When Is It Okay to Waive a Copay? An AKS Compliance Guide for Small Practices (42 CFR § 1003.110)

Introduction

For many small medical practices, copayments can feel like a barrier between patients and necessary care. Patients sometimes struggle to pay out-of-pocket costs, and practices may feel tempted to waive copays as an act of compassion or a way to retain patients. While these intentions may be good, waiving copays, particularly for patients covered by Medicare or Medicaid, can create significant legal risks under the Anti-Kickback Statute (AKS) and the Civil Monetary Penalties Law (CMPL).

Improper copay waivers can be viewed as unlawful inducements, encouraging patients to use a provider’s services or increasing unnecessary utilization. The regulation at 42 CFR § 1003.110 clearly defines what constitutes remuneration and sets limits on when cost-sharing waivers are permissible. For small practices, understanding when it is okay to waive a copay, and when it is not, is essential to avoid penalties, fines, or even exclusion from federal healthcare programs.

This guide explores the compliance framework, highlights risky scenarios, and provides practical best practices to help small practices protect themselves while still showing compassion to patients in need.

Understanding the Legal Framework

The Anti-Kickback Statute (AKS)

The AKS prohibits knowingly and willfully offering, paying, soliciting, or receiving remuneration to induce referrals or generate business reimbursable by federal healthcare programs. Waiving copays can fall under this definition if it is used as a way to attract patients.

The Civil Monetary Penalties Law (CMPL)

The CMPL, codified in part at 42 CFR § 1003.110, specifically prohibits routine waivers of copayments or deductibles. A “routine waiver” refers to a consistent practice of not collecting cost-sharing from patients, which regulators see as a form of remuneration.

Permissible Exceptions

There are narrow exceptions where waivers are allowed:

Financial Hardship: Practices may waive copays when a patient demonstrates genuine financial need, but such waivers must be well-documented.
Failure to Collect After Reasonable Effort: If a provider attempts to collect a copay and the patient does not pay, writing off the debt after reasonable collection efforts is not a violation.
Authorized By Law or Regulations: Certain federal or state programs may permit cost-sharing reductions or waivers.

Why Improper Copay Waivers Create Risk

Improper waivers of copays may seem harmless, but they can lead to significant compliance issues:

Inducement Risk: Regularly waiving copays encourages patients to choose a provider based on financial incentives rather than medical need.
False Claims Act Exposure: Submitting claims to Medicare or Medicaid that fail to account for waived copays may be considered false claims, leading to treble damages.
Civil Monetary Penalties: Each violation can result in fines up to $100,000.
OIG Scrutiny: The Office of Inspector General (OIG) closely monitors patterns of copay waivers, especially if advertised as a marketing tool.

For small practices, these risks are particularly dangerous, as penalties could cripple financial stability and harm patient trust.

Real-World Case Study: Routine Waivers Trigger Enforcement

A small cardiology clinic adopted what it viewed as a patient-friendly strategy, routinely waiving Medicare copays to encourage patients to continue follow-up visits. The intent was to improve continuity of care and reduce financial burdens on patients. However, the clinic did not establish or document any financial hardship policy, made no attempt to collect payments, and even advertised the promise of “no out-of-pocket costs” as a way to attract new Medicare patients.

Regulatory Findings

The Office of Inspector General (OIG) determined that these practices violated both the Anti-Kickback Statute (AKS) and the Civil Monetary Penalties Law (CMPL). Under federal law, routine waivers of copays, without individualized, documented hardship determinations, are considered unlawful remuneration. By openly marketing the waivers, the clinic created a strong financial incentive for patients to choose their services, which regulators viewed as an inducement to generate Medicare business.

Outcome

Settlement: $350,000 civil monetary penalty.
Corporate Integrity Agreement: Mandating external monitoring, independent audits, and board-level compliance reporting.
Training & Oversight: All staff were required to complete AKS and CMPL compliance training, with annual refreshers.

Lesson Learned

What seemed like a “patient-friendly” initiative became a costly enforcement action. Even small practices must recognize that offering financial incentives tied to patient choice, especially when advertised, can cross into illegal territory. Properly documenting hardship waivers and aligning policies with OIG safe harbors are critical to protecting both compliance and patient trust.

Key Compliance Guidelines for Small Practices

1. Establish Written Policies

Create clear policies outlining when copay waivers may be granted. Policies should specify financial hardship criteria and require documentation for every waiver.

2. Require Documentation of Financial Hardship

Practices should develop objective standards for hardship waivers, such as household income relative to federal poverty guidelines. Patients should provide written attestation or supporting evidence.

3. Avoid Advertising Waivers

Never promote copay waivers as part of marketing or patient acquisition strategies. Doing so raises immediate red flags for regulators.

4. Apply Policies Consistently

Ensure that waiver policies apply uniformly to all patients who meet hardship criteria. Selective application could appear discriminatory or financially motivated.

5. Audit and Monitor

Conduct regular audits of billing and collections to ensure compliance. Monitoring helps identify patterns that might suggest improper waiver practices.

Safe vs. Risky Copay Waiver Practices

Scenario	Compliant Practice	Non-Compliant Practice
Hardship Waiver	Waiving a copay after documented proof of financial hardship	Waiving copays for all Medicare patients without documentation
Collection Failure	Writing off a debt after multiple documented collection attempts	Immediately writing off all copays without any collection effort
Marketing Use	Never advertising waivers	Advertising “no copay required” to attract patients
Consistency	Applying the same hardship criteria to all patients	Selectively waiving copays for influential patients or referrers
Documentation	Keeping written records of hardship evaluations	No written records; verbal justification only

Best Practices for Implementation

Create a Hardship Form: Develop a standardized form for patients to request hardship waivers.
Train Staff: Ensure all billing and administrative staff understand the legal limits and documentation requirements.
Leverage Technology: Use electronic health record (EHR) systems to track waiver documentation.
Seek Legal Review: Consult with healthcare counsel to ensure your policies align with federal and state regulations.
Educate Patients: Explain copay obligations clearly, and provide patients with information about when waivers may be granted.

The Financial and Reputational Value of Compliance

For small practices, the temptation to waive copays routinely is understandable, but the risks are too high to ignore. Compliance safeguards not only protect against fines and penalties but also strengthen the reputation of the practice. Patients value providers who balance compassion with professionalism and integrity.

By following the safe pathways outlined in 42 CFR § 1003.110, practices can show empathy for patients in need while protecting themselves from devastating enforcement actions.

Conclusion

Waiving copays is not inherently illegal, but it becomes problematic when done routinely, without documentation, or as a marketing tactic. For small practices, understanding the compliance framework under 42 CFR § 1003.110, the AKS, and CMPL is critical.

The keys to compliance include documenting hardship, maintaining consistent policies, avoiding inducements, and training staff effectively. By implementing structured policies and staying vigilant, small practices can avoid enforcement risks while still providing compassionate care to patients who truly cannot afford cost-sharing.

Ultimately, striking the right balance between patient support and regulatory compliance ensures long-term stability, protects against government scrutiny, and fosters a trusted healthcare environment.

Strengthening compliance isn’t just about checking boxes. A HIPAA compliance platform helps your practice stay ahead by tracking regulatory requirements, running proactive risk assessments, and keeping you audit-ready, proving to patients and regulators that you prioritize accountability.