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Insight Professional Courtesy Problems

Many health care practices and facilities have a policy of providing services to other health care professionals, their family members, or their office staff for free or discounted prices as a “professional courtesy”; however, such policies may create unintended regulatory problems.

Courtesies Offered to Induce Referrals. The federal Anti-Kickback Statute prohibits offering, soliciting, or giving any remuneration (which may include professional courtesies) to any entity in order to induce referrals for items or services covered by any federal health care program, including Medicare or Medicaid. (42 U.S.C. § 1320a-7b(b)). In addition, the federal Civil Monetary Penalties Law prohibits offering any remuneration that is likely to induce a state or federal health care program beneficiary to order or receive items or services covered by such government health care programs. (42 U.S.C. § 1320a-7a(a)(5)).

Courtesies to Physicians Who Make Certain Referrals. Offering professional courtesies to outside physicians,[1] the physician’s family members, or the physician’s office staff may violate the federal Ethics in Patient Referrals Act (“Stark”) if the physician refers certain “designated health services”[2] payable by Medicare or Medicaid to the entity offering the courtesy unless the policy is structured to fit within one of Stark’s regulatory exceptions. To fit within Stark’s “professional courtesy” exception, the professional courtesy must satisfy all of the following requirements:

1. The courtesy may only be offered by entities with a medical staff, which includes group practices, hospitals, and other similar entities. Solo practices do not qualify and, thus, solo practices generally cannot extend professional courtesies to outside physicians or their family members if the physician refers patients to the solo practice for “designated health services”.(72 FR 51064)

2. The courtesy must be offered to all physicians on the entity’s medical staff or in the entity’s local community without regard to the volume or value of referrals or other business generated between the parties.

3. The entity’s professional courtesy policy must be set out in writing and approved in advance by the entity’s governing body.

4. The courtesy offered by the entity may only apply to health care items or services of a type routinely provided by the entity.

5. The courtesy may not be offered to any physician (or the physician’s family member) who is a federal health care program beneficiary unless there has been a showing financial need.

6. The professional courtesy policy must not violate the federal Anti-Kickback Statute, i.e., it may not be offered with the intent to induce referrals, as discussed above. (42 C.F.R. § 411.357(s)). Thus, if the physician may refer patients for designated health services, the entity offering the professional courtesy must either make sure its policy complies with a relevant Stark exception or forego billing Medicare or Medicaid for services referred by the physician.

Waivers of Copays/“Insurance Only” Billing. The government and health insurers have specific concerns about any practices—including professional courtesies—that involve waiving or discounting coinsurance payments, e.g., “insurance only” billing programs. The federal Civil Monetary Penalties law generally prohibits waiving co-payments if the provider knows that doing so will likely influence Medicare beneficiaries to order or receive items or services payable by federal or state health care programs unless (1) the waiver is not offered as part of an advertisement or solicitation; (2) the provider does not routinely waive co-pays or deductible amounts; and (3) the provider waives the co-pay after a good faith determination of financial need or after reasonable collection attempts have failed. (42 U.S.C. § 1320a-7a(a)(5) and (i)(6)). Similarly, Idaho’s own version of the anti-kickback statute generally prohibits engaging in a regular practice of waiving all or part of a patient’s health insurance deductible. (I.C. § 41-348(2)). Finally, contracts with health insurers or managed care organizations may prohibit the waiver of co-pays or deductibles.

The Net Effect. The net effect of these laws is:

1. Practices may generally offer professional courtesies to their own employees, although the courtesy may raise tax concerns. Practices should discuss such concerns with their tax advisors.

2. If professional courtesies are offered to outside physicians who may refer “designated health services” to the practice (or such physicians’ family members or office staff), the practice should ensure that it complies with Stark’s professional courtesy exception set forth in 42 C.F.R. § 411.357(s) and described above. Unfortunately, the Stark exception will not protect solo practitioners.

  • Beware any professional courtesy policies that involve waiving co-pays or deductibles.
  • If the patient is a government program beneficiary, do not waive co-insurance payments unless there is a demonstrated and documented financial need and the practice otherwise complies with the requirements of the Civil Monetary Penalties Law, 42 U.S.C. § 1320a-7a(a)(5) and (i)(6) as described above.

3. If the patient is insured under private health insurance, ensure that the waiver of any co-pays or deductibles is allowed by the practice’s contract with the health insurer or managed care organization. Although there are no Idaho cases discussing I.C. § 41-348, it is unlikely that the state would challenge such a waiver if it was approved by the relevant health insurer.

4. Waiving the practice’s entire fee for a service is safer than waiving or discounting co-insurance payments relating to that service. The OIG has stated, A physician’s regular and consistent practice of extending professional courtesy by waiving the entire fee for services rendered to a group of persons (including employees, physicians, and/or their family members) may not implicate any of the OIG’s fraud and abuse authorities so long as membership in the group receiving the courtesy is determined in a manner that does not take into account directly or indirectly any group member’s ability to refer to, or otherwise generate Federal health care program business for, the physician. (OIG Compliance Program Guidance for Individual and Small Group Physician Practices, 65 F.R. 59447)

5. Never offer professional courtesies as a way to induce referrals, especially referrals for items or services payable by state or federal health care programs.

If you have questions about these or other legal issues, please contact a member of our Health Law group at call 208.344.6000.


[1] For purposes of Stark, a “physician” includes M.D.’s, D.O.’s, podiatrists, dentists, optometrists, and chiropractors. (42 C.F.R. § 411.351)

[2] For purposes of Stark, “designated health services” include the following if paid by Medicare: clinical laboratory services; physical, occupational, or speech therapy; radiology and certain imaging services; radiation therapy and supplies; durable medical equipment and supplies; parenteral and enteral nutrients, equipment, and supplies; prosthetics and orthotics; home health services; outpatient prescription drugs; and inpatient and outpatient hospital services. (42 C.F.R. § 411.351)

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