CurrentAlabama Department of InsurancePolicy 2023-02

Bulletin: Medical bill factoring and altering medical bills

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This bulletin governs the Department's stance on third‑party medical bill factoring and on altering or augmenting medical bills that may be submitted to insurers; it applies to all property and casualty insurers admitted or doing business in Alabama and entities involved in medical billing in Alabama.

Policy Summary

PayerAlabama Department of Insurance

PolicyMedical bill factoring and altering medical bills (Bulletin)

Policy CodePolicy 2023-02

Change TypeInformational bulletin

Effective DateMay 4, 2023

Next Review Date

Key ActionDo not issue or submit medical bills that have been modified or augmented by a third party to reflect charges exceeding those originally billed by the treating provider.

SourceLink

POLICY UPDATE CHANGES

No material clinical or coverage changes in this revision.

BULLETIN NO. 2023-02document identifier

Effective Immediatelyeffective timing

All P&C insurersaudience

Enforcement and Determinations

Enforcement and determinations

Commissioner determinations and enforcement stance:

The Commissioner has determined that proper factoring of medical bills — where a provider issues a bill and a factor purchases the right to collect that billing from the patient — is not the business of insurance under the Alabama Insurance Code.

Medical bills that are issued, modified, or augmented by a third party so as to reflect charges exceeding those originally billed by the treating provider, when done with reasonable anticipation that the billing may be submitted to a health or liability insurer as a bona fide bill, can constitute 'insurance fraud' under Ala. Code § 27-12A-2.

Such conduct may subject the person or business entity to criminal liability and may be investigated and prosecuted by the Department's Fraud Bureau (the insurance fraud unit established under Ala. Code § 27-12A-40).

Billing Conduct and Thresholds

Billing conductmixed

No codes listed

Alteration threshold — when altered/augmented charges may be treated as fraud

Threshold statementCharges altered or augmented by a third party so they exceed the amounts originally billed by the treating provider, when done with reasonable anticipation the billing may be submitted to a health or liability insurer, may be treated as insurance fraud.

Triggering conditionModification or augmentation of an issued medical bill by a third party that increases the charge above the original provider amount.

Intent elementThe alteration is done with reasonable anticipation that the modified bill may be submitted to an insurer as a bona fide bill.

Potential consequenceSuch conduct can subject a person or business entity to possible criminal liability under Ala. Code § 27-12A-2 and investigation by the Department's Fraud Bureau.

Prohibitions and Required Actions

Denial Risk

Prohibition on altered third‑party medical bills

Do not issue or submit medical bills that have been modified or augmented by a third party to reflect charges exceeding those originally billed by the treating provider when such alteration is done with reasonable anticipation it may be submitted to an insurer; such conduct may constitute insurance fraud and be subject to investigation and prosecution by the Department's Fraud Bureau.

Altering or augmenting a bill to increase charges compared with the treating provider's original bill is prohibited when done with reasonable anticipation of submission to a health or liability insurer.
Such conduct can be considered "insurance fraud" under Ala. Code § 27-12A-2 and may be investigated and prosecuted by the Department's Fraud Bureau.

Defined Terms

Proper factoring — definition

DefinitionProper factoring occurs when a medical provider issues a bill and a factor purchases, from the medical provider, the right to collect the billing from the patient.

Regulatory stanceProper factoring is not deemed to be the business of 'insurance' as defined in the Insurance Code (Ala. Code Tit. 27).

Parties involvedInvolves the originating medical provider (seller of the receivable) and the factoring entity (purchaser of the right to collect).

Altered or augmented medical billing — definition and fraud note

DefinitionMedical billing issued, modified, or augmented by a third party in a manner that reflects charges exceeding those originally billed by the treating provider when done with reasonable anticipation that such billing may be submitted to a health or liability insurer.

Legal referenceSuch conduct can constitute 'insurance fraud' as defined in Ala. Code § 27-12A-2.

EnforcementThe Department's Fraud Bureau may inquire, investigate, and cause prosecution of alleged insurance fraud resulting from altered or augmented medical bills.

Policy Summary

PayerAlabama Department of Insurance

PolicyMedical bill factoring and altering medical bills (Bulletin)

Policy CodePolicy 2023-02

Change TypeInformational bulletin

Effective DateMay 4, 2023

Next Review Date

Key ActionDo not issue or submit medical bills that have been modified or augmented by a third party to reflect charges exceeding those originally billed by the treating provider.

SourceLink

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CurrentAlabama Department of InsurancePolicy 2023-02

Bulletin: Medical bill factoring and altering medical bills

Customize your policy alerts

Sign up for Alabama Department of Insurance Policy 2023-02 alerts

Get alerted when Policy 2023-02 changes without checking for updates manually.

Monitor payer policy activity

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Policy Summary

PayerAlabama Department of Insurance

PolicyMedical bill factoring and altering medical bills (Bulletin)

Policy CodePolicy 2023-02

Change TypeInformational bulletin

Effective DateMay 4, 2023

Next Review Date

Key ActionDo not issue or submit medical bills that have been modified or augmented by a third party to reflect charges exceeding those originally billed by the treating provider.

SourceLink

POLICY UPDATE CHANGES

No material clinical or coverage changes in this revision.

BULLETIN NO. 2023-02document identifier

Effective Immediatelyeffective timing

All P&C insurersaudience

Enforcement and Determinations

Enforcement and determinations

Commissioner determinations and enforcement stance:

Billing Conduct and Thresholds

Billing conductmixed

No codes listed

Alteration threshold — when altered/augmented charges may be treated as fraud

Triggering conditionModification or augmentation of an issued medical bill by a third party that increases the charge above the original provider amount.

Intent elementThe alteration is done with reasonable anticipation that the modified bill may be submitted to an insurer as a bona fide bill.

Potential consequenceSuch conduct can subject a person or business entity to possible criminal liability under Ala. Code § 27-12A-2 and investigation by the Department's Fraud Bureau.

Prohibitions and Required Actions

Denial Risk

Prohibition on altered third‑party medical bills

Altering or augmenting a bill to increase charges compared with the treating provider's original bill is prohibited when done with reasonable anticipation of submission to a health or liability insurer.
Such conduct can be considered "insurance fraud" under Ala. Code § 27-12A-2 and may be investigated and prosecuted by the Department's Fraud Bureau.

Defined Terms

Proper factoring — definition

DefinitionProper factoring occurs when a medical provider issues a bill and a factor purchases, from the medical provider, the right to collect the billing from the patient.

Regulatory stanceProper factoring is not deemed to be the business of 'insurance' as defined in the Insurance Code (Ala. Code Tit. 27).

Parties involvedInvolves the originating medical provider (seller of the receivable) and the factoring entity (purchaser of the right to collect).

Altered or augmented medical billing — definition and fraud note

Legal referenceSuch conduct can constitute 'insurance fraud' as defined in Ala. Code § 27-12A-2.

EnforcementThe Department's Fraud Bureau may inquire, investigate, and cause prosecution of alleged insurance fraud resulting from altered or augmented medical bills.

Policy Summary

PayerAlabama Department of Insurance

PolicyMedical bill factoring and altering medical bills (Bulletin)

Policy CodePolicy 2023-02

Change TypeInformational bulletin

Effective DateMay 4, 2023

Next Review Date

Key ActionDo not issue or submit medical bills that have been modified or augmented by a third party to reflect charges exceeding those originally billed by the treating provider.

SourceLink

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