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Witness Testimony
Mr. Lewis Morris
A Review of Hospital Billing and Collection Practices Testimony of Lewis
Morris Good morning Mr. Chairman and Members of the
Subcommittee.I am here today to
discuss the Office of Inspector General's (OIG's) views on the discounts
that hospitals offer to uninsured patients and to others who are unable to pay
their hospital bills.We understand
that there is widespread concern about hospitals' billing and collection
practices as those practices affect patients who cannot afford to pay their
hospital bills.I want to
assure the Committee that OIG fully
supports efforts that hospitals have made to help financially needy patients.We appreciate the opportunity to address this issue and to discuss
OIG's legal authorities in this area. Simply put, the fraud and abuse laws enforced by
OIG allow hospitals and other health care providers and suppliers to offer
discounts to patients who cannot afford to pay for their care.Indeed, our legal authorities have extremely limited application to
discounts offered to uninsured patients.When the patient's health care is covered under a Federal health care
program, such as Medicare or Medicaid, our legal authorities have greater
application.But even then, the laws and regulations clearly enable hospitals and
others to help patients who are experiencing financial hardship.OIG has long-standing and clear guidance on this point. While today's
presentation focuses on discounts that hospitals offer to uninsured and
financially needy patients, the underlying principles apply equally to the rest
of the Medicare- and Medicaid-serving health care industry.Before I discuss OIG's views, it is important to note that a thorough
discussion of hospital discounts for patients with financial hardship also
involves questions for the Centers for Medicare & Medicaid Services (CMS).CMS has programmatic responsibility for the Medicare program and has
established the cost reporting and bad debt rules relevant to hospital
discounting practices.A CMS
witness is also testifying today and will address the CMS issues. From OIG's perspective, discounts offered to uninsured
patients are analyzed under two fraud and abuse laws:the Federal anti-kickback statute and the permissive exclusion authority
prohibiting providers and suppliers from charging Medicare or Medicaid
substantially more than they usually charge other customers.Discounts offered to financially needy Medicare or Medicaid beneficiaries
also must be analyzed under the civil monetary penalty (CMP) statute that
prohibits offering inducements to Medicare and Medicaid beneficiaries. Today, I will begin by describing the limited
application of OIG's legal authorities to discounts offered to uninsured
patients.Next, I will describe how
a hospital may reduce or waive cost-sharing amounts for Medicare or Medicaid
beneficiaries experiencing financial hardship.Finally, I will explain how hospitals and other health care providers and
suppliers can obtain further guidance from OIG on these issues. Discounts
for Uninsured Patients OIG authorities allow hospitals to offer discounts
to uninsured patients.It has been
suggested that two fraud and abuse laws -- the Federal anti-kickback statute and
the exclusion authority prohibiting excessive charges to Medicare and Medicaid
-- prevent hospitals from offering discounted prices to patients who do not have
health care coverage.This view reflects a misunderstanding of the law. The
Federal Anti-Kickback Statute The
Federal anti-kickback statute is a criminal statute that prohibits the
purposeful offer, payment, solicitation, or receipt of anything of value in
exchange for, or to induce, business payable by any Federal health care program,
including Medicare and Medicaid.Congress
was concerned that improper financial incentives often lead to abuses, such as
overutilization, increased program costs, corruption of medical-decision making,
and unfair competition.Accordingly,
Congress banned kickbacks in the Federal health care programs. Giving
something of value (such as a discount on hospital charges) to an uninsured
patient does not implicate the Federal anti-kickback statute, unless the patient
is in a position to generate Federal health care program business.For example, a hospital asked OIG
about the propriety of offering discounts to doctors who self-pay. Such discounts would implicate the statute if one purpose were to induce
the doctors to refer Medicare or Medicaid business to the hospital.But those situations are not, in our view, typical of hospital policies
for discounting to the uninsured.Rather,
most need-based discounting policies are aimed at making health care more
affordable for the millions of uninsured citizens who are not referral sources
for the hospital.For discounts
offered to these uninsured patients, the anti-kickback statute simply does not
apply. The
Excessive Charges Exclusion Authority By
statute, OIG is authorized, but not required, to exclude from participation in
the Federal health care programs any provider or supplier that charges Medicare
or Medicaid substantially more than it usually charges other customers.This law is intended to protect the Medicare and Medicaid programs -
and the taxpayers - from providers and suppliers that routinely charge
the Medicare or Medicaid programs substantially more than they usually charge
other customers. Some
providers have expressed concern that discounting to uninsured patients might
skew their "usual charges" to other customers and possibly subject them to
exclusion under this provision.Let
me assure you that this is not the case.OIG
has never excluded or even contemplated excluding any provider or supplier for
offering discounts to uninsured patients or other patients who cannot afford
their care. OIG
believes that the statute can be reasonably interpreted as allowing providers to
exclude discounts to these patients when calculating their usual charges to
other customers.To this end, when
we proposed regulations in connection with this exclusion authority, we included
a provision that would clarify that free or substantially reduced prices offered
to uninsured patients do not need to be factored into a hospital's usual
charges for purposes of the exclusion authority.Those proposed regulations are still under
development. To further assure the industry with respect to discounts to
the uninsured, we issued guidance in February that, pending issuance of final
regulations or a decision not to proceed with final regulations, we will
continue our enforcement policy that, when calculating their "usual
charges," providers and suppliers need not consider free or substantially
