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Percentage-based billing agreements are not illegal in California

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alshaikhmdlaw:
Recently decided California case 

Al-Shaikh v. State Department of Health Care Services

http://www.courts.ca.gov/opinions/documents/A147939A.PDF

https://www.buchalter.com/wp-content/uploads/2018/04/California-Court-Endorses-Percentage-Billing-Fees-for-Medi-Cal-Providers.Brendel.pdf

This Opinion clarifies 42 Code of Federal Regulations section 447.10 (and, in turn, Welf. & Inst. Code, § 14040.5, subd. (b)). This regulation was misinterpreted by the DHCS’s Chief, the Administrative Law Judge, DHCS’s attorneys, and the Superior Court. They failed to appreciate the regulation’s meaning from its face, and there was no case law to rely on for an interpretation.

This Opinion goes further by clarifying the legality of percentage-based billing contracts. Percentage-based billing contracts are the rule among private practice healthcare practitioners. In speaking with healthcare billing consultants, I learned that these contracts are commonly misunderstood by the government agencies overseeing Medicaid. And such mistakes can have disastrous consequences for the naïve healthcare provider’s practice. If she or he capitulates to the government’s demand to switch to a fee-based billing contract, the practitioner’s business is changed significantly for the worse. And if she or he argues the point, a protracted legal battle ensues because there is no legal precedent to turn to.

Sriram_Sub:
Thanks for sharing.

PMRNC:
I had seen this to by another publication. But have questions myself which I'm researching. First.. California state may not have any baring from this ruling to change HHS or interpretation of HHS or federal ruling..THEY can invoke and interpret State...but not federal.

Now ASIDE from the legal judgment by state of CA.. I have comments regarding the comment:


--- Quote ---Percentage-based billing contracts are the rule among private practice healthcare practitioners. In speaking with healthcare billing consultants, I learned that these contracts are commonly misunderstood by the government agencies overseeing Medicaid. And such mistakes can have disastrous consequences for the naïve healthcare provider’s practice. If she or he capitulates to the government’s demand to switch to a fee-based billing contract, the practitioner’s business is changed significantly for the worse. And if she or he argues the point, a protracted legal battle ensues because there is no legal precedent to turn to.
--- End quote ---

This would be a HORRIBLE argument when trying to overturn any HHS ruling. Mainly because % based is merely ONE method of reimbursement and CERTAINLY is NOT considered the best method for a physician. If it were, we'd have in-house employee's being reimbursed based on % and that simply is not going to happen.  The main argument on behalf of a physician is that it's the "norm" and it's "fair"  however, it still leaves a LOT of vulnarability for the physician since the outsourced billing company is servicing them based on that %. WHILE I get that the OIG opinion was years ago, nothing has changed in that opinion to say otherwise.

NOW from a billing company prospecive, this NORM of % based billing is old and tired and quite frankly degrading in regards to  fair wages. A billing company spends a LOT of time on many different cases and sometimes the outcome is $0.  I, and other billing companies do NOT pay my tax guy a % of my income tax, I don't pay my utilities based on a % of my income so why on earth should we conitinue to consider it a norm to be paid a % of a clients revenue?  Billing companies are leaving money on the table.. A LOT Of money.

To say that a doctors practice is dependent on paying a billing company a % IMHO is ridiculous...If they pay an in-house biller $10 an hour OR an outsourced company $20 an hour they still win and save a LOT of money going outsourced! 

I simply believe that our industry (billing) has created a FALSE misconception that % is the way to gain the client and that the medical practices have followed suit thinking that paying a billing company a % is the better way. This industry has come to believe that the "We don't get paid until you get paid" has run it's course. OFFSHORE medical billing companies have contributed to this deranged way of thinking.. noteably companies such as the one in NJ that uses offshore and is able to promote 4% as their rate.

FACT:  billing on a % leaves a billing company wide open to the possibility of billing fraudulantely (intentionally or not)
FACT:  Service based businesses IN GENERAL do not charge based on a %.
FACT:  Physicians don't save money simply because a service business charges a %.

