Emily Johnson, Associate, McDonald Hopkins

Balance Billing: What Providers Need to Know

By Emily A. Johnson
Associate
McDonald Hopkins

Original Publish Date: September 13, 2016

The topic of balance billing has become a top draw in the media, with headlines shouting "surprise" or "hidden" medical bills, and has been described as an "unfair medical practice" and even "the ugly beast of medical insurance." At the same time, waivers or reductions of patient out-of-network balances can present false claims of liability for the provider under both federal and state law. Moreover, private payors are becoming increasingly more likely to sue and cease paying such providers who routinely waive or reduce patient out-of-network balances or are ceasing to pay such providers altogether. How do we as medical professionals guide ourselves through the waters of potential out-of-network status, and the extremities portrayed in these consumer issues? In this article, we explore the challenges and risks associated with balance billing (regardless of whether balance billing is done by choice or out of legal necessity), the potential impact of both local and national legislation, and ideas on how to educate patients and manage their responses.

But to start with, what is "balance billing"? Per the Federal Register, "Inappropriate balance billing refers to the practice of billing Medicare beneficiaries for the difference between the total provider charges and the Medicare Part B Allowable payment."ⁱ Balance billing includes billing patients for the difference between the provider’s charge and the allowable amount established by the third party payor. Closely related to balance billing is the issue of contractual write-off, which would include charges denied by a payor that the provider (if under contract) would be prohibited from billing the patient for. Balance billing does not include the collection of co-pays, deductibles or coinsurance applied by a patient's medical plan for either in-network or out-of-network care.

At first glance, the avoidance of balance billing may seem simply to be a way of maintaining as many payor contracts as possible and/or always billing the patient balance as set forth in the payor’s explanations of benefits. However, there are many obstacles facing medical professionals who wish to avoid balance billing. With hundreds of payors in the market, it becomes nearly impossible for providers to contract with them all, especially given the increased scrutiny that many payors are applying to their networks. Furthermore, with many payors reducing their networks, it can be difficult for independent professionals to lobby their way to inclusion without the political clout of large medical and academic organizations. As the number of out-of-network providers grows, an increase in balance billing will inevitably follow. Knowing when you can or should balance bill is key to mitigating the risk of contractual compliance and legal standing. Again, it is important to note that this article addresses the issue of billing patients for amounts in excess of their in-network or out-of-network co-pays, coinsurance and deductibles, as established by the payor. Routine waivers of out-of-network co-pays, coinsurance and deductible amounts can put the provider at risk of false-claims filing.

The Risk

Complications can arise from payors who have multiple (and contractually separate) lines of business, whereas you may find yourself contracted with one core line of business, but not the smaller branch lines of business. Additionally, you may also encounter payors with patient-benefit packages that feature different payment tiers for "par" versus "preferred" provider status, shifting more responsibility to the patients utilizing "par" providers. Your billing department needs to discern the difference and know when balance billing is appropriate and when it is not. The risk involved with inappropriate balance billing can range from lack of compliance with the member-hold-harmless clauses of payor contracts, to violation of state laws concerning both member-hold-harmless and false claims (see (WAC 284-170-421) and (RCW 48.80.030)).

Conversely, medical professionals must be careful when accepting typical contractual allowances for those patients with claims processing to out-of-network benefits. Billing offices must be aware of the laws governing "waiver of co-pays and deductibles," which have been earmarked as a priority on the Office of Inspector General (OIG) Annual Work Plan for years and are the basis of payor false-claims allegations against providers.

The Legislative Landscape, both National and Local

Legislation regarding balance-billing regulation is pending at the federal level, although most of this regulation would target only services performed in in-network emergency departments. The "End Surprise Billing Act" (HB 3770) was introduced by Representative Lloyd Doggett of Texas in 2015 and is currently with the subcommittee on health. Although the proposed act has a long way to go, it has garnered much popularity, with 27 Democratic co-sponsors at last count, including Representative Jim McDermott of Washington Stateⁱⁱ. The act would require hospitals to provide in writing an estimate of charges and cost-sharing amounts patients would be responsible for if any services were provided by out-of-network practitioners. In addition, the act would prohibit balance billing of services provided in the emergency department.

