Hospitals Consider Discounts for Needy Patients as Costs Soar

Major medical technology advances over the last two decades have significantly improved the quality of care received by hospital patients. However, the use of technology has also resulted in increased costs and many of the underinsured or uninsured ‘working/retired poor’ have been priced out of the market.

In a recent RAND Health report, Dana Goldman, director of health economics explained: “An array of new medical technology on the horizon could greatly inflate elderly health care spending.” Thus, the historical increase in health care costs will probably continue to track the increase in hospitals’ technological innovations.

Responding to the concerns of the ‘working/retired poor,’ many hospitals have provided discounts to deserving patients. Some hospitals have provided these discounts in a scattershot manner, unguided by a comprehensive, written policy. Other hospitals have shied away from providing any discounts out of a fear of running afoul of the law.

By providing discounts to non-Medicare patients or waiving Medicare cost-sharing amounts (i.e., coinsurance or deductible), a hospital may inadvertently violate any number of laws including the Federal kickback statute, 42 U.S.C. 1320a-7b(b) or Section 1128(b)(6)(A) of the Social Security Act. A violation of the law can give rise to enforcement actions resulting in penalties and exclusion from Medicare participation. Moreover, improperly dispensed discounts can reduce the calculated “usual charge” and a deviation from this “usual charge” could implicate the False Claims Act with its civil and criminal penalties.

Last month, the Office of Inspector General (“OIG”) reaffirmed its position that hospitals are free to offer fee reductions and cost-sharing waivers to those suffering financial hardship. However, a hospital must adopt and follow a clear, comprehensive policy regarding fee reductions and cost-sharing waivers in order to avoid negative consequences. A hospital’s adherence to the following guidelines will help ensure that it does not violate the law.

  1. A hospital should never advertise or promote its Medicare waivers to its patients since it is illegal to offer discounts to Medicare patients in an attempt to procure business.
  2. A hospital should develop a written policy regarding waivers of cost-sharing amounts.
  3. Every cost-sharing amount waiver decision should be made with reference to the hospital’s written policy and this policy should be applied uniformly to Medicare and non-Medicare patients.
  4. No waiver should be given unless the hospital makes a good faith determination regarding “financial need” that involves consideration of various factors such as the local cost of living, the patients’ income, expenses, family size, etc.
  5. The waiver of cost-sharing amounts and provision of discounts for non-Medicare patients should be the exception to the rule. Routine waivers and discounts are not permitted.
  6. Determinations of need should be well documented.
  7. To take advantage of the OIG’s safe harbor, a hospital cannot classify a waived amount as bad debt or shift the payment burden to another payer or third-party.

Promising advances in hospital technology will likely be accompanied by increases in costs. Hospitals that wish to ease those costs for the indigent should be aware of the law and take simple steps to create uniformly applied, compliant policies.

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