Beware employer billing and collection liability avoidance

August 19, 2020

Few employers readily assume responsibility in initial contracts — make sure you read the fine print and negotiate.

As doctors proceed through the many years of education and training prior to their professional careers, very few of them are aware of the many non-clinical aspects of medicine that will eventually come to bear on their lives.

Incidental to any medical career are a variety of business and legal factors that have far-reaching effects. Ironically, virtually no physicians enter their professional career with the slightest bit of knowledge or background on those factors. Accordingly, most physicians unwittingly find themselves entering into legally binding contracts (i.e. employment agreements) with little to no understanding as to what they are agreeing to.

For physician contract attorneys, this is an alarming scenario. We aim to advise physicians as to every aspect of their employment agreement, focusing special attention on the provisions that we know from experience can be structured more favorably for the physician-employee. One such provision inherent in every physician employment agreement is that pertaining to Billing and Collections.

Nearly without exception, every single physician employment agreement addresses the issue of Billing and Collections, as it is an inherent aspect of any practice or hospital’s functioning. Just like any business, a healthcare practice relies on revenue and profits to stay alive, and therefore the process of billing and collecting charges from patients is pivotal to the day-to-day.

Accordingly, most employers feel compelled to address this issue in their physician employment agreements, generally focusing on the fact that while the physician will be providing the applicable services, the onus to actually charge for those services and collect payment for the same falls onto the employer.

Employers are also eager to clarify that all such collected payments are the exclusive property of the employer (versus collected fees going directly to the physician). This is all well and good and expected, but those more inquiring minds (and certainly those with a legal background) might wonder: “Shouldn’t the contract say more about this?” In other words, given what we know about the potential ramifications surrounding billing procedures (e.g. the abundance of coding errors and false claims), perhaps the applicable contract provision should include a promise that the employer will utilize proper billing practices.

Experts estimate that up to 42% of claims are coded incorrectly and the number of False Claims Act cases has been steadily increasing every year. In other words, negligent or fraudulent healthcare charges and claims are somewhat rampant in our country.

While physicians are responsible for the initial documentation of their services, it generally falls on professional coders and billers to officially enter the diagnosis and procedure codes for submission. Sometimes, this is completed by in-house billing staff and other times employers utilize third-party billing companies.

In any case, it is not the physician who ultimately submits a claim. Instead, physicians rely on billing staff to accurately document and submit the claims relevant to their services. Like in any situation, things can get lost in translation and the item communicated by the physician may not be what ultimately comes out on the other end. And even more frighteningly, physicians sometimes find themselves being unwittingly used as false-claim pawns by avaricious practice administrators who are eager to upcharge.

Regardless of whether the wrongful billing practices we’re considering are negligent or intentional, physicians are well advised to seek protection against potential liability. The easiest way to accomplish this protection is to make sure the physician employment agreement places 100% responsibility on the employer to utilize proper billing and collection processes, in conformity with all government and third-party payor requirements. Further, the employer ideally will agree to indemnify the physician from any liability arising out of the billing and collection services utilized in connection with the physician’s services.

It may seem expected that employers would assume this responsibility at the outset; however, that is unfortunately not the case. In our experience of having reviewed many hundreds of physician employment agreements, there are just a few employers that readily assume this responsibility right off the bat (by including applicable contract language in all their physician employment agreements). For those employers who do not assume this responsibility upfront, we experience mixed results in terms of our success in getting them to amend the relevant contract language. But like anything else when it comes to contract negotiation, you simply never know until you ask.

The avoidance of liability in connection with improper billing and collection procedures is just one of many legal facets that physicians should consider when negotiating their employment contracts.

About the Author:

Laura Lauth Andrews, JD is an attorney with Lauth O’Neill, LLC. Lauth O’Neill works exclusively on behalf of health care providers (physicians, nurse practitioners and physician assistants), specializing in the review, analysis and negotiation of employment agreements.