Discounting Private Pay Optical Patients

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We received this email from an office about Private Pay and Discounts. It’s a good question, and thought I would post some published and on the internet responses to the same questions. From the sound of it, it is perfectly OK to discount private pay patients, and many large healthcare organizations are doing so. See the below comments and examples.
EM: What are the laws pertaining to offering self pay discounts for materials?
OVS-Just to clarify – You are basically asking if there are laws for a Doctor to give a discount to a patient if they pay upfront or in cash.
As an example- my dermatologist gives me a 10% discount off his services  because he is not in my ‘plan”
Example 1
Q: When can a physician discount a fee for self-paying patients? Are there any legal or tax ramifications?
A: Generally speaking, there is no prohibition against a physician discounting a fee for a self-paying patient (that is, a patient who pays out-of-pocket and is not covered by a health plan, including Medicare or Medicaid). However, there are some considerations to keep in mind when using any discount program. First, physicians should be aware that Medicare law prohibits you from submitting Medicare claims that contain charges substantially in excess of your usual charges. This provision could apply to a doctor who regularly discounts charges to self-paying patients while submitting higher charges to Medicare. We generally advise clients to limit discounts for non-Medicare patients to less than 30 percent of their total business, which should avoid any allegation that the discounted charges are, in reality, the doctor’s usual charges.
Second, if ever questioned, a physician should be prepared to defend the self-pay discount on some legitimate basis, such as decreased paperwork and administrative expense compared to insurance or government billing, prompt pay considerations or the ability of an individual to pay full charges.

Example 2

Discounting Fees for Self-Pay Patients (posted 2/1/08)
Q: Recently, you had a question about discounting fees for private-pay patients, and you stated you could do that. I just talked to a Medicare consultant who used to work for Medicare, and he stated what we had always been told: If Medicare or any other insurance company found out, they would state that the discounted fee would actually be your “usual and customary” fee, and you could face fines from Medicare for doing so. Could you clarify your answer?
A: Sure. For one thing, you need not drop your price below Medicare’s price (or that of commercial payers) but you can still offer a discount from your fee schedule. In that case, if Medicare wanted to pay what your uninsured patients pay, great.  For another, you set a very detailed, written guideline for when the discount can be offered — if the patient is uninsured and pays in full at the time of service, for example. This might be, what, 20 percent of your patients? That’s not usual and customary. You have legitimate cost savings when you don’t have to bill and get more for your money when it arrives on the day of service.

Certainly, there is some gray here. But there is also a lot of hocus pocus that doesn’t stand up to scrutiny. I’d love to see Medicare publicly defend a policy that says uninsured patients should pay four times as much as Medicare does.

Example 3

From Sutter Health

Example 4

It is the policy of Providence Health & Services, California Region, in response to its philosophy and Mission, to charge all patients an equitable amount for health care services provided. For patients covered by government programs or managed health care plans, the rates charged for services are determined by governmental policy or negotiated contracts. For those patients not covered by a third party payer, the hospital’s retail billed charges will be discounted to an equivalent rate to assure that the privately paying patient will pay essentially the same price for health care as the insured patient. This policy is applicable to all California Region institutional facilities; it does not apply to physician billings

Example 5

This is from a Congressional Testimony: My testimony today will focus on three key points:

  • Consumers’ experiences with markets for self-pay services, such as LASIK, are often held up as a model for the entire health care system. Consumer shopping in self-pay markets has been mythologized with little investigation into how well these markets actually work for patients. Our research findings indicate self-pay markets are unlikely to be a workable model of effective shopping for health care services without either a large role for insurers or regulatory oversight.
  • Insurers’ buying power, or ability to negotiate significant discounts from hospitals, physicians and other providers, eclipses what patients can negotiate individually. And insurers potentially can become even more effective agents as they develop more sophisticated benefit structures and information tools to support consumers in choosing effective treatments from higher-quality, lower-cost providers.
  • Encouraging greater consumer awareness about the costs of health services—i.e. consumer price shopping—does have potential to help contain costs without sacrificing quality—but some are overselling the magnitude of this potential.

Example 6 From Optometric Management

Is it fair to private pay patients to charge a high exam fee and high optical prices if I accept vision plans that pay much less?

Sure. Vision plans are granted a volume discount in exchange for delivering patients to your office and I don’t see any problem with that concept. How much discount you’ll accept is a business decision that only you can make. Accepting a volume discount from a vision plan, which is partially prepaid by the patient’s employer, does not make your services worth any less. If an individual does not belong to the plan, he should pay the usual fees. Optometrists generally undervalue their services, in my opinion.

Examples 7

Here are a few published examples from a Eye Doctor’s Websites:

  • Self Pay Patients (no insurance) (Eye Doctor) A 10% discount will be given on materials purchased (lens, frames, contact lens) when the account is paid in full at the time of service. The discount does not apply to exam charges, contact fitting fees or Optical merchandises (purses, cases, readers, etc.)
    • Senior Discounts: We offer a 15% discount to new private pay seniors over 65 on glasses. Offer good until June 30, 2008 and with coupon pass code 063008 mentioned to receptionist at beginning of visit.
    • New Patients: We offer a 10% discount to all new private pay patients who get a full exam and glasses or contact lens during their first visit. Offer good until Jun 30, 2008 and with coupon pass code 063008 mentioned to receptionist at beginning of visit.
    • Referral Discount: We offer a 10% discount to current patients on your next pair of glasses when you refer a new patient (other than immediate family members) to our practice. The new patient must mention your name and must get a full exam and glasses or contact lens during their first visit. Offer good until Jun 30, 2008 and with coupon pass code 063008 mentioned to receptionist at beginning of visit. Offer not valid for patients covered by insurances which do not permit discounts.