Out-of-Network Billing: Necessity or Nightmare?

Does your practice participate in out-of-network billing (billing without a payer contract)? If so, listen up. Some providers are forced to bill OON, either because health plans won’t enter into a network agreement or the reimbursement the health plan offers isn’t sustainable.

But other providers choose strategically to bill OON. Why? Payers often pay out-of-network claims at a higher rate than in-network claims, so it usually means increased revenue. That might seem like a no-brainer for your eye care practice, but be careful. Out-of-network billing could also be a big liability, leading to increased denials, delayed revenue, and even charges of false claims.

The Problem with Out-of-Network Billing

“To me, as a lawyer, out-of-network billing has become incredibly risky,” says Mary Jean Geroulo, MBA, JD, who spoke about the opportunities and pitfalls of OON billing at the 2017 annual meeting of the Ambulatory Surgery Center Association. Payers just don’t like making OON payments, and here’s why:

• OON claims are expensive.

“The lack of a contract means that OON providers have a tremendous amount of latitude in how they structure their fee schedules,” says Geroulo. “Many OON providers substantially inflate their charges 5-20 percent over ‘normal’ charges to maximize reimbursement.”

• OON providers disrupt payers’ own business strategies.

Payers incentivize providers to contract at lower rates with the promise of more patient volume. This volume results from making OON providers more expensive for patients, driving the patients to in-network providers. If patients are visiting OON providers (who at times will waive patient payment obligations), that takes the volume away from the in-network providers.

• Some providers aren’t transparent regarding their OON status.

This primarily occurs in hospital or surgery center settings. For example, the ophthalmologist performing a surgery will be in-network, but the anesthesiologist or lab is out of network and the patient is unaware. This often results in balance billing, which “has become a huge problem and causes patients a lot of financial distress,” says Geroulo.

As a result, payers are aggressively discouraging OON billing. Some are reducing OON payments by capping the costs via ‘maximum non-network reimbursement’ programs. Others penalize in-network providers from referring patients to out-of-network providers. Some even demand evidence of patient payment before reimbursing providers’ claims. Payers actually call up the patients to find out ‘did you pay the full OON patient obligation that you have’ and if they didn’t, they deny the provider the payment, relays Geroulo. They’ll have a rule in place that basically says ‘if you don’t collect the patient payments, we’re not paying you at all,’ she continues. This can wreak havoc on a practice’s cash flow.

The Even Bigger Problem

Out-of-network status creates challenges in attracting patients, since health plans almost always make visiting out-of-network providers more expensive for the patient. Sometimes providers and facilities (like physician-owned surgery centers) choose to make themselves more palatable to cost-conscious patients through risky processes like routinely waiving co-pays or deductibles, or reducing the patient’s payment responsibility while charging the payer a higher amount. Practices like these form the basis for perhaps the scariest risk of OON billing.

Providers who aren’t careful with their OON billing practices stand a chance of being accused of violating regulations like the False Claims Act and AKS, in addition to allegations of aiding and abetting fraud, unjust enrichment, antitrust, ERISA claims and counterclaims, and even RICO (Racketeer Influenced and Corrupt Organizations Act), to name a few. Geroulo gave several examples during her presentation:

Example #1: USA v. Beauchamp, et.al., Criminal No. 3-16CR-0516D, Nov. 16, 2016.

• The facility, Forest Park Medical Center of Dallas, Texas, induced patients to receive services by failing to collect or attempting to collect OON patient payment amounts.
• The “co-conspirators” attempted to conceal their fraud by writing off the waived patient payments as bad debt, although they never intended to collect those same payments.

Example #2: TriState Advanced Surgical Center LLC v. Health Choice, LLC, F.Supp.3d 809 (2015)

• The ASC calculated patient payments and insurance claims using two separate fee schedules. The patient’s copay and deductible would be calculated using a much lower charge for a given procedure (a “phantom” charge), while the insurance company was billed the regular rate.
• This dual pricing arrangement was used to avoid the appearance of fraud by waiving patient payment obligations, but itself qualified as a form of fraud.

Just because you are out-of-network and decide not to contract with private payers doesn’t mean you are free from the Federal government, says Geroulo. OON payments have been the focus of indictments over the past few years, and the stakes are high. Some verdicts have resulted in jail time. “This is the Department of Justice going after [providers]; this is not United Healthcare going after them,” she warns. “It doesn’t matter if you’re small and think you’re under the radar.”

Next Up…Top Tips for Risk-Free Out-of-Network Billing