April 2019

Medicare billing and the new Shared Debt Recovery Scheme: What you need to know!

Prior to 1 July 2019, health professionals and corporate health service providers will need to review their Medicare billing practices and procedures to ensure that they are ready to comply with changes to the Health Insurance Act 1973 (Cth)(HIA).  

What’s it about?

With the objective of strengthening compliance, protecting the integrity of Medicare claims made under the HIA and of course, saving money, on 1 July 2018, the Government introduced the Health Legislation Amendment (Improved Medicare Compliance and Other Measures) Act 2018 (Cth) (New Legislation).

One of the main issues that the New Legislation seeks to tackle is incorrect (and sometimes fraudulent) Medicare billing practices engaged in by health professionals, and in particular, the incorrect billing practices of some corporate health service providers that provide Medicare billing services on behalf of health professionals working in their organisations (secondary debtors). 

The New Legislation gives Medicare new debt recovery powers aimed at enhancing the ability to recover Medicare debts incurred as a result of inaccurate claiming and inappropriate billing practices. 

When does the Scheme come into effect?

Despite the New Legislation having already partially come into effect on 1 July 2018, the Scheme itself (along with various related amendments to the HIA) will not commence until 1 July 2019.

Reasons for introducing the Scheme

In a Department of Health consultation paper entitled ‘Medicare Compliance – Shared Debt Recovery Scheme’ released in December 2018 (consultation paper), the Government revealed that its success rate in recovering debts associated with incorrect Medicare billing prior to the introduction of the New Legislation, was as low as 20%, resulting in a perceived need for stronger powers to recover debt and reduce inappropriate practices.

A major contributing factor to the low debt recovery success rate, according to the Government, was the changing nature of health practice and the delivery of healthcare services in Australia.  As observed in the consultation paper, the structure and business models of entities that provide healthcare services in Australia has changed significantly since the 1980s, when Medicare was originally established. 

Since the inception of Medicare, we have seen a rapidly growing shift away from the traditional health service provider business model of a number of smaller or sole trader operations (eg. a medical practice run by a doctor and their spouse), to a substantial proportion of health services being provided by large corporate groups, often spanning several health service areas engaging hundreds of health professionals.  This trend can be seen across several health service subsectors (eg. GP services, dental services, pathology and diagnostic imaging services to name a few).

Under these larger structures, it is common for the corporate group to have control over the Medicare billing process and have administrative functions dedicated to billing Medicare on the health professional’s behalf.  The nature of the health professional’s engagement with these companies and the structure of their remuneration under these arrangements are varied and often complex.  The Government is concerned that, it is often the case that health professionals working in these large corporate groups have limited visibility and control over the billing process and what is being done on their behalf.

This lack of visibility and control is perceived to be contributing to incorrect billing practices, and the Scheme has been designed to encourage practitioners and organisations to work together to minimise incorrect billing and promptly repay Medicare where incorrect billing has occurred.

Secondary debtors to share repayments

Under the Scheme, corporate health service providers that conduct Medicare billing on behalf of health professionals may also be responsible – in addition to the health professionals – as secondary debtors for the repayment of part or all of any Medicare benefits that are found by the Chief Executive Medicare (Regulator) to have been incorrectly billed.  It is essential for all health service providers to understand their obligations under the Scheme, but especially those who will be impacted the most by these changes: large corporate health service providers.

An overview of the Scheme

Who does the Scheme apply to?

The relationships that will attract the application of the new Scheme will include those where the secondary debtor:

  • employed or otherwise engaged the health professional to render professional services attracting benefits under HIA;

  • had an arrangement or agreement with the health professional relating to professional services of that kind; or

  • is a person in a class of persons prescribed by the Minister under the HIA.

What are the responsibilities of the Regulator?

The Regulator will be responsible for:

  • conducting audits;

  • issuing notices to and requesting substantiating documents from both health professionals and secondary debtors; and

  • making determinations as to whether a shared debt should be imposed (and if so, the proportion of the debt to be paid by each party and whether a party will also receive an additional administrative penalty).

How will the Regulator determine liability?

In considering whether a corporate health service provider will be liable to make a shared debt payment as a secondary debtor under the Scheme, the Regulator will consider whether:

  • the secondary debtor could have controlled or influenced the circumstances that led to the making of the false or misleading statement to which the debt relates;

  • the secondary debtor directly or indirectly obtained a financial benefit from the making of the false or misleading statement; and

  • there are any other factors which, in all the circumstances, make it fair and reasonable for the determination to be made.

The proportion to be paid by liable health professionals and secondary debtors will depend upon what the Regulator believes is fair and reasonable in the specific circumstances.

Other changes to encourage compliance

In addition to the Regulator’s audit powers and power to request information, the New Legislation includes the following additional requirements and enforcement mechanisms to encourage compliance under the Scheme:

  • the Regulator must give both health professionals and potential secondary debtors notice that they are considering making a determination (this is expected to prompt the parties to provide documents and submissions as to whether they should be liable and to promptly repay amounts found to be owing);

  • the following documents are now required to be kept for a period of 2 years after their creation:

    • referrals of patients to consultant physicians or specialists;

    • requests for pathology services, confirmation of requests for pathology services and various information required to be maintained by pathology authorities;

    • requests for diagnostic imaging services;

    • documents created in connection with the rendering of a professional service specified in the General Medical Services Table; and

    • any other referral determined by the Minister under section 3C of the HIA; and

  • the Regulator may also:

    • apply administrative penalties on amounts of $2,500 (or more) owed by health professionals (and secondary debtors) determined to be owing to the Regulator as a result of incorrect Medicare billing;

    • setoff or deduct incorrectly paid amounts against other amounts owed by Medicare to the health professional (or secondary debtor); or

    • issue garnishee notices (note: a failure to comply with these notices can result in the imposition of fines).

Right to review?

Both health professionals and secondary debtors will be entitled under the Scheme to respond in relation to Regulator determinations and to request a review of determinations.  All reviews must be requested within 28 days after receiving the determination from the Regulator. 

Reviews will be conducted by review officers on behalf of the Regulator and each review applicant will be given written notice of the decision on review.

Other changes

The New Legislation also introduces a similar debt recovery scheme (to the Scheme) under:

  • the National Health Act 1953 (Cth) to apply in relation to incorrect Medicare claims for pharmaceutical benefits; and

  • the Dental Benefits Act 2008 (Cth) to apply in relation to incorrect Medicare claims made in relation to dental services.

Other risks associated with providing false or misleading information

It should be remembered that the changes under the New Legislation and Scheme do not displace the following provisions of the HIA (that already prohibit fraudulent conduct):

  • section 128A which prohibits the making of a statement that is false or misleading and capable of being used in connection with a claim for a Medicare benefit (the penalty is a fine of up to $4,200 per offence);

  • section 128B which imposes more severe penalties for knowingly making false or misleading statements capable of being used in connection with a claim for a Medicare benefit (the penalties are fines of up to $21,000 per offence or up to 5 years imprisonment or both); and

  • section 129 which also prohibits the furnishing of a return or information that is false or misleading in a material particular (which also carries a maximum penalty of fines of up to $21,000 per offence or up to 5 years imprisonment).

Take home message

Corporate health service providers need to review their billing practices prior to 1 July 2019 – non-compliance under the Scheme could not only lead to adverse financial and other criminal penalties, but also to a toxic working relationship with your health professionals.


Author: Matthew Wilson

Further contact: Michael Cossetto