In light of all these facts. I don't see the California case ruling changing anything on a larger scale. Take NY for example...this would NEVER have stood up becaus of NY law where physicians cannot enter into a fee-splittng relationship with medical providers...PERIOD. The law is so VERY clear in the state of NY as it is in other states. Furthermore, billing companies that disregard state law don't just jeopordize their own contracts, but they also put a LARGE burden on the physician violating the fee-splitting laws in their state. There are several states where this isn't even a grey area..but still billing ocmpanies (MOSTLY THOSE OFFSHORE) disregard this law because THEY have not broken the law, the physician or pracitce has.   

So in conclusion, I don't see this changing anything significantly. I still feel like moving away from % based billing is where the industry is heading.

tallmanusa:
The basic lesson taught in Business schools is that in a free market system, you do NOT set your rates, you charge what market will bear. In our business, the Providers feel that paying the billing company is an unnecessary expense.
They will pay the least they have to.
Whether the percentage billing is good or bad is irrelevant; a billing company would have to accept whatever the  market bears or look for another type of business.

I would agree that charging by percentage may be a " horrible " way of doing business, but that is the way it is.

With regard to billing business a good or bad business with the percentage model, the stats are that it is a tough business to say the least. Most billing companies lose money. They can't cover their basic expenses.

The merchant account companies, who solicit every business, hang up when you tell them that you are a medical billing company; they are not interested. I was told that we are a " high risk business" along with escort services and cannabis growing; the failure rate to be very high, almost 100%.
We pay a premium for our credit card merchant account like every one else here, because so many go under sooner or later, leaving the merchant account companies high and dry.

In short accept the percentage fee as a fact of life, and congratulations if you are still here and not decided on an alternative career.
The Court case is good news, at least there is no legal barrier to what is norm.

By the way the New Jersey company that you mentioned that charges 4% is a public company, they ran up a  loss of $12 million in two years. So much for the profitability in this business.

All of this is for one reason; the Provider will not pay any more money or anything other than a measly percentage fee.

PMRNC:

--- Quote --- a billing company would have to accept whatever the  market bears or look for another type of business.
--- End quote ---

Yes, and I've never had a problem telling a new client this by presenting a realistic approach. I ask them if they have an accountant and there answer is usually yes, and then I ask them if they pay their accountant a % and they usually say "NO WAY" ...point scored for me. Same goes for any service business. Next point, I ask them if they hired a marketing firm to bring in new patients would they pay them a % and 9 out of 10 providers are smart enough to know that would violate the anti-kickback statute and referal laws. Another point scored. Then I ask them, if you hired 2 billers right now that would do the work of what I would do as my own company with my own liability and insurance and costs, would they pay that employee a % of revenue? Answer is obvious what they will say.

Bottom line is that business owners can be in charge of market demand simply by being straight up with a provider and making their case. I'm in the state of NY. 8 out of 10 providers KNOW the law is extremely clear and HAS been challenged UNSUCCESSFULLY so they already know they can't engage in fee-splitting under any circumstance. The billing companies here that do charge a % are NOW begging for work because they have not changed their billing methods and doctors are way too educated now to know that if they are solicited by a billing company from any state and even offshore (This is probably why we don't have a huge problem with offshore outsourcing because the don't know the law here is for the DOCTOR, not them and would stand in a court of law) that wants to charge them a % they flat out can't do it. NY and Florida probably have the clearest rules regarding fee-splitting so it's easy in these states to explain to providers that don't know, it's only one paragraph to show them and that in turn allows the right billing company to show they care about their clients while protecting their own contracts. Those doctors that do it anyway and those billing companies that do it any way both lose. The provider can be sanctioned or worse, and the billing company's contract RETROACTIVELY for that provider is NULL/VOID.

I didn't go to business school, but I don't think in business rules are that black and white and I think business owners can decide the market value by standing up for their business and their business models along with educating their clients ;)

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