Public Health Law Map - Beta 5 - Medical and Public Health Law Site

The Federal government, and several of the states, have specific laws governing
financial transactions between medical care providers. These laws include the
Medicare Fraud and Abuse laws and the Stark I and Stark II, which apply to care
paid for in whole or in part by the Federal government.
These laws can prohibit otherwise permissible discounts or “no charges.” For
example, a surgeon who only gave professional courtesy to physicians who
referred her business would clearly violate the law. Professional courtesy based
on being on the same hospital staff would raise the same issues, although the link
to referrals is more tenuous. Giving professional courtesy to all physicians
without conditions would be more defensible, but if the government could show
that a disproportionate number of physicians receiving the courtesy were also
referring physicians, the court would probably rule that this was a prohibited
inducement.
(5) Penalties
Traditionally, if physicians violated the terms of their contracts with private
insurers, the insurer could refuse to pay the claim and/or deselect the physician
from the plan. The insurer could also sue the physician for fraud. In extreme
cases, the local district attorney or U.S. Attorney could prosecute the physician
for mail and wire fraud for using the mail and electronic communications to file
the fraudulent claims. The Health Insurance Portability and Accountability Act of
1996 (HIPAA), better known as the Kassebaum-Kennedy bill, now makes it a
federal crime to defraud private insurance companies. Violations of the contracts
with a private insurer are criminal fraud under HIPAA and could result in fines
and criminal prosecution.
To date, there have been no reported cases, prosecutions, or settlements solely
based on professional courtesy to medical care providers. Looking at general
patient care, rather than just professional courtesy, there have been private
insurance fraud actions based on illegally waiving copays and/or providing
discounts that were not passed on to the insurer. There have been federal actions
for the same violations, as well as for using waivers and discounts to induce
Medicare patients to use other medical care services.
Professional courtesy means making no charge to anyone, patient or insurance,
for medical care. There are no special exceptions in the law that allow
professional courtesy to physicians in situations where the same courtesy could
not be extended to all patients. Conversely, there are some situations where such
courtesy can be extended to all patients except physicians and other medical care
providers. Medical care providers must examine their professional courtesy
policies to ensure that they do not violate either the contractual terms in private
insurance policies or the Medicare/Medicaid laws and regulations. Although
there may be situations where it is defensible to “no charge” for services to
medical care professionals, the physician should ensure that this professional
courtesy is not linked to referrals, either in reality or in appearance.
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