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FAQs:  Administrative Fees Under Medicare

Client Alert

Late patients, last-minute cancellations, and difficulty in collecting fees are all common complaints from our healthcare clients.  As such, it is no wonder that a common topic among our healthcare clients revolves around what administrative fees can be charged to patients and related issues.  We thought it would be interesting to share some of the most frequently asked questions we receive in this area. 

Please note that this article is not legal advice, and readers are advised to seek legal counsel concerning their specific facts and circumstances.  All answers are based on Medicare laws and regulations.  Many commercial payers will follow Medicare guidelines in their own policies, but a provider will need to check with each specific commercial payer to confirm their policies.  Additionally, practices that are “cash-pay only” would not be subject to Medicare regulations or commercial payer policies, because they don’t bill third-party payers.  Finally, every state has unique laws, so it is imperative to confirm whether your state law addresses any of these topics. 

Q1: Can a physician practice require patients to pay a deposit for an appointment or scheduled procedure?

        A: Yes, practices can require deposits in order to secure appointments. However, some insurers may explicitly forbid your practice from doing so. Additionally, best practice is to inform patients upfront about the fee.

Q2: What about hospitals? Are they permitted to collect deposits?

        A: Chapter 2 (Section 10.3) of the Medicare Claims Processing Manual does not permit requiring prepayment as a condition of admission. However, Section 10.4 does state that “[t]he provider may collect deductible or coinsurance amounts only where it appears that the patient will owe deductible or coinsurance amounts and where it is routine and customary policy to request similar prepayment from non-Medicare patients with similar benefits that leave patients responsible for a part of the cost of their hospital services.”


Q3: Can my physician practice charge appointment cancellation fees to patients who do not cancel within 24 hours of their appointment?

        A: Yes, charging a fee is permitted by Medicare if it is in the practice’s written policy. However, Medicare is clear that these late fees can be charged ONLY to Medicare patients, and Medicare will not pay for the missed appointment, so it must be charged to the patient directly.


Q4: Can hospitals charge hospital inpatients a missed appointment fee?

        A: No, this would violate 42 CFR 489.22.


Q5: Can my practice keep patient credit cards on file?

        A: Yes, practices can keep patient credit cards on file, provided that certain safeguards are put in place to protect card information. Additionally, you should check with your credit card processing company to assure that they permit cards to be kept on file, as well as check with any applicable insurance carriers that would cover identity theft, credit card fraud, or other issues involving the practice’s credit card transactions.


Q6: What requirements does my physician practice need to follow in order to safeguard patient credit card information?

       A: Both the Payment Card Industry Data Security Standard (“PCI DSS”) and the Health Insurance Portability and Accountability Act (“HIPAA”) apply to practices that store patient credit card information. As such, practices should have a policy in place outlining the requirements for each.

PCI DSS lists twelve (12) safeguards that must be met when storing credit card information:

(1) Install and maintain a firewall configuration to protect cardholder data;

(2) Will not use vendor-supplied defaults for system passwords and other security parameters;

(3) Protect stored cardholder data;

(4) Encrypt transmission of cardholder data across open, public networks;

(5) Use and regularly update anti-virus software or programs;

(6) Develop and maintain secure systems and applications;

(7) Restrict access to cardholder data by business need to know;

(8) Assign a unique ID to each person with computer access;

(9) Restrict physical access to cardholder data;

(10) Track and monitor all access to network resources and cardholder data;

(11) Regularly test security systems and processes; and

(12) Maintain a policy that addresses information security for all personnel.

Additionally, HIPAA lists certain standards for disposing of patient payment information. For example, safe disposal would include card information being placed into locked shred bins, and all employees who are responsible for disposing of such information receive training in proper disposal.

If you have questions about rules or policies governing administrative fees charged to patients, please contact Member and General Counsel Jeana Singleton by email at, by phone at (330) 253-2001 or another member of the Healthcare & Hospital Law Department of Brennan Manna & Diamond.


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