., as do whether they apply to all payers or all physicians.

For example, Pennsylvania law provides that "it shall be unlawful for any health care practitioner, or any primary health center, corporation, facility, institution or other entity that employs a health care practitioner, to balance-bill [Medicare]."

By contrast, Kentucky law applies only to certain payers, those that offer a health benefit plan that is not a managed care plan (as defined under state law) but that does provide financial incentives for a covered person to access a network. Those plans' contracts must include a "hold-harmless agreement under which the covered person will not be balance-billed by the in-network provider, except for deductibles, co-pays, coinsurance amounts, and noncovered benefits."

Other states extend the prohibition to private payers and out-of-network physicians.

Florida law, for example, provides that a physician or any representative of a physician, regardless of whether the doctor is under contract with the plan, may not collect or attempt to collect money from, maintain any action at law against or report to a credit agency a subscriber of an organization for payment of services for which the organization is liable, if the physician in good faith knows or should know that the organization is liable.

Accordingly, before any physician engages in balance billing, the doctor should consult legal counsel, or his or her state medical board or Legislature, to determine if balance billing is prohibited under state law.

Even if balance billing is not prohibited under state law, in-network physicians must take a further step and review their payer contracts to determine if balance billing is prohibited contractually.

Finally, physicians who accept reimbursement from government-administered health care programs should check the terms of these programs to determine if they contain restrictions against balance billing.

One last word of caution: Physicians should not inflate their bills for services to circumvent the contractual and statutory restrictions against balance billing. Such action could result in an even bigger problem for a physician -- a charge of insurance fraud in most states.

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