Reassignment occurs when a physician or entity entitled to receive payment under Medicare assigns or allows another entity to receive that payment. Medicare payments for medical services are payable directly to the patient. The patient may then assign the payment to his physician, but the physician is prohibited from reassigning payment to anyone else unless an exception to the reassignment prohibition is met. For physician groups and practice management companies, the applicable exceptions include reassignment to an employer, clinic, manager or agent. A violation of the prohibition on reassignment is punishable by:
- Termination of the physician's or supplier's participation agreement.
- Revocation of the right of the physician or supplier to receive assigned payments.
- Civil monetary penalties of up to $2,000 per item or service claimed.
- Criminal penalties of a fine of not more than $2,000 and/or imprisonment of not more than six months for knowing, willful and repeated violation of the reassignment rules.
Payments to Employers
An employer such as a medical group may establish it qualifies to receive Medicare payments for the services of its physicians by submitting a written statement to the Medicare carrier certifying it will bill Medicare for such services only where the physician is its employee and the physician has acknowledged in writing that only the employer and not the physician has the right to receive the payments for all of his services within the scope of his employment.
Under the Medicare regulations, a Form W-2 provides evidence that an employment relationship exists. The physician's acknowledgment that the employer has the right to receive payment may be in the form of a written employment contract which either expressly or by clear implication provides that the employer will receive the payments.
In the absence of a contract, the employer should have in its possession the physician or supplier's signed and dated statement stating: "I acknowledge that under the terms of my employment only [Name of Employer] is entitled to claim or receive any fees or charges for my services."
Payments to Clinics
If the physician is not an employee, the exception for Medicare payments to clinics usually will apply subject to significant limitations. Medicare will pay a clinic if there is a contractual arrangement between the physician under which the organization bills for the physician's services.
Under the reassignment rules, a clinic is a free-standing entity, (i.e., a physician, medical group or imaging center) providing diagnostic and/or therapeutic medical services on an outpatient basis providing service in quarters that it owns or leases. A clinic may establish that it qualifies to receive payment for the services of a physician on its staff by submitting a written statement certifying it will bill for such services only as provided for by its written contractual arrangements with the physician.
For purposes of Medicare benefits payable for these services, this agreement may be terminated by either party upon written notice to the other. However, such termination is not binding upon Medicare until two weeks after the Medicare carrier receives written notice of it.
For payment to be made to a clinic for a physician's services, all the services furnished by the independent contractor-physician for patients of the clinic must be furnished within the physical premises of the clinic. A clinic may not receive Medicare payments for services furnished by the physician for patients of that clinic outside its physical premises.
For example, a clinic cannot receive payment for services performed by an independent contractor-physician in a hospital. If an independent contractor-physician will be providing services for patients of the clinic both on and off its premises, the clinic should bill and receive payment under the physician's own medicare number. It is not acceptable to have two different billing arrangements with respect to different services by the same independent contractor-physician for the same clinic patient. However, a clinic may receive Medicare payments for the services of some physicians whom the group engages as employees and for the services of other physicians whom it engages as independent contractors.
In instances where a clinic does not have an appropriate written contract with its physicians, the following language to be signed by both parties and dated is recommended: "It is agreed that only [Name of Clinic] will bill for and receive any charges or fees for the services of [Name of Physician]."
Payments to Agents
Medicare will make payment in the name of the physician or supplier to an agent who furnishes billing or collection services, including a management company, if the agent:
- Receives payment under an agency agreement with the physician or supplier.
- Is not compensated in any way related to the dollar amount billed or collected.
- Is not compensated in a manner dependent on the actual collection of payments.
- Acts under payment disposition instructions which the physician may modify or revoke at any time
- In receiving the payment, acts only on behalf of the physician or supplier (except insofar as the agent uses part of the payment to compensate the agent for billing and collection services.)
This exception permits computer and other billing services to claim and receive Medicare payments in the name of the physician or supplier. These conditions for payment ensure the billing agent has no financial interests in how much is billed or collected and is not acting on behalf of someone who has such an interest. These conditions do not apply if:
- The agent merely prepares bills for the physician or supplier and will not receive and negotiate the checks payable to the physician or supplier.
- The entity receiving payment in the name of the physician qualifies to receive payment in its own name for the physician or supplier.
Lock Box Arrangements
A physician practice management company cannot qualify for this exception if its management fee is based on a percentage of the physician group's revenues. To avoid problems with the reassignment rules and still be paid on a percentage basis, the physician practice management company must allow the physician or physician group to receive and control Medicare payments before they are transferred to the physician practice management company. As long as the physician has initial control over the payment, Medicare does not consider a reassignment to have taken place.
Under such an arrangement, the physician practice management company and physician should certify in writing that:
- The physician practice management company will forward all Medicare payments to the physician's bank account for deposit.
- Funds from the physician's account can only be drawn in the name of the physician.
- The physician will continue this payment arrangement only so long as he has sole control of his account and the bank is subject only to his instructions regarding the account. The physician can then be required, as a condition of the management and billing service agreement, to issue a standing order authorizing the bank on a daily basis to sweep or transfer any funds in his account into an account under the physician practice management company's control.
Sometimes this arrangement is referred to as a lock box arrangement. However, the physician must be able to revoke the sweep order. This means the physician could at some point breach the service agreement by revoking the sweep order and withdrawing all of the funds in his account.
The physician practice management company's primary recourse would be to terminate the service agreement and seek recovery from the physician for any damages resulting from the breach of the agreement.