HSAs, insurance, bad debt and ethics: Healthcare profession

[dianna]

A friend was relaying to me two payment/ethical dilemmas and I asked to post them here to see if others in the healthcare profession have had similar experiences or could impart some advice. My friend is an MD in a small private group (not part of a larger hospital system) with a specialty practice, but only in the past year or two have they encountered these issues. They have two scenarios within their group of patient bad debt.

Scenario 1: Patient "Jane" comes in for her appointment mid-year. Reception verifies insurance as active but the amount of the deductible that has been met this year is either not verified or the information received from the insurance carrier is not reliable enough to know what the patient should pay (plus the procedure codes and costs may not be known to reception at time of service). Dr. M sees Jane and the charges are submitted to the insurance carrier; insurance pays nothing as Jane has not yet met her deductible for the year; insurance applies charges to Jane's deductible. Dr. M sends an invoice to Jane; Jane submits the invoice to her HSA and the HSA releases payment to Jane for the visit, but Jane does not pay Dr. M. In short, Jane has been able to use her HSA to "pay for" eligible services, but fails to pay Dr. M.

Scenario 2: Patient "Joe" comes in for his appointment and knows that his deductible has been met. Reception verifies insurance as active and that the deductible has been met. Joe signs all appropriate forms and releases insurance payment directly to the clinic. Dr. R sees Joe and the charges are submitted to the insurance provider using the appropriate electronic processing; the insurance provider releases payment to Joe and this is discovered by Dr. R's clinic on the Electronic Remittance Advice. Dr. R sends repeated invoices to Joe, but Joe does not pay Dr. R. In short, Joe has been able to cash in on insurance payment for services that Joe has received from Dr. R but failed to pay Dr. R.

Questions:
1. Other than continuing to invoice Jane and Joe and possibly utilizing a collections agency for failure to pay, are there other actions that the clinic may take to collect payment?
2. How many months do other clinics/healthcare groups allow to pass on uncollected debt before passing bad accounts over to collections?
3. Are Jane and Joe committing a patient type of fraud (insurance fraud? HSA fraud?)? If yes, what actions are possible? Do concerns about breaching patient-doctor confidentiality come into play?

Thank you -

[zzcooper123]

Jane and Joe are committing fraud against the Physician.

The Practice should inform these patients a notice will be sent to IRS. They should be immediately discharged since they will no doubt repeat this trick.

[tarnation]

I don't think you have presented enough information in your cases to establish fraud. In case #2, it sounds like the insurance company messed up. Why not just make the insurance company pay you like they were supposed to?

[dianna]

Jane and Joe are committing fraud against the Physician.

I agree that Jane and Joe are highly undesirable patients, yet my understanding is that a certain proportion of patients don't pay their bills. However these two situations are slightly different than one not paying a copayment or coinsurance fee in that another agency has paid the patient.

The Practice should inform these patients a notice will be sent to IRS.

Now this is interesting... and I presume you mean this more for the Jane / HSA example than for the Joe / insurance example? [I don't see how the IRS would become involved with Joe and the insurance example, but please enlighten me if I am missing something] Does anyone have a protocol for this type of reporting (ie, what to submit and where to submit, etc? - - when a patient submits a physician's invoice for reimbursement but then fails to pay the physician?)? I did a cursory search on the internet and couldn't find anything yet.

They should be immediately discharged since they will no doubt repeat this trick.

The clinic does not routinely see the same patients over and over (such as a dentist's or pediatrician's office might) so the point about discharging them is less pertinent here. But you are absolutely right that people will likely repeat this problem.

[dianna]

I don't think you have presented enough information in your cases to establish fraud. In case #2, it sounds like the insurance company messed up. Why not just make the insurance company pay you like they were supposed to?

I asked the doc about this, too, and he shared that the clinic administrators have contacted the insurance co on this, but since the clinic is considered "out of network" for this insurance company, the insurance co's policy is to pay the patient not the clinic. I wonder if this policy is a way of hassling clinics to join a network or influencing patients not to choose an out-of-network provider (which often costs more).

