Medicare Issues for Direct Pay and Concierge Practices

doctor-patient-relationship-673855-m.jpgThe strain of health care reform and third-party-payer bureaucracy will likely continue to push physicians towards non-traditional business models for practicing medicine. This is especially true for non-specialists. As the trend of physicians to find viable practice model alternatives grows, it is widely expected that the number of direct pay and concierge physician practices will increase significantly.

Atlanta Medical Practice and Health Care Law Firm

Our health care law practice is particularly interested in direct pay and concierge medicine legal issues. While the particulars may vary, the typical concepts upon which such medical practices are built are fixed, affordable fees for patient “membership” in the direct pay/concierge program, 24/7 access to a physician, much more time and involvement in the physician-patient relationship, better preventive care and planning, and a more rewarding professional life for the physician without (or with reduced) headaches of a third party payer medical practice.

The legal and business issues raised by setting up such a practice, however, are important and must be carefully evaluated. For example, one such issue is whether the details of a particular direct pay or concierge model violate Medicare billing rules. The federal laws that govern Medicare patients and federal reimbursement can make it very risky for concierge practices to charge Medicare beneficiaries retainer fees for certain medical services. Medicare billing rules have heavy consequences for double billing of a Medicare covered procedure. The setup of the concierge practice model has the potential to trigger this issue, and some practitioners may be better off opting out of Medicare entirely. However, physicians also have the option of accepting or not accepting assignment, with their choice affecting who they bill for their services. Physicians accepting assignment will bill Medicare directly, while those not accepting assignment bill the patient, who in turn seeks reimbursement from Medicare.

The benefits of signing Medicare “participation agreements” include five percent higher reimbursement. However, “participating” physicians cannot charge more than the Medicare fee schedule amount for those claims. If a doctor does not accept assignment, the doctor is prohibited under Medicare rules from charging more than 115% of the scheduled fee amount. Doctors who want to charge more than that would need to formally opt-out of Medicare entirely, as mentioned above.

If a doctor bills a Medicare beneficiary in violation of Medicare’s assignment rules or limiting charges, he or she can be prosecuted under the federal False Claims Act (FCA). The FCA authorizes very significant penalties ($5,500 to $11,000 per claim) for knowingly presenting the federal government with a fraudulent claim for payment or making a false statement that supports the claim. In addition to the per claim penalties, the doctor can be charged three times the amount of monetary damages suffered by the government based on the false claims. An Office of Inspector General (OIG) Alert issued in March 2004 explained, “When participating physicians request extra payments for covered services from Medicare patients they are liable for substantial penalties and exclusion from Medicare and other Federal health care programs.” March 31, 2004 OIG Alert

Medicare billing rules are complicated and sometimes vague when applied to specific circumstances. Determining what is a covered or non-covered service depends on varying factors such as the patient, circumstances and the service. Providing services that Medicare specifically exempts from coverage is one way that a retainer practice can avoid the risk of billing for a covered service. Direct pay model practices that provide services that are clearly non-covered according to Medicare run the least risk of violating law. However, even this safeguard is not foolproof considering the vagueness and confusion of Medicare laws and broadly stated OIG’s Alerts. The riskiest model for a concierge practice is one that includes more comprehensive medical services and mixes covered and non-covered services in billings.

To avoid the confusion of Medicare law and the severe financial penalties that come with a billing violation, concierge practice owners may consider not accepting Medicare at all, as many have done already. Opting out of Medicare, generally speaking involves:

  1. Signing an opt-out affidavit;
  2. having their patients sign opt-out contracts;
  3. agreeing to not submit any claims to, or receive payment from, Medicare for two years; and
  4. filing the op-out affidavit within 10 days after signing the first private contract and at least 30 days before the end of the quarter in which the first contract becomes effective

See Opting Out of Medicare: a guide for physicians, Association of American Physicians and Surgeons (February 6, 2014) Properly following Medicare’s opt-out requirements is essential. Violating any of Medicare’s opt-out rules may result in the physician losing the right to enter into any private contract and to receive any Medicare reimbursement for up to two years and create liability under the False Claims Act for submitting false claims.

If you have questions about starting a concierge medical practice or the federal regulations that govern such a practice, feel free to call us at (404) 685-1662 (Atlanta) or (706) 722-7886 (Augusta) for a free phone consultation.

*Disclaimer: Thoughts shared here do not constitute legal advice.

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