By Keith Pendleton, JD

Two days ago, I posted an article on ProviderLAW under the title of "Cool New Resource on Hardship Discounts!" In that piece, I focused on a particular type of patient discount referred to by many providers as a "Hardship Discount." You can review the article at http://www.providerlaw.com/whatsnew/whatsnew.php. Basically, the article explained why the issue of patient discounts has become so relevant. It explained how many providers, in light of diminishing insurance coverage, have begun to ask – "How can we safely discount the patient-portion-due without creating a 'split-fee' schedule?" It also looked at a really cool HRSA resource on the topic of "Hardship Discounts." If you wish to understand more about Hardship Discounts, I would definitely suggest you take a look at that piece.

This article focuses on a different form of discount, recently described by the OIG (Office of Inspector General) as a "Prompt Pay Discount." Prompt Pay Discounts are different than hardship discounts. Whereas a Hardship Discount refers to a discount granted for financial need, the "Prompt Pay" discount refers to situations where the health care provider is seeking to avoid the costs of debt collection. I should mention that the OIG is basically the enforcement branch of the U.S. Department of Health and Human Services – a.k.a. MEDICARE.

According to the OIG, a Prompt Pay Discount is a discount which "is designed to reduce the Health System's accounts receivables and costs of debt collection, and to boost its cash flow." It is a discount that "bear[s] a reasonable relationship to the amount of collection costs that would be avoided."

If you're wondering – What does that mean? – check out the recent OIG Advisory Opinion – Advisory Opinion No. 08-03A. In this case, a hospital had posed a series of questions to the OIG relating to Prompt Pay Discounts. This is quite common. A health care entity will submit a series of questions to the OIG seeking the OIG's opinion on a particular practice. The OIG will then respond with its answers. Advisory Opinion No. 08-03A represents the OIG's response to a series of questions relating to Prompt Pay Discounts.

In Advisory Opinion No. 08-03A, a hospital was proposing a Prompt Pay Discount which would be awarded to the patient according to the following schedule. One level of Prompt Pay Discount would be granted to patients on payments made prior to discharge. A different level of Prompt Pay Discount would be granted to patients who made payments after discharge, but within 30 days of the discount offer.

Here is the schedule discussed in the Advisory Opinion:

% of Bill Discounted on Payments Made Prior to Discharge

Balances $0 -- $999 = 10%
Balances = $1,000 = 15%

% of Bill Discounted on Payments Made Post-Discharge But Within 30 days of Discount Offer

Balances $0 -- $999 = 5%
Balances = $1,000 = 10%

Naturally, in answering questions like this, the OIG will include a bunch of disclaimers. Which it certainly did in Advisory Opinion No. 08-03A. Totally by way of example, the OIG highlighted the fact that the Prompt Pay Discount would be offered by the hospital without regard to the "reason for the patient's admission" or "length of stay." The OIG also highlighted the fact that the hospital had certified that it "would not advertise the discount opportunity." In fact, under the arrangement, patients and their representatives would only be informed of the Prompt Pay Discount's availability "during the course of the actual billing process." Based on these kinds of "features," the OIG concluded that it "would not subject the Health System to administrative sanctions" under various federal laws.

Advisory Opinion No. 08-03A may raise a number of questions. But one thing the Opinion seems to make clear – it illustrates that there are indeed legitimate ways that health care providers can discount their fees under federal law.

For those of you who are interested, I will be discussing the the issue of discounts in my upcoming seminars – "Self-Pay Seminar (module 1): Step-by-Step Answers & Tools on Discount and Payment Issues." Seminars commence October 8th.