Practices may now be liable for their provider’s billings.
From 1st July 2019, medical and healthcare practice owners must be careful when incentivising their doctors or allied health professionals using the percentage of their gross fees method, or any other similar method.
A possible risk is if a provider ‘dobs in’ a practice to escape the full liability of any breach, and practice owners are not insured or have not taken steps to mitigate this problem.
This article explores what you can do (and please note you need to do it now, not after a complaint has been made, when it may be too late).
As a side note ‘medical entrepreneurs’ have now been included in the Health Insurance Act 1973 so you really need to carefully watch your commercial arrangements e.g. pathology rents, charging management fees etc.
Under the new Shared Debt Recovery Scheme rules, a practice may be held liable for fraudulent billing. Practices must have key documents, business models, systems and staff training in place to defend the practice from any claim where a doctor ‘dobs in’ the practice in order to reduce their liability.
The new law reads like a new Medicare audit Tribunal for practices, and not just providers.
The AMA seeks to extend the responsibility for fraudulent claims to practices that influence or coerce a doctor to make ‘fraudulent’ billing claims. They want the service or management fee percentage charged to be paid back to Medicare, which may be higher than the default rate of 35% of gross billings.
Some important statements to note from the Government’s Explanatory Memorandum are set out below:
‘The Scheme will not apply to:
- debts owed to the Commonwealth as a result of inappropriate practice following referral to the Professional Services Review;
- claims adjustments that occur routinely as part of health practice, where a practitioner alerts the Department of Human Services to an error in claiming in order to correct the claims record;
- voluntary acknowledgements of incorrect payments where a practitioner accepts the full amount of the debt; or
- debts arising where one party has, without knowledge of the other, engaged in criminal conduct in relation to Medicare claims or billing.
When a practitioner issues an itemised invoice or receipt or makes a bulk bill claim for a Medicare service, the practitioner is stating that they have rendered a professional service that meets all of the elements of the MBS item descriptor. If the service does not meet all of the elements of the MBS item descriptor, it may be determined that there was a ‘false or misleading statement’. This does not mean that there was an intention to defraud or to be dishonest when claiming a Medicare benefit or billing for a professional service. It may have been an unintentional error.
A ‘false or misleading statement’ gives grounds for the Department to recover the incorrect payment as a debt.’
This part of the law is concerning, given there appears to be a lack of open and transparent commonly-agreed clinically relevant healthcare standards in Australia. See our articles 2011 Federal PSR Senate Inquiry, Medicare cops FOI (Freedom of Information) reveal they have no procedures or policies when prosecuting providers! and Why your doctor may be reluctant to see you?
The AMA seeks to increase practice liability?
On the 6th February 2019, the AMA submitted its Federal Shared Debt Recovery submission where, if practices put doctors under a key performance indicator, they could be 35% to 50% liable or more, depending on the circumstances.
This is where a practice’s control or influence leads to false or misleading statements which constitutes fraudulent billing. The AMA suggest a 35% default rate of gross billings that Medicare can claw back from practices by garnisheeing their bank accounts. We are curious why the AMA seeks to increase what is already an onerous piece of legislation.
This will dramatically increase practice compliance costs and deeply affect how practices have traditionally operated.
Some very fine lines been drawn here. It seems to us it would be easy to fall foul of these misstatement rules. Medicare does not have clear guidelines and PSR enforcement has no clear criteria.
How does this work when practices are told and paid to incentivise providers for health outcomes e.g. SIP’s and PIP’s? This appears to contradict the current state of play.
Practice owners have a right to be concerned; they may never know about that one doctor whom they are unsure regarding billing practices. Nor do practice owners have any real control over how patients are treated or billed. The last thing they want is to have Medicare claw back any management fees they have charged the practitioner for those services for which the practitioner has pleaded guilty to inappropriate billing “under the influence”.
If this is the case practices should ensure:
1. All doctors should be paid less and employed because of 100% of the risk shifts to the practice.
2. Do not set clinical KPI’s for your doctors or staff in staff service agreements, manuals or meetings as it may be considered as a tool of ‘influence’.
3. Make it a policy that only the doctor bills from the consulting room computer. There should be no outsourcing of this function.
4. Tighten up your business models, structures, service agreements and accounting audit trails now. Review how you train your staff on their working relationship with providers. Are they employees, contractors or tenant doctors? The latter should be the case.
6. Ensure in writing that your insurance covers Medicare audits.
The AMA’s submission interestingly reveals when practices are at risk of allegations of control or influence. Make sure you are not doing this in your practice (see below). To counter any claim, it is critical to have in place documentation of business structures, systems and contracts, and staff training, which explain the practice’s relationship with each provider.