(edited to allow BBCode)

[Calm Man]

In case #1, I wonder how the doctor/clinic "knows" about the fraud. But assuming the facts of #1 and #2 are accurate, we are dealing in my opinion with simple theft, not fraud, although I am not a lawyer. I would either write it off and inform the patients they may not come back to the office or I would send them a letter stating the facts and indicating that you are contemplating informing law enforcement or turning it over to a collection agency or both.

[dianna]

In case #1, I wonder how the doctor/clinic "knows" about the fraud.

Good question - regarding scenario #1, the clinic only knows what Jane has been telling them.... that she submitted for a distribution/withdrawal from her HSA but hasn't paid the clinic (for over 6 months!) because she claims she hasn't seen the money come from the HSA yet.... but the clinic administrators believe that Jane is being dodgy and not likely to pay the bill.

[Sidney]

Jane submits the invoice to her HSA and the HSA releases payment to Jane for the visit, but Jane does not pay Dr. M. In short, Jane has been able to use her HSA to "pay for" eligible services, but fails to pay Dr. M.

I believe this is not legal according to the rules of HSAs. You can only reimburse for expenses incurred. For a cash taxpayer, that means paid. Since she did not pay for any medical expense, none was incurred.

[BruDude]

Insurance companies don't pay the patients, they pay the doctor directly. Anyone can withdraw funds from an HSA for any reason they want, all you have to do is write yourself a check. If it's not a healthcare expense, they would owe the income tax and a 20% penalty to the IRS.

[dianna]

Insurance companies don't pay the patients, they pay the doctor directly.

Unfortunately, this is not 100% correct. Even though the clinic is submitting the claims and noting that any payment should be made to the clinic not the patient, the insurance company policy states that for out-of-network clinics they will distribute payment to the patient. This is odd to be certain, but it is their policy.

[MoneyOCD]

Jane submits the invoice to her HSA and the HSA releases payment to Jane for the visit, but Jane does not pay Dr. M. In short, Jane has been able to use her HSA to "pay for" eligible services, but fails to pay Dr. M.

I believe this is not legal according to the rules of HSAs. You can only reimburse for expenses incurred. For a cash taxpayer, that means paid. Since she did not pay for any medical expense, none was incurred.

There is 2 issues with 2 quotes above:
1. Patient do not have to submit anything to HSA to get money out, that rule exist only for FSA. It is very possible that patient sent EOB to HSA and waiting for distribution - she can wait forever, never going to happen. What she needs to do is just write a check from HSA to the Dr OR bring HSA debit card to the doctor office to be charged.

2. To get money from HSA you do not need proof of payment, you just need proof of eligible expence incurred, not paid- EOB is sufficient for that. No one will look at any proofs unless patient will be audited by IRS.

[jebmke]

Jane submits the invoice to her HSA and the HSA releases payment to Jane for the visit, but Jane does not pay Dr. M. In short, Jane has been able to use her HSA to "pay for" eligible services, but fails to pay Dr. M.

I believe this is not legal according to the rules of HSAs. You can only reimburse for expenses incurred. For a cash taxpayer, that means paid. Since she did not pay for any medical expense, none was incurred.

There is 2 issues with 2 quotes above:
1. Patient do not have to submit anything to HSA to get money out, that rule exist only for FSA. It is very possible that patient sent EOB to HSA and waiting for distribution - she can wait forever, never going to happen. What she needs to do is just write a check from HSA to the Dr OR bring HSA debit card to the doctor office to be charged.

2. To get money from HSA you do not need proof of payment, you just need proof of eligible expence incurred, not paid- EOB is sufficient for that. No one will look at any proofs unless patient will be audited by IRS.

True enough but withdrawing from an HSA and declaring it on your return as a qualified expense when it is not is probably illegal whether or not you get audited.

The debit card is probably the best solution. If I recall from my HSA agreement, checks result in a fee with some administrators.

[MoneyOCD]

True enough but withdrawing from an HSA and declaring it on your return as a qualified expense when it is not is probably illegal whether or not you get audited.

The debit card is probably the best solution. If I recall from my HSA agreement, checks result in a fee with some administrators.

If we are talking about case 1- there is no any info if patient took money out of HSA. Only thing we "know" that she submitted docs for reimbursement. No IRS fraud here, most likely confusion on HSA rules vs FSA rules.

