Healthcare providers are at risk when outsourcing their billing. They may be held liable for the billing contractor’s fraud, waste, and abuse, and could face serious penalties as a result.

Healthcare Providers: You Are Liable for Billing Contractor Fraud, Negligence

Physicians and practice managers: Keep an eye on medical billing or health services contractors acting on your behalf. Your practice is liable for any violations of state and federal healthcare fraud laws, including Stark Law, the Anti-Kickback Statute, and the False Claims Act.

Careless or improper billing and collections can also lead to recoupments and collection rates far below industry standards. Health insurance SIUs and Medicare auditors are on alert for billing contractors that violate plan agreements and abuse the law.

Examples of bad actions by billing companies include:

• Impersonating patients to negotiate bills

• Failing to collect copays or deductibles

• No good-faith effort to collect

• Patients never received a bill

• Crediting patients or forgiving patient fees while still billing the insurer for the full amount

• Handling protected personal information (PPI) without a business associate agreement (BAA) in violation of HIPAA

• Missing documentation for claims

• Filing claims under non-reimbursable procedure codes

• Filing claims under a reimbursable code while documentation indicates a non-reimbursable procedure or service

• Filing claims for multiple units of a billing code when only one unit is allowed per session

• Unbundling claims: billing separately for codes that are included in the primary service code

• Failing to follow the appeals process outlined in plan documents

Ignorance is no defense if the independent contractor is under contract with your practice or acting with your agency.

Fraudulent Behavior by Billing Contractors Can Lead to Recoupment, Delayed Payments, & Civil or Criminal Liability

You are responsible for claims billed under your taxpayer identification number (TIN). You hold the proceeds of those claims and, as a result, can be held 100-percent liable for fraudulent or illegal acts committed by your independent billing contractor and the ensuing damages.

Consequences include delayed payments, audits, recoupment, Medicare exclusions, civil penalties, and criminal liability including fines and incarceration.

There are also significant consequences if your contractor is not abiding by insurance plan documents or other requirements. Failure to meet plan requirements – such as consistent coding errors, making late (or no) appeals, and not following administrative procedures – can render your claims ineligible for payment.

Most physician practices maintain a net collection rate of 90 percent or above. The American Academy of Family Physicians (AAFP) advises a collection rate at a minimum of 95 percent. Keep an eye on denial rates as well. The AAFP reports the average denial rate is 5 to 10 percent.

If your collection or denial rates fall below these averages, it’s time to take action.

Prevent Billing Company Fraud

To prevent billing fraud or just plain carelessness by your billing service contractor, it is vital that you and your practice conduct your own independent review and audit of medical records and billing records to verify the compliance of your contractor’s activities.

Practices may also consider consulting quality assurance and compliance professionals and using CMS provider resources to provide education and encourage prevention.

Prevention is the most valuable tool in a physician’s arsenal when combatting fraud.