In this episode, hosts Brad and Michael share the story of a cardiology practice that added a cash-based weight loss program to its traditional insurance-based model. The change led to unexpected legal challenges, patient confusion, and operational strain as the practice struggled to manage conflicting payment structures. Tune in to learn the legal obligations of in-network providers, the compliance risks of mixing payment models, and how to stay compliant when adding new services.
Listen to the full episode using the player below, or by visiting one of the links below. Contact ByrdAdatto if you have any questions or would like to learn more.
Transcript
*The below transcript has been edited for readability.
Intro: [00:00:00] Welcome to Legal 123s with ByrdAdatto. Legal issues simplified through real client stories and real-world experiences, creating simplicity in 3, 2, 1.
Brad: Welcome back to another episode of Legal 123s with ByrdAdatto. I’m your host, Brad Adatto, my co-host, Michael Byrd.
Michael: As a business and health care law firm, we meet a lot of interesting people and learn their amazing stories. This season’s theme is Unintended Consequences. We sometimes find ourselves in a situation that can be traced back to a seemingly inconsequential or unrelated decision.
Brad: Michael, once again, this season we welcome back series regular, our partner, Jay Reyero.
Jay: Hey, guys, I always love being here.
Brad: Yes, we’re happy to have you back, Jay. because I’ve got some fun stuff to kind of kick us off today. Now, normally this is the part where we touched on some lighthearted topic, but I want to get really serious and talk about something very interesting.
Jay: Okay.
Michael: [00:01:00] Brad, I don’t think you’re capable of a serious conversation.
Brad: Okay, follow me here. Ready?
Michael: Okay.
Brad: Have you heard of the Golden Globes?
Jay: I am going to assume that you’re talking about the annual award show that’s given out for excellence in international film and television.
Brad: Ding, ding, ding. Yes, you’re correct, Jay. Well, beginning in 2026, the Golden Globes will be adding a new category to award a slate. It is recognized for extraordinary diverse talents in podcasting honoring the best podcast of the year. Guys, I think we have a chance.
Michael: I really like where your head’s at, Brad. We need to tighten things up a bit to get ourselves award worthy. Kennedy, can you make a planning note? because I don’t want to forget that we need less, Brad
Brad: Oh, hold on. Kennedy, I think my headphones are not working well. I heard Michael say less Brad. There must be some technical issue on that. [00:02:00]
Jay: No, I heard it loud and clear.
Michael: Yeah, it’s for the award, Brad.
Jay: All right, Brad, what do we have to do in order to qualify for the award?
Brad: All right. The top 25 podcasts will qualify for the award with a total of six final nominees for the category. And there are a whole bunch of different categories and other details, but we don’t have to worry about that right now.
Michael: Do they have a law category?
Jay: Okay. So first obvious question I think that everybody’s wondering, how close are we to the top 25?
Brad: Jay, don’t worry about that. It’s not important, but I do have to go through the top 25 and I identify two podcasts that I think if we work hard enough, we could actually take over their market share and completely replace them.
Michael: Okay. I’m curious. I’ll buy it. What’s the first one?
Brad: It sounds pretty common here. The first one is, Call Me Daddy. And we are three dads and we have really great handcrafted dad jokes. And of course, the puns that Jay brings. [00:03:00]
Jay: Whoa, Brad, I’m pretty sure you’re mistaken on that one. I think you mean Call Her Daddy with Alex Cooper. It’s like one of the one of, if not, the most listened podcast by women. I don’t know what list you’re looking at.
Michael: I think your show sounds less dad joke and more niche adult content show. No whips and chains, Brad.
Brad: None of that. Okay, asking for a friend here. But I’m wondering if our 13-year-old boy humor is a niche, which reminds me of the other show on the list that might be, that follows this. And I think we all love this show and maybe the best category for us – Smartless.
Michael: Yes. That is probably good because they’re definitely not professional podcasters like us, but we all love them. And I think what is compelling about Smartless, which is hosted by Jason Bateman, Sean Hayes and Will Arnett, [00:04:00] is that they are friends in real life. And so they kind of give each other a hard time and have surprise guests on every week. That’s their big thing is you don’t know who they’re going to bring on.
Jay: Yeah. And I could see you’re thinking here, Brad, right? Three guys, enjoy each other, friends and around each other outside the podcast and check, check, check. They make fun of each other frequently. I’ll have to say they probably are a little bit more harsh, so I guess I can up my game though. I can definitely up my game.
Brad: I’d rather you’re not, but your game’s pretty good. See, here’s what I’m thinking. Like, I could be the Will Arnett of it, you know, the intelligent, funny guy that reads great books and he just runs circles around you guys. I was having trouble figuring out which one of you was Sean Hayes. I mean, you have the Star Wars background Jay, so you know how much he loves Star Wars and Marvel, so I was like, he’s kind of like Sean Hayes. And then I kept thinking more like Michael really hates everyone like Jason Bateman does. He’s likable and like when he’s talking to a client, [00:05:00] but in reality, he’s just a terrible human being off camera. So then I was like, oh, well, maybe he could be Jason Bateman. I don’t know. Does that make sense everyone?