Second case is different story. Wondering what insurance company is it? I never heard of such thing as change in assignment of benefits due to doctor being out of network (does not mean that it is not true case).

[BruDude]

Insurance companies don't pay the patients, they pay the doctor directly.

Unfortunately, this is not 100% correct. Even though the clinic is submitting the claims and noting that any payment should be made to the clinic not the patient, the insurance company policy states that for out-of-network clinics they will distribute payment to the patient. This is odd to be certain, but it is their policy.

That doesn't make any sense, but I'll believe you. I've never dealt with an insurance company that operated that way...and I've dealt with a lot of insurance companies.

[MoneyOCD]

Insurance companies don't pay the patients, they pay the doctor directly.

Unfortunately, this is not 100% correct. Even though the clinic is submitting the claims and noting that any payment should be made to the clinic not the patient, the insurance company policy states that for out-of-network clinics they will distribute payment to the patient. This is odd to be certain, but it is their policy.

OK, if insurance states that it is their policy, can Dr office pull all claims that was submitted to them this year to see how they have been paid? I am having hard time believe that it is only first time Dr submit claim to that insurance being out of network - or was that a resent change?
I would also ask insurance to provide in writing their policy and use it going forward to make all patient to pay upfront if they have this specific policy.
In all honesty, I think insurance made mistake and trying to cover it. I would send official "provider appeal" to get answer in writing. All insurances take appeals very seriously and there are specific groups that handling them

[Jerilynn]

Dr. R sees Joe and the charges are submitted to the insurance provider using the appropriate electronic processing; the insurance provider releases payment to Joe and this is discovered by Dr. R's clinic on the Electronic Remittance Advice. Dr. R sends repeated invoices to Joe, but Joe does not pay Dr. R. In short, Joe has been able to cash in on insurance payment for services that Joe has received from Dr. R but failed to pay Dr. R.

If I remember correctly, this one is on the insurance company. If the patient assigned benefits to the Dr, then the ins co is on the hook for it. What (ideally) happens is that they issue a new check to the Dr. and go after the deadbeat, err patient for the money.

edit: This doesn't apply for that 'non in network' stuff that some ins companies pull.

Questions:
1. Other than continuing to invoice Jane and Joe and possibly utilizing a collections agency for failure to pay, are there other actions that the clinic may take to collect payment?

Too late, the goat has left the pasture. But you can try Small claims court (this works really well if the patient has assets that you can collect on/garnish after you get the judgement), report to credit bureau, don't make the same misktake in the future and get payment at the time of treatment. Or even BEFORE the Tx as my internist does. Small claims is easy, my office manager would do all the paperwork and show up for court, I never had to go. And if you did Tx and didn't get paid for it, the judge always ruled in our favor.

2. How many months do other clinics/healthcare groups allow to pass on uncollected debt before passing bad accounts over to collections?

In my practice, about 90 days. Once an account passes 90days, the odds of getting the $$ go way down. We didn't mess around, our AR was usually around $3k - $7k. For comparison, the oral surgeons(3) in the building next to me has AR over $250k.

[Jerilynn]

I agree that Jane and Joe are highly undesirable patients, yet my understanding is that a certain proportion of patients don't pay their bills.

Maybe. It could be that the office staff that is supposed to collect the money is "highly undesirable".

[Jerilynn]

I don't think you have presented enough information in your cases to establish fraud. In case #2, it sounds like the insurance company messed up. Why not just make the insurance company pay you like they were supposed to?

I asked the doc about this, too, and he shared that the clinic administrators have contacted the insurance co on this, but since the clinic is considered "out of network" for this insurance company, the insurance co's policy is to pay the patient not the clinic. I wonder if this policy is a way of hassling clinics to join a network or influencing patients not to choose an out-of-network provider (which often costs more).

(edited to allow BBCode)

I have run into that with BCBS and Delta Dental. If the doc didn't participate (I didn't) they would send a check to the patient, not the Dr and not made out to both. Hence, we had to collect all the money at the time of treatment and let the patient get reimbursed by the ins co.

