How to Deal with Patient “Financial Hardship”

As billing professionals we hear it all too often, a patient calls the physician or their office because they say they cannot afford to pay. Now the provider is calling us to request a discount or to write off the balance, in hopes of quieting the squeaky wheel or due to basic human compassion.  At AdvantEdge, we are reimbursement specialists and often patients ourselves, and we get it. But, we are here for a reason: to get our clients the funds that they have worked so hard for, and to keep our clients out of any potential compliance hot water.  This article highlights the need for each practice and hospital to have a meaningful financial policy in place and to use it in a consistent manner.

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Medicare, along with every federal payor and most commercial payors, has specific regulations requiring providers to collect balances due from patients unless there is a meaningful and valid hardship waiver on file.  As charitable as physicians want to be, the law does not allow routine write-offs of co-pays and deductibles. If the provider does routinely offer discounts or waivers of deductibles without properly investigating a patient’s financial situation, the practice runs the risk of violating its payor contracts, being accused of committing insurance fraud, and/or paying an illegal kickback to induce patients to seek treatment from the practice.

Some payor contracts also require the practice to bill the payor the lowest rate that the practice bills any of its patients, a so-called “most favored nation provision.”  Typical Medicare participation agreements are subject to this type of provision.  If a practice or hospital waives deductibles or co-pays, then insurers often take the position that the amount being billed to the insurer ought to be reduced by the amount waived.

Financial hardship determinations are typically based upon a review of household income, assets and liabilities in relation to current Federal Poverty Income Guidelines https://aspe.hhs.gov/poverty-guidelines.

Hardship waivers should not be granted based on a patient’s comments about their inability to pay or how a provider “feels” about the patients’ circumstance. Patient inability to pay must be documented with appropriate financial proof such as copies of tax returns, W-2s, 1099s, recent pay checks, copies of household bills, etc. Note that non-essential expenses such as credit card bills should not factor into hardship determinations.

A practice or hospital should create and apply its own guidelines, e.g. 20% above the federal poverty definition, as long as the same standards apply to all patients. The patient’s hardship should be periodically reviewed to ensure their status has not changed.  It is also advisable to maintain all records and information gathered while determining hardship, along with the amounts waived.

What about the Uninsured?   When it comes to uninsured patients who are willing to pay for services, offering a cash or “prompt pay” discount may be possible, as long as you are cognizant of the payor contracts where you are obligated to offer your “lowest rate.” Additionally, no practice or hospital should have multiple fee schedules or they may find that payors adjust “usual and customary fees” to the lowest fee schedule amount.

Unfortunately, the current healthcare system with its myriad regulations is not geared toward encouraging or allowing providers to offer free or highly discounted care to patients. Providing free care may seem like a compassionate idea, but it is likely to create costly liability issues unless done using a formal policy.