For over 200 years, professional courtesy has been a hallmark of physician practice, a symbol of collegiality among doctors. Historians describe its 18th century beginnings as physicians providing charity care for the families of their deceased colleagues—an early form of health insurance for doctors’ widows and children. Over the years, the concept of collegial care also became the preferred alternative to physicians treating themselves or their own family members. In fact, the American Medical Association’s (“AMA”) first code of medical ethics created an obligation among doctors to reciprocate medical care and to extend the courtesy to physician family members as well. Today, the AMA recognizes professional courtesy as a “long-standing tradition” but not an ethical requirement.1 The federal government’s commentary about “the provision of free or discounted health care items or services to a physician or his or her immediate family members or office staff,” however, is far more cautious than nostalgic.2 The Department of Health and Human Services Office of Inspector General’s advice that physicians “consult with an attorney” before extending professional courtesy warns that certain arrangements for free or discounted medical care run afoul of fraud and abuse laws.3
Because most physicians continue to extend professional courtesy in some way, it is important that they exercise caution when delivering services free of charge, at a reduced rate, or with waived insurance co-payment, as such honorable conduct might implicate the Anti-Kickback Statute, Stark Laws, the False Claims Act, or the civil monetary penalties law, or violate the terms of health plan provider contracts. Specifically, the OIG considers how the recipients of professional courtesy are selected and how the professional courtesy is extended when determining if the arrangement is fraudulent.
The Anti-Kickback Statute
If recipients of a physician’s professional courtesy are selected in a manner that directly or indirectly takes into account their ability to affect past or future referrals, the federal Anti-kickback Statute may be implicated.4 The federal Anti-kickback Statute prohibits the knowing and willful solicitation, receipt, offer or payment of anything of value in exchange for or to induce a referral of business for which payment maybe made by a federally funded health care program (e.g. Medicare, Medicaid).5 It is unlawful for a physician to provide free services if done to induce Medicare beneficiaries to purchase items or services from them, or to induce physicians to refer Medicare beneficiaries. For example, if an orthopedic surgeon treats a pain management physician at no charge because he refers patients for his consultations or MRI services at the orthopedic surgeon’s office, then the free service could be considered a kickback, particularly when professional courtesy is not extended to a family practice physician.
Anti-kickback violations are punishable by up to five years in prison, with the potential for additional criminal fines up to $25,000, and administrative civil money penalties reaching as much as $50,000. Additionally, the OIG may commence administrative proceedings to exclude anyone convicted of an Anti-kickback violation from participation in federal and state health care programs or impose civil monetary penalties for fraud, kickbacks, and other prohibited activities.
The Stark Law
The Stark Law is a strict liability, civil statute that prohibits the referral by a physician of Medicare patients, for items or services by a certain providers, when the physician (or his/her immediate family member) has a financial relationship with the provider, unless an exception is met.6 Importantly, the law defines a financial relationship broadly, as it includes not only an ownership interest or a compensation arrangement, but also any form of remuneration. The Stark Law has developed over three phases. Phase II created an exception for certain professional courtesy arrangements, which was severely narrowed by the Phase III. Originally, the professional courtesy exception allowed 11 categories of providers (designated health service or DHS entities) to provide free or discounted health care items to physicians and their family members if six conditions were met: (1) the courtesy was offered to all physicians on the entity’s bona fide medical staff or in the entity’s local community without regard to the volume or value of referrals or other business generated between the parties; (2) the items and services were of a type routinely provided by the entity; (3) the entity’s professional courtesy policy was in writing and approved in advance by the entity’s governing body; (4) the courtesy was not offered to any federal health program beneficiary unless there was a good faith showing of financial need; (5) if the courtesy included a full or partial waiver of any coinsurance obligation, the entity was to notify the insurer in writing; and (6) the arrangement did not violate the federal Anti-kickback Statute. Today, the limited professional courtesy exception is only available to DHS entities with bona fide medical staffs—hospitals and physician practices. Phase III’s changes also eliminated condition (5) of the exception outlined in Phase II. Thus, the Stark Law allows physician practices to extend professional courtesy to all physicians in their local community, and the physicians’ family members, for services they routinely provide, according to an approved written policy, if the patients are not members of the Medicare or Medicaid program, and the arrangement would not otherwise violate the Anti-kickback statute. By extending professional courtesy to all physicians in the community, a physician’s selection of the beneficiaries of its professional courtesy is inclusive and unrelated to the volume or value of referrals.
Health Plan Provider Agreement Violations
Another way physicians extend professional courtesy is by waiving the co-payment for other physicians and only collecting the insurance payment. The practice is commonly referred to as billing “insurance only.” The purpose of co-payments is to discourage medically unnecessary care by making patients conscious of the cost of their medical care because they reflect a portion of the cost of care. By waiving the co-payment, however, a physician’s bill reflects a reduced cost of care. Physicians should ensure that their policies on waiving co-payments are consistent with applicable law and with the requirements of their agreements with insurers. Just as Medicare considers a claim for $80 when the physician waived the $20 co-pay for a $100 service to be fraudulent—then the total bill would be $80 and Medicare should only be billed $64 (80% of $80)—many provider agreements prohibit “insurance only” claims, in the absence of financial hardship, such claims are considered a misrepresentation of the cost of care.
The False Claims Act
The AMA provides that “when a copayment is a barrier to needed care because of financial hardship, physicians should forgive or waive the copayment.”7 The federal government, however, has taken the position that physicians who routinely and consistently waive their fees through free or discounted care submit false claims because they misrepresent their actual charges to the government health care programs. In other words, if the service is routinely provided at a discounted rate then it would be false for the physician to bill Medicare more than others by submitting a claim for the full cost of care. The False Claims Act authorizes the government to impose treble damages, plus $5,500 to $ 11,000 in fines per claim, upon any one who knowingly submits a false or fraudulent claim for payment to the government.8
Not surprisingly, there is no precedent of the OIG or Department of Justice prosecuting a physician’s benevolent extension of professional courtesy but there are plenty of instances where arrangements for free or discounted care implicate fraud and abuse laws. In a time of heightened health care regulation it is as important as ever that physicians are cautious in considering to whom and how they extend discounts and fee-waivers so that they are not punished for seemingly good deeds.
By Molly Nicol Lewis, Associate of McBrayer, McGinnis, Leslie & Kirkland, PLLC
Ms. Lewis concentrates her practice in healthcare law and is located in the firm’s Lexington office. She can be reached at email@example.com or at (859) 231-8780.
This article is intended as a summary of newly enacted federal law and does not constitute legal advice.
- 1 AMA Ethical Opinion 6.13- Professional Courtesy.
- 2 Federal Register Vol. 65, No. 194, Thursday, October 5, 2000 at 59447-8.
- 4See 42 U.S.C. 1320a-7b(b).
- 6See 42 U.S.C. 1395nn
- 7 AMA Ethical Opinion 6.12- Forgiveness or waiver of insurance copayments.
- 8See 31 U.S.C. 3729-3733.