Three little words that make a difference

5 minute read

We all know there is no formal education in Medicare billing, but it is worth remembering what that means.

No formal Medicare education means none – for anyone – and GPs need to keep their wits about them when it comes to bulk billing law.

Beware creative accounting advice if you’re bulk billing

There is no subject at accounting school called “How Medicare works”, so it is worth keeping this fact in the back of your minds before blindly accepting creative accounting advice, because in my experience, it is often wrong.

Separate legal entities that are used to try and circumvent bulk billing law is a good example, and one that popped up again recently during a conversation with a general practice.

The law is clear: when a patient is bulk billed for a single service, no additional fees can be charged and that includes fees charged by separate legal entities.

The relevant legal precedent is found in a criminal case involving the late GP, Dr Geoffrey Edelsten. Dr Edelsten’s case provided us with one of the first decisions to examine the bulk billing law in Section 20A of the Health Insurance Act 1973 (HIA).

The case is Dalima Pty Ltd v Commonwealth of Australia (New South Wales Supreme Court, Unreported, 22 October 1987), and the central issue for determination was the meaning of the three words “in respect of”, which are highlighted below.

The facts of the case

Dalima Pty Limited, Dr Edelsten’s company, operated medical centres, replete with grand pianos in the waiting rooms.

The practices were staffed by contracted GPs, who each had a fee splitting arrangement with Dalima Pty Limited. This was, and remains, a common arrangement in medical practices.

The modus operandi in these practices was that each patient would be charged a “facility fee” when they came to see a GP.

But note: the facility fee was not charged by the GPs but by the company, Dalima Pty Limited. In this way, Dr Edelsten hoped he would circumvent Section 20A because the GPs did not bulk bill and charge a gap (called a facility fee). The separate facility fee was charged by Dalima Pty Limited, not the GPs.

The issue for determination was therefore whether or not the facility fees constituted “an amount payable in respect of medical services” rendered at the centres within the meaning of Section 20A.

The issues for determination

 The prosecution argued that the facility fees were fees “in respect of” the medical services provided because they were inextricably linked to the GP services. It was a condition precedent to receiving professional services within the meaning of the Act, and it made no difference that the fee was charged by a separate legal entity.

The defence argued the opposite – that the facility fees were not fees “in respect of” the professional services rendered by the GPs, because they were charged by a separate legal entity, and did not form a component part of the GP services, which could only be said to be provided when the doctor and patient were interacting face to face.

The decision

The court held that the “facility fees” were fees “in respect of” the medical service rendered.

Justice Enderby accepted the submission that the words “in respect of” were of “notoriously wide import” and were “sufficiently wide to make the facility fee an additional fee in respect of the service rendered”. He rejected the submission on behalf of Dr Edelsten that the medical services could only be said to be provided when the doctor and patient were “face to face”.

His Honour said:

 “I hope the law reflects reality and I have no doubt that the reality of what is happening in the two sentences is that a fee called a ‘facility fee’ is being charged by Dr Edelsten’s company to patients as a condition of them being able to use the centres and gain access to a doctor and receive medical services from a doctor.”

The facility fee was an amount payable “in respect of” the service, and it did not matter that the services rendered also related to MBS items.

His Honour went on to hold that the imposition of a facility fee prevented the medical service provider in that case from accepting an assignment and bulk billing.

The court made the following further observations regarding bulk billing and the integrity of the Medicare scheme:

“The relevant statutory context is not criminal legislation but a system for government subsidy of medical payments with complex safeguards for the revenue… The bulk billing system manifests a policy objective of limiting patient expenditure on medical services, whilst retaining the traditional doctor/patient relationship…Medical practitioners receive the certainty of payment without any bad debts, in exchange for restraint on the fees they can charge.”

In addition to being illegal, fees charged by separate legal entities under the guise of being unrelated to bulk billing corrupt the bulk billing statistics and deny patients access to safety net benefits. If the government can’t see the out-of-pocket costs patients are paying, then those amounts obviously won’t count towards the patient’s safety net calculations.

Bulk billing is dying – we all know that. But this type of conduct, which in my experience is often driven by incorrect and ill-informed accounting advice, is contributing to worsening problems for GPs and consumers alike.

The best advice is to keep it simple – if a patient is bulk billed for a single service, they should walk out having not handed over a cent to anyone for anything. If that is not viable for your practice, then just charge a private fee.

Dr Margaret Faux is a health system administrator, lawyer and registered nurse with a PhD in Medicare compliance, and is the CEO of AIMAC, which offers courses and explainers on legally correct Medicare billing.

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