New York’s Medicaid Program Re-issues Warning for Health Care Providers to Avoid “Percentage of Collection” Fee Agreements with Billing Companies, or Face Recoupment Proceedings

Recent letters from New York’s Medicaid Fraud Control Unit (“MFCU”) to those healthcare providers in New York State who have “percentage of collection” arrangements with their outside billing companies are demanding that such providers refund money paid to them by Medicaid based on MFCU’s determination that such billing arrangements are illegal under the Medicaid law and may also constitute unprofessional conduct under New York’s Education Law.

Healthcare providers, especially those who accept Medicaid, should immediately review their billing vendor service contracts to make sure they do not provide compensation to the billing company that is based on a percentage of collections.

In response to the letters recently sent to New York licensed physicians by MFCU, the Medical Society of the State of New York (MSSNY) is urging its members to amend the fees they pay to their billing companies for Medicaid claim submissions so that they reflect either: (1) payments based on time; or (2) a flat fee for claims submitted.

In its letter to selected healthcare providers who were found to have such illegal arrangements, MFCU states:

“Billing agents are prohibited from charging Medicaid providers a percentage of the amount claimed or collected. In addition, such payments arrangements, when entered into by a physician, may violate the Education Law and State Education Department’s regulations on unlawful fee-splitting.

In recent months, the Medicaid program has been made aware of violation of the regulations concerning the permissible payment arrangement with business agents. Although we understand that these practices are very common when it comes to billing other third party health insurance programs, including the Medicare program, it is not an acceptable arrangement under the Medicaid program.”

MFCU encourages all healthcare providers to assure that their payment arrangements are in compliance with the Medicaid regulations. Otherwise, the provider may be required to refund the resulting Medicaid payments made to him/her, or his/her practice. MFCU also cautions healthcare providers that they should only contract with billing agents who are enrolled in the Medicaid program and that they should ask for written proof of such enrollment before engaging them to provide billing and collection services.