Although largely silent on the issue of HB 3770, the American Medical Association (AMA) has come out in support of the right of out-of-network providers to balance bill, stating that "the AMA believes that physicians should be fairly paid for their services, in particular when those services are rendered under emergency situations and under the force of legal compulsion."ⁱⁱⁱ

In Washington State, the Office of the Insurance Commissioner (OIC) has pending legislation (HB 2447) that promises to protect patients from "surprise emergency services bills." The proposed legislation would limit the hospital from billing the patient above "expected charges" and would require payors and medical providers to resolve disputes regarding contracts and out-of-network fees through arbitration, on a case-by-case basis.^iv

The Washington State Medical Association (WSMA) has taken a similar position to the AMA, while specifically calling out the goal of the proposed legislation:

"Balance billing allows physician groups to remain viable in the absence of a contract with an insurance carrier. It also creates a dynamic tension between the physician and the carrier, which helps incentivize negotiations and contracting. A prohibition would have the effect of price fixing—forcing physicians to treat without certainty of payment. WSMA opposes any prohibition on a physician's ability to balance bill in order to ensure access to care and maintain incentives to contract."^v

Here, the WSMA hits the nail on the head. If all medical professionals, regardless of contractual status, are required to accept a mandated, and yet to be determined, fee schedule, what incentive does a payor have to offer and maintain adequate networks? Are you as a physician's office prepared to enter in to "binding arbitration" every time you treat a patient who presents to your office with health-care coverage for which you are not contracted? What can your office do now to protect your income while maintaining good customer service?

What’s Next?

Many of us will watch what happens in both the state and national legislatures in the next few years. As medical professionals we want to do the right thing, yet still receive the appropriate reimbursement for our work. In the meantime, medical offices are encouraged to:

Remove the "surprise." When possible, educate patients regarding the impact of an out-of-network status before services are rendered.
The key to excellent customer service is preventing the call in the first place. Ensure that billing departments are billing patients appropriately and remain compliant with existing laws as well as payor contracts.
Be proactive, not reactive. Instead of waiting for patient complaints, conduct proactive audits of your billing to ensure that the amounts billed to patients are correct.
Establish a clear and speedy track for complaints. If a patient complaint is received you must ensure that it does not languish in someone's inbox. Have a process in place for the handling and review of billing complaints, and a means for taking corrective action. Is the complaint due to an incorrect amount billed, or does the patient not understand his or her bill?
Look for trends in patient complaints—what are they telling you? Identify root cause issues that are contributing to incorrect or misunderstood billing. A small clarification added to your billing statements may make a big difference.
Keep an eye on proposed legislation related to balance billing. Think of ways the legislation may impact your practice and what you can do to prepare.
Maintain active engagement with your provider contracts, and never take a contractual relationship for granted. Ensure that payors understand the value your practice adds to their networks.

If your practice employs a proactive plan to get ahead of balance billing, you will be well on your way to compliant and appropriate billing practices.

ⁱFederal Register, Volume 63, No. 243, Friday, December 18, 1998
ⁱⁱhttps://www.congress.gov/bill/114th-congress/house-bill/3770/text
ⁱⁱⁱhttp://www.ama-assn.org/ama/pub/physician-resources/legal-topics/litigation-center/case-summaries-topic/balance-billing.page
^ivhttps://www.insurance.wa.gov/about-oic/newsroom/news/2016/01-18-2016.html
^vhttps://wsma.org/wcm/Legislative_Action_Center/Key_Issues/Balance_Billing/wcm/GovernmentAffairs/Legislative_Action_Center/
Balance_Billing.aspx?hkey=d4859cae-5079-4c0b-a09e-ea86a87593fa

Emily A. Johnson is an associate in the firm’s Business Department, focusing her practice on matters primarily for clients in the healthcare industry. Her wide-ranging health law experience includes mergers and acquisitions, general corporate assistance, such as preparation of organizational documents, preparation of corporate documents, and general contract review. In addition to general corporate matters, she provides regulatory and compliance assistance on both a federal and state level. She has assisted corporations, long-term acute care hospitals, rehabilitation hospitals, physicians groups, professional corporations, and community hospitals among others. She also has significant experience with the 340B Federal Drug Pricing Program, including implementation, program compliance, audit preparation, and preparing for audits conducted by the Office of Pharmacy A airs. She can be reached at 312-642-1798 or ejohnson@mcdonaldhopkins.com