reduced charges to uninsured patients. In
sum, no OIG authority or policy should deter hospitals and others from offering
financial relief to uninsured patients. Waivers of Cost-Sharing Amounts for Financially Needy Medicare and Medicaid Beneficiaries A discount offered to a Medicare or Medicaid
beneficiary generally takes the form of a waiver of all or a portion of the
Medicare or Medicaid program copayment or deductible, that is, the portion of
the bill that the beneficiary owes.Routine
waivers of Medicare or Medicaid cost-sharing amounts are problematic under the
fraud and abuse laws because they may be used impermissibly to induce Federal
health care program business.For
example, many fraud schemes use the promise of "free" or "no out-of-pocket
cost" medical items or services to attract Medicare or Medicaid beneficiaries. However, the law also clearly permits health care
providers to waive Medicare and Medicaid cost-sharing amounts for financially
needy beneficiaries.OIG has a
long-standing and well-publicized position supporting such financial hardship
waivers.For example, the ability
to forgive Medicare cost-sharing amounts in consideration of a patient's
financial hardship is discussed in a 1992 OIG special fraud alert on the waiver
of copayments and deductibles.The alert is available on our web site, along with other
guidance on this subject, at http://oig.hhs.gov/fraud/fraudalerts.html. The Civil Money Penalty Prohibiting Beneficiary
Inducements While the Federal anti-kickback statute may be
implicated in some cases, the primary legal authority in the area of waivers of
Medicare and Medicaid cost-sharing amounts is the CMP prohibiting inducements to
beneficiaries.Enacted as part of
HIPAA in 1996, the CMP prohibits offering a beneficiary anything of value,
including waivers of cost-sharing amounts, that is likely to influence the
beneficiary's selection of a provider, practitioner, or supplier of Medicare
or Medicaid payable items or services.Beneficiary
inducements are of particular concern because vulnerable beneficiaries may be
enticed to obtain services that are medically unnecessary, overpriced, or of
substandard quality. While generally banning routine cost-sharing waivers, such
"insurance only" billing and the like, the Congress recognized that some
beneficiaries might not be able to afford their cost-sharing amounts.The statute thus includes an express exception for waivers on the basis
of financial need.The exception has three requirements: · the waivers
may not be routine; · the waivers may not be offered as part of any advertisement or solicitation; and · the waivers may only be made after determining in good faith that
the individual is in financial need or that reasonable collection efforts have
failed. This exception is available to hospitals and others that
want to provide relief to Medicare and Medicaid beneficiaries who cannot afford
their cost-sharing amounts. We recognize that what constitutes a good faith
determination of financial need may vary depending on individual patient
circumstances.We believe that
hospitals should have flexibility to consider relevant variables.For example, hospitals may consider: · the local cost of living; · a patient's income, assets, and expenses; · a patient's family size; and · the scope and extent of a patient's medical bills. A hospital's financial need guidelines should be
reasonable, based on objective criteria, appropriate for the hospital's
locality, and applied uniformly to all patients.Hospitals should take reasonable measures to document the financial need
determination.We are mindful that
there may be situations when patients are reluctant or unable to provide
documentation of their financial status.In
such cases, hospitals may be able to use other reasonable, documented methods
for determining financial need, including, for example, patient interviews or
questionnaires. As discussed in our 1992 special fraud alert and elsewhere,
it is OIG's position that the principles articulated in this CMP exception
apply equally to financial need-basedcost-sharing
waivers under the Federal anti-kickback statute.There also is a safe harbor under the Federal anti-kickback
statute that protects certain cost-sharing waivers for inpatient hospital services
(waivers protected under this safe harbor are also protected under the CMP).The safe harbor contains a number of conditions designed to prevent
abusive waiver practices, but does not require a determination of financial
need. In sum, the fraud and abuse laws clearly allow hospitals to
provide relief to Medicare and Medicaid beneficiaries who cannot afford their
cost-sharing amounts. Obtaining OIG Guidance As evidenced by the number and range of fraud
alerts, bulletins, and other guidance we have issued, OIG has a strong
commitment to providing guidance to the health care provider community.As previously noted, in February we issued specific guidance on OIG's
fraud and abuse authorities and their application to hospital discounting
practices.This guidance, titled
"Hospital Discounts Offered to
Patients Who Cannot Afford to Pay Their Hospital Bills" ("Discounts
Guidance"), is available on our website at www.oig.hhs.gov and is attached to
this testimony. In addition to these resources, OIG's advisory
opinion process is available to hospitals or others that want to know how OIG
views a particular discount arrangement.OIG advisory opinions are written legal opinions that are
binding on OIG, the Department of Health and Human Services, and the party that
requests the opinion.To obtain an
opinion, the requesting party must submit a written description of its existing
or proposed business arrangement.Further
information about the process, including frequently asked questions, can be
found on OIG's web site at: http://oig.hhs.gov/fraud/advisoryopinions.html In addition, our web site contains the Discount Guidance, the proposed regulations on the excessive charges exclusion authority, and a special advisory bulletin discussing the CMP statute, as well as special fraud alerts and bulletins, safe harbor regulations, compliance program guidances, and advisory opinions that relate to the issues I have discussed today. Conclusion In conclusion, I
want to assure the Committee that OIG fully supports efforts to ensure that a
patient's financial need is not a barrier to health care.Furthermore, OIG legal authorities permit hospitals and others to offer bona
fide discounts to uninsured patients and to Medicare or Medicaid
beneficiaries who cannot afford their health care bills. Mr. Chairman and Members of the Committee, thank you for
inviting OIG to testify today.I
would be happy to answer any questions you may have. |