We find the Government’s position a little curious. After all, there is a shortage of doctors/providers and fierce competition to attract and retain doctors. They usually dictate the rules, unless they are a registrar. So we are a little surprised with this sledgehammer legislation, that in our view is being used to crack a walnut.
How can practices meet Government-incentivised health outcomes without being seen to be breaking these new rules? Can your practice risk a doctor pleading guilty to something outside of a practices control? Can it afford to pay back Medicare for any service or management fees charged to the doctor e.g. 35 to 40% of their gross billings? How can a practice protect itself?
This is a paradox that may elude even the most proactive and ethical practice in Australia. We may now have a legislative tight rope all practices will have to review, in order to defend any claim.
The AMA’s position appears to be extremely well-researched and endorsed by them. So it may as well be law. It seems to cover the same ground as a healthcare Payroll Tax decision we covered last year (see our checklist) in the article 2018 Historic Doctors/Providers Payroll Tax warning!
In particular it takes a detailed view of practice agreements, structures, systems and staff when it comes to defending a claim against the practice.
The Devil is in the detail!
The AMA 2019 Submission indicates who is affected and when – see below:
The AMA submit practices can use the following as a defence (we have put in italics our recommendation under each quote):
Forms of evidence that the CME (or delegate) could consider would include:
Recommendation 1: Review all service agreements and remove any performance clauses or item numbers. Ensure the agreements are signed. For template service agreements prepared by a lawyer, click on templates.
Bank statements for the account/s where Medicare/PIP payments are paid, or entity service fees are paid
Recommendation: Review your current business structure and business model to ensure they are correct. Your practice manager and bookkeeper should be clear on the correct processes.
Review all banks statements and chart of accounts to ensure revenue and expense items are correctly recorded. A separate bank statement and chart of accounts must clearly show where all income and expenses are paid. Billings Trust or Clearing accounts for fee-for-service e.g. Medicare income are often missed. This is because they are not part of a traditional accountant’s role and it is missed. You cannot afford to do this for Medicare Audit or Payroll Tax purposes. Your advisers may not be aware of this. See the Doctor and Staff Contracts video and contact us (with no obligation) for more information on whether your chart of accounts has been set up correctly.
MBS claims history for the medical practitioner or allied health provider PIP statements if they form part of the shared remuneration arrangement.
Remuneration statements – where entity or billing agent transfers practitioner’s proportion to them
Statutory declarations from staff of the possible secondary debtor as to the billing culture of entity
Recommendation: They will interview your staff. This can be intimidating. It is hard to retract statements your practice staff may have said to an investigator. Make sure everyone is on the same page.
Ensure you are clear on your business model. We recommend the use of the term tenant doctors and not employees or contractors. If you have the correct model ask key practice staff e.g. The Board, Practice manager, and/or bookkeeper to watch the Doctor and Staff Contracts video.
Evidence of compliance with Good Accounting Practice as contractually – i.e. Audit trail claims made on behalf of the primary debtor
Recommendation 4: Implement recommendations 1 and 2.
Reconciliation of records between the clinical information provided by the primary debtor (practitioner) to the secondary debtor (hospital/billing agent) for the purpose of billing items of service.
Recommendation 5: Implement recommendation 3
Correspondence from the secondary debtor (i.e. hospital) in which the offer of private practice arrangement is made.
Recommendation 6: Implement recommendations 1
Statement from a secondary debtor (i.e. hospital) describing the basis upon which a private practice arrangement offer was made.
Recommendation 7: Implement recommendation 1 and use an experienced independent law firm. Ask us for more information.
A written term where the secondary debtor expressly advises the primary debtor to seek independent legal advice in advance of signing an agreement.
Recommendation 8: Implement recommendation 1 make a clear statement in the agreement.
Any available forensic audit of practice or organisation/entity revenue.
Recommendation 9: Implement recommendations 1, 2 and 3.
(c)Health and Life Pty Ltd
Chartered Accountant, Chartered Tax Adviser, Registered Tax Agent, Former AGPAL Surveyor 10 years of service
David Dahm is CEO and founder of the national medical and healthcare chartered accounting firm Health and Life and global Founder and CEO of the not for profit project the International Healthcare Standards and Ethics Board (www.ihseb.org)
After a serious work related car accident in 1989, and nine operations later I continue to be a patient and provider advocate. I enter my third decade as a national Chartered Accountant for Medical and Healthcare practices in Australia. I am a former 10-year Australian General Practice Accreditation surveyor. I come from a medico family. I have served on the AAPM national Board and was the inaugural national Chair of the Certified Practice Manager CPM post nominal. I continue to provide accounting tax and practice management advice to many practices all over Australia.
You know who you are and I thank you for this real honour and privilege to serve you and your community through you. Note, I am not a lawyer please seek appropriate legal and accounting advice. This information is for general information and discussion only.