Health Law Pointers - Volume XIX, No. 2

Health Law Pointers


Volume XIX, No. 2

April 6, 2017


Lawrence M. Ross
[email protected]


Nicholas A. Pusateri
[email protected]



As a public service, we are pleased to present this issue of our health law newsletter addressing the legal concerns of health practitioners. The primary purpose of this newsletter is to provide timely educational information and commentary for our clients and subscribers. In some jurisdictions, newsletters such as this may be considered: Attorney Advertising.


If you know of others who may wish to subscribe to this free publication, please feel free to forward it. If you wish to subscribe or unsubscribe, please send an e-mail or call the Editor, Lawrence M. Ross, at (716) 849-8900.


Billing Medicaid? Stay Away from Percentage-Based

Fee Arrangements with Your Billing Agency


            With the hustle and bustle of busy healthcare practices, many practitioners these days are using third party billing agencies to bill and collect patient fees from payors. And why wouldn’t they? Delegating the administrative functions of a healthcare practice to outside companies allows practitioners to focus more on patient care. The problem for New York physicians is that many billing agencies, if not most, have moved away from service-based fees and now utilize “value-based” compensation structures, such as percentage-based fees. In other words, rather than charging a flat fee or fees based on time, the billing agencies are compensated based on a percentage of the overall revenue they collect from payors.

When practitioners and billing agencies enter into such arrangements, however, they may be doing so unlawfully on two fronts:

  1. Such arrangements appear to conflict with state and federal Medicaid rules.

  2. Percentage-based fee arrangements may conflict with the State Education Department’s prohibition on unlawful fee-splitting, which may subject practitioners to allegations of professional misconduct.

Just recently, the Medical Society of the State of New York (MSSNY) posted on its blog a warning that some of its member physicians had received letters from the Medicaid Fraud Control Unit (MFCU) of the New York State’s Attorney General’s Office that requested refunds of Medicaid payments (here’s the link). In a letter made public by MSSNY, MFCU asserted that Medicaid overpaid for a physician’s fees because the physician utilized a percentage-based fee arrangement with its billing agency in violation of state and federal Medicaid rules. MFCU demanded that half of the overpayment be returned to Medicaid, plus 9% interest. MFCU indicated that although percentage-based fee arrangements may be acceptable under other third party health insurance programs and under Medicare, they are clearly unacceptable under Medicaid. MSSNY is now urging its members that have percentage-based fee arrangements with their billing vendors for Medicaid claim submissions to revise those arrangements such that the vendors’ fees are based on service rather than percentage of collections. It’s advice that we recommend adhering to because New York and federal regulations clearly state that payments may be made to a billing agency if, among other things, the agency’s compensation for its services “is not related [to] a percentage or other basis to the amount billed or collected.”

Furthermore, the letters from MFCU direct their recipients to a March 2001 issue of the Medicaid Update, issued by the New York State Department of Health, which states that percentage-based fee arrangements with billing vendors may violate the prohibition against fee-splitting. The State Education Department’s regulations prohibit the sharing of fees for professional services between licensed and unlicensed individuals or businesses. The prohibition attempts to guard against improper interference or influence from unlicensed persons who care more about the financial bottom line than the patients’ best interests. Unfortunately for practitioners, percentage-based fee arrangements resemble fee-splitting: Let’s say a doctor charges $200 for a patient visit, and the billing vendor gets 10% of the $200 for collecting the fee; the licensed doctor and the unlicensed billing vendor are splitting the fee—$180 to the doctor and $20 to the billing company. When practitioners act in contravention of the Education Department’s regulations, they may be committing professional misconduct under New York’s Education Law. Such a determination can have disastrous effects on practitioners’ careers, resulting in restrictions on or even revocation of their licenses and revocation of their board-certified status.

So, if you are a practitioner that has a percentage-based fee arrangement with your billing vendor, it’s time to review and modify your arrangement. Worried that you have a written agreement and the billing agency may accuse you of breaching the contract? Don’t be. Your first duty is to safeguard your license and reputation. What’s more, New York courts, like those in many other jurisdictions, are disinclined to enforce a contract that is unlawful on its face or that perpetuates illegality, which is what a percentage-based fee arrangement may be doing. Our Healthcare Law Practice Group here at Hurwitz & Fine, P.C. has extensive experience drafting, negotiating and amending agreements with third parties who assist with the administrative functions of healthcare practices. We would happy to discuss your situation with you and chat about the best possible options for your practice going forward.  



