Client billing under fire

Along with reimbursement levels and dermatology’s Stark law exception, the practice of client billing is under government and private payer scrutiny respectively, an expert says.

Under client billing, says Jane M. Grant-Kels, M.D., a dermatologist sends a biopsy specimen to an outside lab, pays the dermatopathologist a discount fixed fee, then directly bills the patient’s insurance for the purchased test. In contrast, under direct billing, the lab performing the pathology service bills the patient and/or his insurance directly. Dr. Grant-Kels is professor and chairman of dermatology, University of Connecticut School of Medicine. She also directs the department’s dermatopathology service, residency program and cutaneous oncology center.

Appropriate rationales for client billing include the fact that “pathologists will charge you less than they charge private payers because they don’t have to bill the patient. They get guaranteed payment” from your office, Dr. Grant-Kels says. “The system will save money.”

Furthermore, she says, “Not all dermatopathology labs are in-network, and client billing would allow you to use the lab of your choice. So if done correctly, client billing can save the healthcare system money and allow you to use the dermatopathologist of your choice, and not have the patient pay out-of-pocket.”

However, she says that under client billing, “There is a potential for unethical behavior or abuse. The devil is in the details. For example, if a lab charges $50 per specimen to the dermatologist, and then the dermatologist directly bills the patient’s insurance for $100, the dermatologist makes a large profit on somebody else’s work. That has been reported to be taking place.”

Such markups violate not only the American Medical Association code of ethics, but they also can result in disciplinary action in some states, Dr. Grant-Kels says.

While such markups are illegal within Medicare, she adds, they’re permissible with private insurance in 34 states. In these states, “The labs will offer the dermatologists discounts for processing their privately insured patients’ specimens so that they are guaranteed the Medicare and Medicaid specimens. An under-the-table deal is made.”

The federal government opposes client billing, she says.

“Medicare requires direct billing for lab services, as do some private insurers. And 16 states prohibit client billing,” Dr. Grant-Kels says. “Some states have anti-markup legislation that requires disclosing markups to patients.”

Some states have fee-splitting prohibitions that can cost violating physicians their medical licenses, she adds.

“Ultimately, ethics and knowledge of the rules will free us from potential abuses. The academy (American Academy of Dermatology) continues to provide online resources to update and educate members on this complex issue and its implications,” Dr. Grant-Kels says.

Disclosures: Dr. Grant-Kels is a member of the American Academy of Dermatology Board of Directors. She reports no relevant financial interests.