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.

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12 Responses to “NY Medicaid demands repayment of Millions of Dollars”

  1. kelly Says:

    This may be a silly question, what if we charge per encounter?

    • solutionsmedicalbilling Says:

      Some billing services do charge per encounter. We actually have some providers that pay this way.

      • cyndeewestonCyndee Weston Says:

        It has to be an arms length transaction, based on fair market value and cannot loosely be based off of a percentage. But that is the spray to go.

      • kelly Says:

        Does anyone have some comments on what a going rate per Encounter would be or even a ballpark. I have not spoken to anyone that is on a per Encounter. I know it would depend on how much you handle, from Total billing including patient to just coding. Any thoughts from anyone?

      • solutionsmedicalbilling Says:

        Per claim fees vary greatly depending on the type of provider and type of claims. They can be anywhere from $1.50 per claim to $250.00. The higher claims are more for residential treatment facilities. Most services cannot do claims for as low as $1.50 but some do if they are strictly submitting claims, not tracking or appealing, the patients are repeat patients, and you have a system where you can submit electronically for fee so you have no claim costs such as postage, printing, forms, or clearinghouse fees.

        For example, a chiropractor billing $40 per visit will not pay the same per claim fee as a surgeon billing much higher fees, etc.

        Hope that helps!

  2. cyndeewestonCyndee Weston Says:

    AMBA has researched NY specifically, it is against NY banking and education department law. We’ve had NY attornies give opinions and speak at our conferences on this. This is the first we’ve heard of them asking for money back, but we’ve known for years it was against the law.

    • solutionsmedicalbilling Says:

      Yes, we too have known that it was considered fee splitting. This is the first we have ever seen any action taken. Many providers also know but still want to pay a % while others refuse. This is a wake up call to those providers and billing services that have not believed that it is considered fee splitting.

      • cyndeewestonCyndee Weston Says:

        Our General Compliance Cousel has been talking to AMBA Members for years about this possibility that it could happen. Many of our members have moved to a flat rate or per transaction fee. I understand that doctors want to pay like everyone else does, but neither a doctor nor a billing company sue the other party for breach of contract because entering into a percentage billing arrangement in NY is illegal and could never be enforced.

  3. Carmen Driggs Says:

    I just assumed that’s the way it’s supposed to be. I’ve been paying a percentage to our billing agency for years. I even looked into changing our EHR system and the one I looked into has a “percentage” rate fee for claim submission if we elect to use their services. If I elect to pay per encounter, does this include all the capitation encounters that we submit too?

    • solutionsmedicalbilling Says:

      Many companies charge this way, from small billing services to large corporations. We know of several PM/EHR companies that offer billing for a % as well as their software. It has been done this way for years. There has been much discussion on our forum http://www.medicalbillinglive.com/forum regarding this over the past several years. Many have not believed us over the years when we explain that % billing can be considered fee splitting and I totally get it. In many cases % billing is the easiest method and appears to be the most fair. I also do understand the logic behind billing a flat fee or per claim fee. Many times billers work diligently on claims that never get paid so they are not paid as well. In any case, whether or not we agree doesn’t really matter. The government has determined that % billing is considered fee splitting and therefore if providers continue to engage they may face penalties. The letter from NY Medicaid states that it could result in loss of license.

  4. Don K Says:

    Any guidance on a physical therapy practice in NY? *Billing on an encounter basis

    • solutionsmedicalbilling Says:

      First, there is a bill in front of the state right now trying to change the law to allow providers to pay billing services based on a percentage. It has not passed yet, but probably will soon.

      In any case, if you are trying to come up with a fee for a PT practice you have a couple of options:

      1. per encounter – it would help to know what their average reimbursement is per visit. That way you have something to base it on. Ask how many visits per day/week/month and what their collections are for an average month. Also consider how much time it would take a week to do the billing for the size the account is. You can either calculate how much per encounter based on your time, or based on their average reimbursement, or a combination of both.
      2. flat fee – take all of the data from above and figure out a flat fee for your services for a month

      Hope that helps.


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