Best Practices for Expanding Your Medical Practice to Treat Opioid Addiction

Opioid addiction and opioid-related deaths are increasing in Western New York and many other parts of the country. Drug abuse, formerly viewed as a law enforcement problem, is now regarded as a serious public and mental health challenge and is increasingly being treated by physicians. In Western New York, however, there is a dearth of physicians qualified to treat opioid-addicted patients, and thus state and local authorities, as well as payors, are encouraging local physicians’ efforts to become qualified. New York’s qualification process is not burdensome. It requires physicians to have a license to practice medicine in New York and a waiver from the U.S. Substance Abuse and Mental Health Services Administration (“SAMHSA”) to prescribe or dispense buprenorphine, a medication used for treating opioid addiction


Physicians can obtain the SAMHSA waiver by (i) attending eight hours of training in treatment and management of opiate-dependent patients from the American Society of Addiction Medicine (ASAM), the American Academy of Addiction Psychiatry, the American Medical Association, the American Osteopathic Association (AOA), the American Psychiatric Association or another accredited agency, or by (ii) attaining addiction certification from ASAM or subspecialty certification from the American Board of Medical Specialties or AOA. With qualification, however, comes new business and legal risks. A physician’s ordinary course of practice involves much more than the ability to prescribe, and expansion of it to treat opioid addiction affects every aspect of the business. We identified several common factors of successful buprenorphine practices which we encourage physicians to consider before deciding to expand their practice:


  • Additional Education
    Acceptable medical practice requires a prescription to be issued for a legitimate medical purpose by a physician in the ordinary course of his or her professional practice. Thus, prior to initiating treatment, physicians should have a greater understanding of drug or opioid addiction, and they should be knowledgeable about addiction treatment and all available pharmacologic treatment agents as well as available ancillary services to support both physician and patient. Without additional education a third party reviewer could reasonably conclude that a physician was prescribing buprenorphine outside the scope of his or her practice. Moreover, a better understanding of addiction treatment adds to doctors’ confidence in their ability to manage opioid addictions.


  • A Clinical Care “Team
    At least two physicians qualified to treat opioid addiction should collaborate in providing services due to the special patient requirements for frequent visits and follow-ups, and to allow access to on-site peer support, coverage and mentoring. Moreover, certain program details may be handled best by non-physicians, such as a nurse care manager, nurse practitioner, physician’s assistant, social worker and/or healthcare counselor to minimize overburdening the physicians.


  • Excellent Record Keeping
    Treating opioid addiction requires complete medical records, documenting the dates and amounts of prescribed medications, and confirming that the prescribing physician is within the maximum number of actively treated patients (during a waivered physician’s first year, a maximum of 30 patients can be treated at one time; thereafter the physician may apply for permission to treat up to 100). The DEA conducts random site visits to physician offices to assure compliance with these requirements.


  • Adequate Staff and Staff Training
    Because in-office treatment of addiction patients fundamentally changes the nature of a practice, office staffers should receive formal training prior to the prescription or administration of buprenorphine. Moreover, studies show that a buprenorphine practice is better facilitated when the staff enthusiastically embraces the practice—especially those at the reception desk.


  • Intensive Office Controls
    The opioid-addicted patient is a different type of patient typically treated by the practice, and thus the practice must take adequate measures to ensure patients are taking buprenorphine as prescribed. This requires effective in-office urine-testing procedures (including unannounced urine testing), pill counts and observed ingestion of buprenorphine.


  • Patience with Patients
    Buprenorphine is used by a broad patient population, typically without community supports and having long addiction histories. Physicians and staff should anticipate difficulties ranging from patients requiring more time than expected to the unavailability of counseling resources and reports of diversion and injection.

  • A Diverse Referral Network
    Physicians should have several options for outside therapies for which to refer their patients. Behavioral and mental health services, such as counseling, support groups, 12-step programs and other non-pharmacological therapies, are an integral part of treating opioid addiction. In addition, successful management of patients with comorbid psychiatric disorders requires consultation with or referral to mental health counselors.


    It should come as no surprise that expanding a medical practice to include treatment of opioid addiction includes a significant financial investment to ready the practice for such an expansion. In addition, there are ancillary financial risks that physicians should be aware of before committing to prescribe buprenorphine:


  • Potential Increase in Malpractice Insurance Premiums
    Prescribing buprenorphine may increase the medical practice’s risk profile because it attracts opioid addicts. Such patients are often viewed by insurers as a potentially high risk for malpractice.


  • Potential for Inadequate Reimbursement
    Studies show that most opioid-addicted patients are self-pay or reliant on public funding mechanisms (e.g. Medicaid, which has complex rules regarding coverage of pharmacotherapy). Some are insured, but private insurance addiction treatment coverage is often limited, especially if the patient has not previously been diagnosed with an opioid use disorder. Insurance policies may also limit care to several months in duration or exclude medications for opioid dependence altogether.


While the principles above are generally applicable to every practice, physicians are encouraged contact an attorney specializing in healthcare to determine the best possible course for effectuating a seamless transition to opioid addiction treatment. Our attorneys at Hurwitz & Fine, P.C. are able to assist and are happy to discuss any questions or concerns that physicians may have regarding the risks associated with treating opioid addiction.

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