Hospital-based medical groups, notably anesthesiology and radiology groups, are increasingly turning to creative means to provide coverage and to improve collections. Both are laudable goals. However, some groups cross the line from collaboration to fraud via pass-through billing.
Pass-through billing is the healthcare industry term used to describe billing by one entity for services or items that were actually provided by a different entity.
In the context of physician services, issues of pass-through billing most often arise when services actually provided by physicians employed by or contracted to one medical group (“Group A”) are billed by a different medical group (“Group B”). Group B bills for those services under its name, tax identification number, and provider agreements with one or more payors. To the payors, the Group A physicians appear to be Group B physicians—but are they? The object is most often to obtain the higher reimbursement associated with Group B’s contract rates, a form of payor rate arbitrage. It might also be to make out of network physicians appear to be in-network.
What’s Wrong With Pass-Through Billing of Services?
So why should you care?
The simple answer is that you likely want to keep your medical license, don’t want to be liable for civil damages including significant punitive damages for fraud, and want to avoid potential criminal prosecution.
I’ve yet to see a payor agreement that doesn’t limit the individuals whose services may be billed pursuant to its terms to those providers who are members of the contracted group. How “members” are defined varies, but it’s nearly always clear that the definition does not include physicians and other providers employed by another group. A violation triggers breach of contract claims, fraud claims, and, on the criminal side, depending on how claims were transmitted, mail fraud, wire fraud, and other state and federal violations.
Depending on the circumstances, the arrangement might also violate state or federal anti-kickback laws, criminal false claims laws, and prohibitions on “fee splitting”.
Pass-through billing can also implicate state medical ethics and “unprofessional conduct” requirements, leading to medical board discipline.
Some Immediately Actionable Takeaways
Before even considering any arrangement in which your group bills for the services of another group’s members, obtain legal advice to interpret the limitations of all impacted payor agreements. The same advice applies in reverse, i.e., in the case in which members of your group are going to have their services billed through another group’s TIN.
There are, depending upon the particular arrangement, potential end runs around contractual pass-through billing prohibitions, but they are highly fact specific and technical. Depending on your appetite for risk, they can and should be explored.
If you resonate with this, it likely pays to have a chat.
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