Percentage-Based Billing Contracts Violate Medicaid Regulations and May Constitute Improper Fee-Splitting
March 22, 2017
The Medicaid Fraud Control Unit (MCFU) of the New York State Office of the Attorney General has recently issued restitution demand letters to providers for allegedly entering into percentage-based contracts with their billing agents. The MCFU letters cite the Medicaid Update March 2001, titled “A Message for Providers Using Service Agents” as follows:
Billing agents are prohibited from charging Medicaid providers a percentage of the amount claimed or collected. In addition, such payment arraignments, when entered into by a physician, may violate the Education Law and State Education Department’s regulations on unlawful fee-splitting.
A physician will be guilty of misconduct if he or she permits:
any person to share in the fees for professional services, other than: a partner, employee, associate in a professional firm or corporation, professional subcontractor or consultant authorized to practice medicine, or a legally authorized trainee practicing under the supervision of a licensee. This prohibition shall include any arrangement or agreement whereby the amount received in payment for furnishing space, facilities, equipment or personnel services used by a licensee constitutes a percentage of, or is otherwise dependent upon, the income or receipts of the licensee from such practice, except as otherwise provided by law with respect to a facility licensed pursuant to article twenty-eight of the public health law or article thirteen of the mental hygiene law.
See Educ. Law §6530(19)*.
A physician is subject to professional misconduct charges if he or she has
directly or indirectly requested, received or participated in the division, transference, assignment, rebate, splitting, or refunding of a fee for, or has directly requested, received or profited by means of a credit or other valuable consideration as a commission, discount or gratuity, in connection with the furnishing of professional care or service . . .
See Educ. Law §6531.
The prohibition against fee-splitting is related to the state anti-kickback law which prohibits physicians from
[d]irectly or indirectly offering, giving, soliciting, or receiving or agreeing to receive, any fee or other consideration to or from a third party for the referral of a patient or in connection with the performance of professional services . . .
See Educ. Law §6530 (18).
Licensed professionals in New York State must review their contracts to verify that the compensation paid to their agents is not based on a percentage of fees for professional services.
*A similar rule applies to other licensed professionals. See N.Y. Rules of the Board of Regents §29.1(b)(4).
**In addition to the Federal Anti-Kickback Statute at 42 U.S.C. §1320a-7b(b), New York has enacted its own wide-reaching anti-kickback and anti-referral laws and regulations seeking to eliminate fraud and abuse in healthcare on a statewide basis. The state anti-kickback statue is set forth in the Social Services Law (See N.Y. Social Services Law § 366-d). The N.Y. Education Law addresses matters of professional misconduct rather than violations of fraud and abuse laws and regulations.