Q: I need help figuring out if discounting fees, writing off co-pays and or giving free services is legal? ChiroHealthUSA is blasting scare text messages and webinars about being prosecuted for illegal discounts. Does California insurance companies and/or Medicare allow such discounts?

A: California has a law that was passed years ago that discusses offering discounts and making it clear WHO they could be offered to, and that if offered, it would not affect what would be considered the doctors actual fee. The section from that law is below:


657.  (a) The Legislature finds and declares all of the following:

   (1) Californians spend more than one hundred billion dollars ($100,000,000,000) annually on health care.

   (2) In 1994, an estimated 6.6 million of California's 32 million residents did not have any health insurance and were ineligible for Medi-Cal.

   (3) Many of California's uninsured cannot afford basic, preventative health care resulting in these residents relying on emergency rooms for urgent health care, thus driving up health care


   (4) Health care should be affordable and accessible to all Californians.

   (5) The public interest dictates that uninsured Californians have access to basic, preventative health care at affordable prices.

   (b) To encourage the prompt payment of health or medical care claims, health care providers are hereby expressly authorized to grant discounts in health or medical care claims when payment is made promptly within time limits prescribed by the health care providers or institutions rendering the service or treatment.

   (c) Notwithstanding any provision in any health care service plan contract or insurance contract to the contrary, health care providers are hereby expressly authorized to grant discounts for health or medical care provided to any patient the health care provider has reasonable cause to believe is not eligible for, or is not entitled to, insurance reimbursement, coverage under the Medi-Cal program, or coverage by a health care service plan for the health or medical care provided. Any discounted fee granted pursuant to this section shall not be deemed to be the health care provider's usual, customary, or reasonable fee for any other purposes, including, but not limited to, any health care service plan contract or insurance contract.

   (d) "Health care provider," as used in this section, means any person licensed or certified pursuant to Division 2 (commencing with Section 500) of the Business and Professions Code, or licensed pursuant to the Osteopathic Initiative Act, or the Chiropractic Initiative Act, or licensed pursuant to Chapter 2.5 (commencing with Section 1440) of Division 2 of the Health and Safety Code; and any clinic, health dispensary, or health facility, licensed pursuant to Division 2 (commencing with Section 1200) of the Health and Safety Code.

However, there are many layers of regulations that affect what providers can and cannot do regarding their fees and discounts. In this case, your state clearly allows doctors to offer discounts, they specifically refer to "prompt payment" and go on to say that they can be offered to those who do NOT qualify for health plans such as MediCal. What this does not say, and we have to understand, is that this is a state rule, and it does not trump federal regulations that apply to Medicare patients, or other federally insured patients. Those groups are covered by OIG regulations which make it clear providers cannot offer anything of value, defined as more that $15.00 or a total of $75.00 in a year without it being considered an inducement violation. They also make it clear that providers must charge "fair market value" or it could be an inducement. This is from the OIG's Special Alert Bulletin which is attached with pertinent sections highlighted. This issue goes away if the patient is offered legal network based discounts for their non-covered services under the ChiroHealthUSA agreement. 

Next, since this regulation references "prompt payment", that term is typically referring to the bookkeeping savings doctors offer when they do not have to bill a patient. Most of the literature from medical management magazines and CPA journals indicate billing cost the docs between 9-21%. And the OIG issued an opinion to a hospital that a "prompt payment discount" of 5-15% would be considered reasonable by the OIG. The issue for many providers is that the discounts they offer for cash are far above the 5-20% range and are often just a cover for a dual fee schedule. If the docs are offering discounts in the 30-50% range as many do, then this clearly isn't reflective of actual bookkeeping savings. We teach docs to make sure their discounts are "defensible" and reflective of their actual cost savings when they don't have to bill. 

Finally, this section of regulation does not take into to account what happens to patients who ARE insured, max out their insurance. Clearly they don't meet one of the categories outlined and therefore the discounts offered to them could come into question since there is often a provider agreement in place. Using ChiroHealthUSA allows these patients to join the network and receive discounts that the doctor selects, often allowing them to transition from insurance to private pay because their cost is about the same. 

The doctor said that we present scare tactics about being prosecuted, when in fact, doctors of chiropractic are being found guilty of violating these rules and being fined huge sums of money, Below is a screen shot from the DOJ website of a doctor who was fined in March of this year for giving away his services.