The New York State Medicaid Fraud Control Unit (“MFCU”) recently sent out a series of recoupment letters to health care providers who have arrangements with management or billing companies where payment to the companies is based on a percentage of collections. The letters state that such payment arrangements violate Federal and state Medicaid regulations, and require providers to repay the Medicaid program overpayments based on these arrangements, plus nine percent (9%) interest.
Section 360-7.5(c) of the Department of Health’s (“DOH”) Medicaid regulations permits providers to employ business agents, such as a billing service or accounting firm, but “only if compensation paid to the agent is: (1) reasonably related to the cost of the services; (2) unrelated, directly or indirectly to the dollar amounts billed and collected; and (3) not dependent on actual collection of payment.” 18 N.Y.C.R.R. §360-7.5(c). In addition, §504.9(a)(1) states that an agent’s compensation for services must be related to the cost of processing a claim, not based on a percentage or other basis to the amount billed or collected, and not dependent upon collection of the payment. 18 N.Y.C.R.R. §504.9(a)(1).
The recoupments required in the letters to health care providers were based on audits and investigations of health care providers’ agents. The audits determined that the compensation paid to such agents was based on upon a percentage of claims, in violation of these regulations.
Although New York’s fee-splitting prohibition has been on the books for many years, the State has only recently begun to enforce it. According to DOH’s March 2001 Medicaid Update, the Medicaid program had recently become aware of violations of these payment arrangement regulations. In February 10, 2017, the Medical Society of the State of New York posted a warning to physicians on its blog regarding MFCU’s audits of fee-splitting arrangements, and urged members to change the way they reimburse their billers for Medicaid claim submissions to either a time-based fee or a flat fee for claims submitted.
Not only is fee-splitting prohibited by the Medicaid regulations, it is also a basis for a finding of professional misconduct. Section 6530(19) of the State Education Law prohibits any non-licensed person from sharing in the fees for professional services, including any arrangement whereby the amount received in payment for furnishing space, facilities, equipment or personnel services used by a licensed professional constitutes a percentage of, or is otherwise dependent upon, the income or receipts of the licensed professional from his/her practice.
Physicians are well advised to check their billing agent agreements and other agent arrangements, such as those with marketing companies, to make sure that they are not paying such agents on a percentage of their collections or claims submitted, especially if they are billing Medicaid for services.