Physician Courtesy Threatens Hospital Compliance Programs, Has Kickback Risks

Managed Care On-Line™: Articles

This article was published in Report on Medicare Compliance 3/25/99

How hospitals handle physician courtesy may be the acid test of whether you have an effective compliance program, not to mention whether you risk kickback prosecution.

Concern about physician courtesy - free or discounted care for physicians and their relatives and friends - is growing among the feds, compliance officers, other health care executives, and physicians. "Discounts are one of the most immediate issues that arise in a compliance program. It's one which all constituents at a hospital use to measure whether a hospital pays physicians for referrals," says consultant Mark Pastin, president of the Council of Ethical Organizations.

Physician courtesy may or may not be illegal depending on how and why it's done. For one thing, "it would not be inappropriate for a hospital to waive charges for all members of its medical staff," but you can't give free hospital care only to the physicians who are your biggest referrers, federal prosecutor Jim Sheehan tells RMC. Also, "physician courtesy is either whole courtesy or no courtesy at all. You can't courtesy the copayment only. If the patient has no financial obligation, neither does the insurer," Sheehan says. Some Medicare copay and deductible waivers are OK if patients are in dire financial need, but you have to resist demands by your star physicians to simply waive copays or deductibles for all their patients. If there is an intent to induce referrals, copay/deductible waivers could trigger the kickback law - and it distorts the physician's fee schedule, he notes.

Hospitals Must Take Stand on Courtesy

But what if there's no intent to induce referrals and the entire fee is waived? In those cases, courtesy may be a more important issue in the compliance and ethics arena. "How can you tell employees you believe in honesty and ethics when doctors get free meals and their families get free medical care?" notes Geralyn Kidera, vice president of the Council of Ethical Organizations.

Experts say hospitals must take a stand one way or the other. "While no one may go to prison over physician discounts, if you haven't addressed it, you probably haven't got a compliance program," Pastin says. "You have to have a clear defensible policy that won't cause employees to giggle when they hear it".

Yet physician courtesy is a time-honored tradition that physicians will cling fiercely to. So what should hospitals do? For starters, Kidera says to review your hospital's current policy on physician courtesy by asking these questions: (1) Do you have an actual policy or is it informally "understood"? (2) Are there limits? (3) To whom does it apply? (4) Is it random or pervasive? (5) Are there non-contractually negotiated discounts or payment waivers? (6) Do you routinely waive payment of the patient portion of the bill? (7) Do you ever "insurance only" bill? (8) Are any consumer/patient or professional discounts reflected in bills to any primary or third-party payer? (9) Do you always comply with insurance or managed care requirements regarding patient copay requirements?

Then consider the following options:
-- Take a hard-line approach and bar all freebies, requiring physicians and their friends and families to pay what everyone else pays. "That's sending a message the rules apply to everyone," Kidera notes. Also, "if anyone can afford health care, it's physicians. As a social policy matter, it would be more appropriate to grant discounts to indigent people," notes consultant Stephan Vincze.
-- Let your hospital continue giving physician courtesy, but make sure you get something in return. That is an approach adopted by one hospital that wanted to protect its tax exemption by avoiding inurement. For example, physicians have to provide a certain number of hours of charity care or serve on committees in direct proportion to the free hospital care given their relatives and friends. (One caveat: The physicians still fought this bitterly, so the hospital compliance officer told RMC that it might as well have banned courtesy. "We tried to eat our cake and have it too, and it hasn't worked that well." The compliance officer urges other hospitals to get rid of courtesy.)
-- Keep physician courtesy. If you do, be prepared for sticky situations, like physicians who take courtesy to an extreme. In one real-life example, a hospital, seeking to keep a hotshot surgeon happy, agreed to give free care to anyone he knew. The compliance department is now trying to untie that knot.
-- Limit physician courtesy, but don't ban it. Have very defined parameters within the law.

Be Wary of Courtesy Under Private Insurers

Physician courtesy may be just as risky with private insurers. "I strongly encourage my fellow compliance officers to ask for legal counsel's review before adopting a policy which would allow the waiver of copays and/or deductibles for any non-governmental payers," says Ed Gaines, general counsel-senior vice president for compliance at Healthcare Business Resources in Durham, N.C.

Gaines says providers can't "eat their cake and have it too" by essentially rewriting the patient's commercial insurance policy by taking away a patient's disincentive to overuse medical care. Gaines' company has a strict policy against copay waivers regardless of payer.

Helping Physicians Swallow a Bitter Pill

Whatever you decide to do about physician courtesy, you have to educate physicians about the ins and outs - which should be done as part of compliance education, Vincze says.

Compliance generally is a tough sell because physicians see it as more red tape and government meddling in health care.
Vincze's tips:
-- Acknowledge physicians' concerns; be sympathetic.
-- Ask them to put themselves in the shoes of government and private payers to understand the crackdown on billing and financial relationships.
-- Use a physician as a co-trainer in comp<%0>liance training.
-- Before you begin training, hold a focus group to sensitize physicians to these issues, expose them to the concepts and get their insights. "It's a mistake to develop a training program without their input," he says.

Reprinted with Permission.

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