What is Fee-splitting

Fee-splitting laws were enacted many years ago in several states including NY to protect patients from unscrupulous physicians.  Fee-splitting occurs when a physician splits part of the professional fee he earns with someone else.  It was enacted to prevent harm from a small minority of physicians who were looking to strictly line their pockets.  It was meant to keep doctors from referring services to another doctor who was getting paid for the referrals.

In the strictest sense of this law, it also pertains to doctors who take credit cards as a form of payment as the credit card companies are charging a percentage to the doctors.

Medicaid admits that charging a provider a percentage is very common but still illegal.  Most medical professionals prefer to pay a percentage as it is easier for them to compare to other services.  All are now required to find another method of payment or risk losing their medical license.

NY Medicaid demands repayment of Millions of Dollars

NY Medicaid has been sending letters to physicians in New York State demanding providers pay back huge amounts of money.  These demands are not for any overpayments or errors in billing.  The Medicaid Fraud Control Unit has found a new way to take millions of dollars away from doctors based on an article in Volume 16 Number 3 of a Medicaid update issued in March of 2001.

The article states that billing agents are prohibited from charging Medicaid providers a percentage of the amount claimed or collected.  They state it is prohibited by the antiquated fee splitting laws.

They go on to state that they understand that these practices are very common but it is not acceptable under the Medicaid program.

The letter then goes on to state that during the period of 1/1/2010 to present time Medicaid paid out $XXXXXXXX to the provider, and that the provider paid the billing service $xxxxxx.  They then demand that one half of the amount the provider paid to the billing service during that time frame be repaid to Medicaid.  The amounts Medicaid is demanding are staggering.  We were sent a copy of one letter demanding $48,151.66.  To add flame to the fire Medicaid is charging 9% interest on top of this.
What can we, as a medical community, do about this?  Some are hiring attorneys to fight it.   Some are checking into it with their professional associations.   We know of one family practice that is going out of business.  They have notified their patients and are closing up.  Other doctors will drop out of the Medicaid program.  How will all this affect Medicaid patients if doctors give up participation with the program?

We have been saying for several years that charging a percentage is considered fee splitting in several states including New York.  The problem is that most providers want to be charged a percentage because they feel that this is the best way to make sure that the billing service is doing their job.  They are only paid if and when the provider is paid.  However, at the end of the day it is still considered fee splitting.

At this time it appears that it is only straight New York State Medicaid however we have heard rumors that the Medicaid Managed Care Plans may follow.   Commercial insurances could also decide to follow suit.  The letter sent out by NYS Medicaid indicates that providers can actually lose their license for violating fee splitting laws.

If you or one of your providers have received a letter from Medicaid requesting a refund due to percentage billing please let us know what your office is doing about this.  What are you hearing?  We will post responses anonymously to let others know what is happening.