In this State, several yrs ago, they tried to pass a law stating that if money was owed, the ins company had to issue the check to both the pt and the doc. This way, at least the pt couldnt take the money and run. Of course, BCBS went **BONKERS** and threw as much lobbing money as they could to defeat it. And it was defeated.

[Jerilynn]

Insurance companies don't pay the patients, they pay the doctor directly.

Eh? This is not accurate in all cases.

[Jerilynn]

Insurance companies don't pay the patients, they pay the doctor directly.

Unfortunately, this is not 100% correct. Even though the clinic is submitting the claims and noting that any payment should be made to the clinic not the patient, the insurance company policy states that for out-of-network clinics they will distribute payment to the patient. This is odd to be certain, but it is their policy.

We had some of these cases where we got paid in full and wanted the ins co to send the money to the pt. We even sent a cover letter saying that the patient has not assigned benefits and to mail the check to them..... Some companies, still sent us the check. Sheesh.

[Jerilynn]

Insurance companies don't pay the patients, they pay the doctor directly.

Unfortunately, this is not 100% correct. Even though the clinic is submitting the claims and noting that any payment should be made to the clinic not the patient, the insurance company policy states that for out-of-network clinics they will distribute payment to the patient. This is odd to be certain, but it is their policy.

That doesn't make any sense, but I'll believe you. I've never dealt with an insurance company that operated that way...and I've dealt with a lot of insurance companies.

BCBS and Delta Dental.

[BruDude]

Insurance companies don't pay the patients, they pay the doctor directly.

Eh? This is not accurate in all cases.

When out of network, the physician bills the insurance company and balance bills the patient for any excess charges over the reasonable & customary charge set by the insurance company. Almost every doctor's office I've come across will file OON claims for the patient even though they do not accept the insurance. If they do not file OON claims, it is the responsibility of the patient to pay the bill in full at the time of service and submit a claim directly to the insurance company for reimbursement, but they must provide proof of billing and payment for the claim to be approved. I have never seen an insurance company that will just simply cut a check to the patient and hope that they pay the provider, otherwise they would be opening themselves up to a massive amount of fraud.

[MoneyOCD]

Found interesting article on the subject, it is from 2009 but still very insightful on what is going on with assignments of benefits

[Jerilynn]

I have never seen an insurance company that will just simply cut a check to the patient and hope that they pay the provider, otherwise they would be opening themselves up to a massive amount of fraud.

From your lips to God's ears. Unfortunately, it's not like that for Dental in many States.

[interplanetjanet]

I have never seen an insurance company that will just simply cut a check to the patient and hope that they pay the provider, otherwise they would be opening themselves up to a massive amount of fraud.

BCBS of California and New Jersey definitely do this in at least some situations. Regardless of what the paperwork says, BCBS of California seems to allow a member to call up and make a note in their file about how payment is to be made. I believe I have run into this in the past with UHC as well.

[BruDude]

I have never seen an insurance company that will just simply cut a check to the patient and hope that they pay the provider, otherwise they would be opening themselves up to a massive amount of fraud.

BCBS of California and New Jersey definitely do this in at least some situations. Regardless of what the paperwork says, BCBS of California seems to allow a member to call up and make a note in their file about how payment is to be made. I believe I have run into this in the past with UHC as well.

Then they have a bunch of idiots making the rules...good thing I don't have to deal with that from any of the companies I work with.

[Jerilynn]

I have never seen an insurance company that will just simply cut a check to the patient and hope that they pay the provider, otherwise they would be opening themselves up to a massive amount of fraud.

BCBS of California and New Jersey definitely do this in at least some situations. Regardless of what the paperwork says, BCBS of California seems to allow a member to call up and make a note in their file about how payment is to be made. I believe I have run into this in the past with UHC as well.

Then they have a bunch of idiots making the rules...good thing I don't have to deal with that from any of the companies I work with.

I betcha a pizza that they aren't idiots and that they make the rules so as to get more net $$$$.

[BruDude]

I betcha a pizza that they aren't idiots and that they make the rules so as to get more net $$$$.

You haven't met very many home office workers, have you?

[dianna]

Wondering what insurance company is it? I never heard of such thing as change in assignment of benefits due to doctor being out of network (does not mean that it is not true case).

