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What does the new Medicare Shared Debt Recovery Scheme mean for medical professionals?

Author: Craig Hong
4 min read
26 September 2019

Key Takeaways

  • Incorrect Medicare billing can leave a medical practice and doctors liable for any compliance debt
  • It is essential to account for Medicare Shared Debt Recovery in contractor and service agreements
  • The Commonwealth has final say over who is liable for any debt, but contractor agreements can provide indemnification for involved parties

New legislation introduced in July (2019) means doctors and a medical practice can be held liable for any over-claim on Medicare.

For this reason, it is essential medical professionals and practices understand what the Shared Debt Recovery Scheme legislation means and how they can take steps to mitigate against liability.

Firstly, what is the Shared Debt Recovery Scheme?

The Shared Debt Recovery Scheme (the Scheme), came into effect on 1 July, 2019 and is part of the Health Insurance Act 1973. It is designed to help the government hold practitioners and other third parties involved in the processing of Medicare claims, responsible for repayment of compliance debts for incorrectly claiming Medicare benefits.

Any incorrect claims must be repaid through the making of a shared debt determination.

As a general rule, the primary responsibility for correctly claiming Medicare benefits rests with the health practitioner providing the Medicare service. This is because the practitioner is the person who has a provider number, which they give to clients and patients so they can claim any Medicare refund.

A practitioner should only give their provider number to a client or patient when they have delivered a Medicare service in accordance with the requirements to be eligible for a refund under the Medicare Benefits Schedule.

Unfortunately, many medical practitioners are pressed for time in providing patient care to manage the billing process from start to finish. In most medical practices, Medicare claims and billing is often be handled by one or more appropriately trained administrative staff.

People being people, the chances for an incorrect claim increases with each set of hands a patient’s billing goes through.

In practices where there are not clear policies and procedures for claims, the chances of incorrect claims is exponentially higher.

However, under the Scheme, the government can make a determination that in cases of incorrect Medicare billing, both a practitioner (Primary Debtor) and a practitioner’s employer, principal or service provider (Secondary Debtor) are now liable for repayment of compliance debts.

Generally, the default split of liability for the compliance debt will be 65% to the Primary Debtor and 35% to the Secondary Debtor, but the Commonwealth has a broad discretion in how to apportion the liability for the compliance debt.

How to mitigate risk?

The Commonwealth has made it clear that it will not be bound to any contractual provisions between a primary and secondary debtor, which can make it difficult, but not impossible, to mitigate against.

So even if you have contractual clauses which makes another party liable for some or all of the compliance debt, the Commonwealth can make a different shared debt determination and that party will be liable to the Commonwealth for the amount stated in the determination.

Once this determination is handed down, there is nothing in the legislation to stop a practitioner and a practice from having a contractual arrangement whereby one party indemnifies the other for any payments that the other ends up being liable for under the shared debt recovery scheme.

If done correctly, it means that even though the indemnified party will still technically liable to pay the debt to the Commonwealth, they will then be entitled to recover that money from the other party in accordance with their private contract.

What do practices and doctors need to do to protect themselves?

There are a number of practical steps doctors and medical practices can take to protect themselves against liability under the new legislation. These include:

  • Review your billing practices and procedures to reduce or eliminate the risk of incorrect billing and Medicare claims as far as practicably possible
  • Check your current agreements to see what the position would be in the event of a shared debt determination
  • Agree between doctors and the practice what the liability position should be in a range of incorrect billing scenarios
  • Amend your documents to reflect the agreed position

It is critical that medical practices consider how this new legislation may affect them and because of the interaction between the legislation and contractual provisions, it is important that any indemnities included in an agreement are carefully drafted to achieve the desired result.

If you would like to know how your agreements would currently deal with a shared debt determination, if your agreements are silent to this issue or if you want to amend your agreements to more particularly address this new legislation, please contact me to discuss.

The information in this blog is intended only to provide a general overview and has not been prepared with a view to any particular situation or set of circumstances. It is not intended to be comprehensive nor does it constitute legal advice. While we attempt to ensure the information is current and accurate we do not guarantee its currency and accuracy. You should seek legal or other professional advice before acting or relying on any of the information in this blog as it may not be appropriate for your individual circumstances.

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