Answers to Questions about Chiropractic:
Is It Legal to Give a Discount When Patients Pay Cash?

Stephen Barrett, M.D.
Samuel Homola, D.C.

Question

Some chiropractors offer a discount when patients pay cash? Is that legal?

Answer

It depends on the circumstances. Chiropractors who bill insurance companies that pay "usual and customary fees," have a legal obligation to disclose the extent to which they give cash discounts, because the giving of discounts causes the "usual fee" to be lowered. For example, suppose a chiropractor charges insured patients $50 for an office but half of the patients pay $40 because they get a 20% cash discount. The true (average) fee would be $45, and failure to disclose that would be illegal. Here's how the New York State Insurance Department answered a similar question:

STATE OF NEW YORK
INSURANCE DEPARTMENT
25 BEAVER STREET
NEW YORK, NEW YORK 10004

The Office of General Counsel issued the following opinion on June 7, 2007, representing the position of the New York State Insurance Department.

Re: Fees charged by a chiropractor; insurance fraud?

Question Presented:

If a chiropractor were to charge a lower fee for services to "non-insurance" patients—that is, patients without insurance or whose contractual benefits under an insurance policy have been exhausted—than to patients whose cost of services is covered by insurance, could the chiropractor's conduct alone constitute insurance fraud?

Conclusion:

No. If a chiropractor charges a lower fee to non-insurance patients who pay cash, that activity would not constitute insurance fraud, because neither the chiropractor nor the insured would submit any claim for services to an insurer, self-insurer, purported insurer, or any agent thereof. However, if a chiropractor submits a claim to an insurer for an insured patient, or issues a bill to an insured patient for services knowing that the bill will be presented to the insurer, then the chiropractor would be wise to fully disclose to the insurer that it charges non-insurance patients who pay cash a lower fee.

Facts:

The inquirer reports that he is a chiropractor who conducts business in New York State. The inquirer notes that he asked the New York State Education Department - the agency that licenses chiropractors to do business in New York—whether it is permissible to provide a discounted fee to certain patients who pay cash for chiropractic services. The inquirer was advised by the Education Department to request an opinion from the Office of General Counsel of the New York State Insurance Department.

The inquirer proposes to engage in two activities, and ask whether they might subject him to charges of insurance fraud. First, the inquirer proposes to charge a lower fee for services to a patient who pays cash and whose contractual benefits from an insurance policy have been exhausted than to an insured patient whose contractual benefits under an insurance policy have not been fully utilized. Second, the inquirer proposes to charge a patient without insurance who pays cash a lower fee for services than an insured patient. The scenarios presented assume that the inquirer would be a “non-participating” provider vis-à-vis any insurer involved, and would have no contractual relationship with the insurer.

Analysis:

N.Y. Ins. Law § 403(a) (McKinney 2006) is relevant to the inquirer’s inquiry. It states in pertinent part: "In this article, 'fraudulent insurance act' means an insurance fraud as defined in section 176.05 of the penal law . . . ." In turn, N.Y. Penal Law § 176.05(1) (McKinney Supp. 2007) sets forth the following definition of "fraudulent insurance act":

1. A fraudulent insurance act is committed by any person who, knowingly and with intent to defraud presents, causes to be presented, or prepares with knowledge or belief that it will be presented to or by an insurer, self insurer, or purported insurer, or purported self insurer, or any agent thereof, any written statement as part of, or in support of, an application for the issuance of, or the rating of a commercial insurance policy, or certificate or evidence of self insurance for commercial insurance or commercial self insurance, or a claim for payment or other benefit pursuant to an insurance policy or self insurance program for commercial or personal insurance which he knows to: (i) contain materially false information concerning any fact material thereto; or (ii) conceal, for the purpose of misleading, information concerning any fact material thereto.

Similarly, N.Y. Penal Law § 176.05(2) (McKinney Supp. 2007) states:

2. A fraudulent health care insurance act is committed by any person who, knowingly and with intent to defraud, presents, causes to be presented, or prepares with knowledge or belief that it will be presented to, or by, an insurer or purported insurer or self-insurer, or any agent thereof, any written statement or other physical evidence as part of, or in support of, an application for the issuance of a health insurance policy, or a policy or contract or other authorization that provides or allows coverage for, membership or enrollment in, or other services of a public or private health plan, or a claim for payment, services or other benefit pursuant to such policy, contract or plan, which he knows to:

(a) contain materially false information concerning any material fact thereto; or

(b) conceal, for the purpose of misleading, information concerning any fact material thereto. Such policy or contract or plan or authorization shall include, but not be limited to, those issued or operating pursuant to any public or governmentally-sponsored or supported plan for health care coverage or services or those otherwise issued or operated by entities authorized pursuant to the public health law. For purposes of this subdivision an "application for the issuance of a health insurance policy" shall not include (a) any application for a health insurance policy or contract approved by the superintendent of insurance pursuant to the provisions of sections 3216, 4304, 4321, or 4322 of the insurance law or any other application for a health insurance policy or contract approved by the superintendent of insurance in the individual or direct payment market; and (b) any application for a certificate evidencing coverage under a self-insured plan or under a group contract approved by the superintendent of insurance.

The Department is of the view that both a "fraudulent health care insurance act" and a "fraudulent insurance act" constitute insurance fraud within the meaning of Insurance Law 403(a).

The inquirer proposes to charge a non-insurance patient who pays cash a lower fee for chiropractic services than he charges an insured patient. With respect to non-insurance patients, neither the chiropractor nor the patient submits any claim for chiropractic services to an insurer, self-insurer, purported insurer, or any agent thereof. Accordingly, in processing such a claim, there is no insurance act involved, fraudulent or otherwise.

However, if a chiropractor submits a claim to an insurer for an insured patient, or issues a bill to an insured patient for services knowing that the bill will be presented to the insurer, then the chiropractor runs the risk of being charged with a fraudulent insurance act if the chiropractor were to mislead the insurer by, for example, failing to disclose that he charges non-insurance patients a lower fee for the same services he provides to insured patients. Thus, the prudent chiropractor should fully disclose to the insurer that it charges non-insurance patients who pay cash a lower fee.1

This opinion is limited to whether the transactions described might constitute insurance fraud. The Department expresses no view here about any fee schedule pertaining to no-fault insurance or the availability of workers' compensation benefits. Nor does the Department purport to construe the New York State Education Law.

For further information you may contact Senior Attorney Robert Freedman at the New York City Office.

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1If a chiropractor has a contractual relationship with an insurer, the terms of that contract may limit the provider's discretion to charge lower fees to different categories of patients.

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Dr. Homola is a second-generation chiropractor who has dedicated himself to defining the proper limits on chiropractic and to educating consumers and professionals about the field. His 1963 book Bonesetting, Chiropractic, and Cultism supported the appropriate use of spinal manipulation but renounced chiropractic dogma. His 1999 book Inside Chiropractic: A Patient's Guide provides an incisive look at chiropractic's history, benefits, and shortcomings. Now retired after 43 years of practice, he lives in Panama City, Florida.

This page was posted on February 17, 2004.