For this scenario, you can add Medica to the list of companies (like BCBS and Delta Dental) who will pay patients directly.

[ppc]

I betcha a pizza that they aren't idiots and that they make the rules so as to get more net $$$$.

It is definitely to make more money for the insurance companies. When the patient is paid directly, the provider usually does not get paid since the patient steals the money. The provider then will require other patients with this plan to pay upfront. Many patients do not want to pay upfront to get reimbursed later. These patients either forgo any care which saves money for the insurance company or go to an in-network provider which also saves money for the insurance company.

[BruDude]

I betcha a pizza that they aren't idiots and that they make the rules so as to get more net $$$$.

It is definitely to make more money for the insurance companies. When the patient is paid directly, the provider usually does not get paid since the patient steals the money. The provider then will require other patients with this plan to pay upfront. Many patients do not want to pay upfront to get reimbursed later. These patients either forgo any care which saves money for the insurance company or go to an in-network provider which also saves money for the insurance company.

Going to in-network providers does not necessarily save $$ for the insurance company since OON claims are based on reasonable and customary charges, which are likely to mirror (or close to it) the charges negotiated for in-network.

[interplanetjanet]

It is definitely to make more money for the insurance companies. When the patient is paid directly, the provider usually does not get paid since the patient steals the money. The provider then will require other patients with this plan to pay upfront. Many patients do not want to pay upfront to get reimbursed later. These patients either forgo any care which saves money for the insurance company or go to an in-network provider which also saves money for the insurance company.

This doesn't mirror my experience. One out of network provider I've used actually prefers for reimbursements to go to the patient rather than to her directly, she says it makes her billing simpler and her life less complicated. She's in a field that depends on repeat business, though (therapist) and I imagine she can cut people loose who do not pay with less of a loss than a large provider that may do one service for a patient.

[jsl11]

My dentist is "out-of-network" and Delta Dental always sends the payment to me. I have asked why not send it directly to the dentist and save me a trip to the bank. The answer was "Our policy is to not pay out-of-network dentists directly. We do this as an incentive to get them to join our network." My dentist is fully aware of this policy. He sends the claim to Delta and trusts me to pay him after I get the insurance payment. Of course, I always pay his bill, so he is content.

Jeff

[Dianne]

I betcha a pizza that they aren't idiots and that they make the rules so as to get more net $$$$.

It is definitely to make more money for the insurance companies. When the patient is paid directly, the provider usually does not get paid since the patient steals the money. The provider then will require other patients with this plan to pay upfront. Many patients do not want to pay upfront to get reimbursed later. These patients either forgo any care which saves money for the insurance company or go to an in-network provider which also saves money for the insurance company.

From the patient's perspective, upfront payment has the advantage of forcing the doctor to inform the patient in advance (a) that the doctor is out-of-network, and (b) exactly what the cost to the patient will be. Obtaining cost information is often difficult for patients, even when those patients are Bogleheads. viewtopic.php?f=2&t=100770

Some patients decide not to pay the doctor after they receive a bill that is higher than what they imagined it would be in the absence of advance pricing information from the doctor. That could be what happened with Jane in the OP. (Not that I condone what she is doing.)

I am sympathetic to the doctors in this story, as the patients are definitely in the wrong. I hope the doctors find a way to get compensated.

[dianna]

Some patients decide not to pay the doctor after they receive a bill that is higher than what they imagined it would be in the absence of advance pricing information from the doctor. That could be what happened with Jane in the OP. (Not that I condone what she is doing.) .

The services offered by the clinic in question are not numerous, and the costs of services along with Procedure Codes and Description of Codes are sent to patients in advance of the appointment. From my vantage point, I think his clinic is doing a very good job informing patients, in advance of receiving services, of the highest possible cost; insurance contracting may then lower the actual cost to the patient (through in-network contracted rates), but the clinic at least gives information for the patients to calculate the "worst case scenario" if you will.

As a healthcare consumer, I find it hard to imagine not paying anything to someone who has provided a service; even in light of financial hardship, many hospitals and clinics will offer payment plans or reduced fee agreements. Sigh.

[Spirit Rider]

Scenario 1: Jane submits the invoice to her HSA and the HSA releases payment to Jane for the visit, but Jane does not pay Dr. M. In short, Jane has been able to use her HSA to "pay for" eligible services, but fails to pay Dr. M.

Invoices are not submitted to HSA custodians and they do not release payments. HSA custodians act as banking agents for the HSA owner and manage credits, debits, records management, and IRS reporting. The HSA custodian may provide checks, a debit card and/or a bill payment system. How is it that the provider has any knowledge of the HSA activities? The HSA owner has full control over payments and is soley responsible for ensuring that debits are for qualified expenses. The HSA custodian has no role in validating that payments are proper. Compliance is a tax issue, which means it is voluntary subject to IRS verification.

3. Are Jane and Joe committing a patient type of fraud (insurance fraud? HSA fraud?)? If yes, what actions are possible? Do concerns about breaching patient-doctor confidentiality come into play?

Distributions to the HSA owner have no direct association to specific qualified expenses. All that is required is that the total distributions match total qualified expenses. These can be joined, split, time shifted etc... The only thing that Jane could be guilty of is failing to report non-qualified distributions. The provider would have no way of knowing this was true.

Also, health care providers have to walk a very fine line when it comes to personnel health information. HIPPA regulations are very strict when it comes to releasing patient financial records. Allowed use is usually limited to insurance and client billing, valid debt collection and credit reporting activities. I would be very careful about getting too agressive unless you have very specific legal advice. There were significantly increased liabilities and penalties for violations adopted in 2009.

[staythecourse]

Love it. Getting your care taken and not paying the person who is taking care of you. I'm sure the same folks would have no problem suing if something had gone wrong with their treatment. So the doctor is taking on the uncompensated risk of getting sued for the possibility of him collecting his dues?

In the end in example 1 I would report this to the IRS as fraud of an HSA and for both would let the collection agency take care of it. If we lived in a ideal world the doctor would sue the 2 patient's for not paying. I still don't understand why doctors don't sue patients??

Either way if I was the doctor I would stop taking out of service pts. unless they payed via credit card up front.

Good luck.

[Jerilynn]

One out of network provider I've used actually prefers for reimbursements to go to the patient rather than to her directly, she says it makes her billing simpler and her life less complicated.

I believe you, but I can't imagine how this would make billing simpler and less complex for the practitioner. Maybe that's her problem, she 'bills'. We didn't (normally), we would collect the patient's part at the time of treatment and then file the ins and wait for the ins payment. If we did our job right, there would be a positive balance and we would issue a check to the patient that same day. Her AR must be pretty high, I would guess.

[Jerilynn]

My dentist is "out-of-network" and Delta Dental always sends the payment to me. I have asked why not send it directly to the dentist and save me a trip to the bank. The answer was "Our policy is to not pay out-of-network dentists directly. We do this as an incentive to get them to join our network." My dentist is fully aware of this policy. He sends the claim to Delta and trusts me to pay him after I get the insurance payment. Of course, I always pay his bill, so he is content.

Jeff

My first several years in practice, I would trust the patient to pay. After getting burned a zillion times, I had them pay at the time of Tx. Course, as the nature of my specialty, I didn't have very many repeat patients. Also, I discovered that for some referring dentists, they would send me the patient for Tx if they thought the patient would be hard to get payment from if THEY did the Tx. Bunch of sweethearts, those guys/gals were.

[Jerilynn]

Love it. Getting your care taken and not paying the person who is taking care of you. I'm sure the same folks would have no problem suing if something had gone wrong with their treatment. So the doctor is taking on the uncompensated risk of getting sued for the possibility of him collecting his dues?

In the end in example 1 I would report this to the IRS as fraud of an HSA and for both would let the collection agency take care of it. If we lived in a ideal world the doctor would sue the 2 patient's for not paying. I still don't understand why doctors don't sue patients??

Either way if I was the doctor I would stop taking out of service pts. unless they payed via credit card up front.

Good luck.

Believe it or not, the 'wanting to stiff the doctor on the bill' is regional. In the NE the average patient would feel obligated to pay their medical bills. In Arkansas, (average)people aren't very worried about not paying. As a matter of fact, when lending institutions looked at a client, they didn't grade them down if they had unpaid medical/dental bills because it was so common.