Michael: I had you penciled in as Sean Hayes.
Brad: Fair.
Jay: All right, Brad. So how are we going to deal with the facts? Small detail here that they interview celebrities and famous people. I mean, are you friends with Justin Theroux?
Brad: Yeah. No, but we do have many famous medical and business celebrity guests that joined the show. And I guess we need more Hollywood types for the Golden Globes to really start noticing us. But again, going back to what are we known for – truly handcrafted great dad jokes and good puns. I mean, this is a humor show.
Michael: I’ll just say we probably should move on. Let’s jump into today’s story. How about that? And start earning our stripes.
Brad: All right, Jay, let’s bring those Golden Globes here.
Jay: Alright, well, no pressure. We’re that close. [00:06:00] So the characters in today’s story are going to be a group of cardiologists. We’ll call them Dr. Bateman and Dr. Arnett, and they were founders of the Ohio Practice Cardiac Arrested Development Group, and let’s just call it CAD Group for short today.
Michael: Brilliant. I’m actually watching Arrested Development for the first time right now, and it does live up to the height.
Jay: So CAD Group was your typical cardiology practice treated patients for the typical cardiovascular issues, saw patients covered by all types of payers, Medicare, federal programs, and they were also in network with commercial insurances.
Michael: Okay, Brad, get ready, stretch, vocabulary award today, which we have covered before when Jay was here, but we’ll let you have your Golden Globe moment. So you ready? Explain what in-network means.
Brad: My Golden Globe moment. Got it. First I’d like to thank the Golden Globe for voting for me for this award for best podcast…
Michael: It was more of a just kind of [00:07:00] keeping the analogy, but yeah, get focused.
Brad: I was working on my speech.
Michael: Yeah, you got cut off just like the music.
Brad: Okay. All right. Right. Sticking with it. In-network insurance really refers to health care providers and facilities that have contracts with the insurance company, accepting and have negotiated these rates and services. In these situations, the patient’s insurance typically covers a large portion of the costs. You know, usually the patient has to pay some type of out-of-pocket. These expenses could be co-payments or co-insurance. While out-of-network insurance involves providers that do not have contracts with the patient’s insurance company. As such, an out-of-network provider typically means the insurance may cover less or no cost, leading to really higher out-of-pocket expenses for the patient.
Jay: Great job, Brad. We didn’t even have to play the music to get you off stage.
Brad: Yeah, I got nervous and Michael mentioned that there was an ability to play music earlier, so I was trying to go pretty fast with that.
Jay: Did well. So, CAD Group, were humming along in their operating season, [00:08:00] both doctors were busy, productive, patient satisfaction was where it needed to be. Really nothing out of the ordinary until Dr. Arnett traveled to a continuing medical education conference up in Canada.
Michael: I’m going to guess a preview that he probably came back with a new idea. The number of times we get phone calls after a medical conference or at the medical conference with, what do you think about this? They hear something new. Is that what we’re dealing with here?
Jay: No, exactly. Dr. Arnett began to hear all the rave about weight loss medication, the Wegovy, Mounjaro, Zepbound, tirzepatide – all the GLP-1s. And he had been aware of them before the conference, but this conference was really shining the light on the opportunities. So this was back in the beginning of that explosion that the three of us have been immersed in for a while.
Brad: Yeah. Going back to what the doc saw, I mean, I know that the weight loss medications are relatively new in certain areas where I feel like we’ve been deep in this unique practice area for a while now. [00:09:00]
Michael: I know. The funny thing is, is that primary care physicians, kind of, to your point, Brad, they’ll tell you GLP-1s have been around forever for diabetes and in their world, it was common knowledge that it caused weight loss. So they’re very nonplussed by all the activity. But the revolution that you’re speaking of is relatively new and also feels like a lifetime.
Jay: Yes. So Dr. Arnett came back super excited about everything he had just learned and immediately shared it with Dr. Bateman. And what Dr. Arnett was envisioning was exploring how could CAD Group expand by bringing on this new weight loss service line.
Brad: And we’ve discussed in other shows, adding new service lines and it’s a great way to introduce – you may bring in new patients, maybe, or bring a new form of income. However, it does have traps that they had to think about. [00:10:00] So what did Dr. Bateman think about it?
Jay: Well, I mean, he was initially a little skeptical, but Dr. Arnett was pretty persistent. And so, they continued to evaluate it from a medical standpoint to see would it fit within their practice mindset. And what really pushed them over the edge was the cardiovascular benefits that were being uncovered and more publicized by these drugs.
Michael: Yeah. And it has been in the news more and more and actually had an interesting kind of non-news conversation with some doctors. I don’t know the veracity of this, but they were talking about that even that tirzepatide, that the data or the science is showing that it’s even going to be a bigger game changer for cardiovascular health. It’s just there may not be quite as much science or data yet.
Brad: Yeah. And for those that know, the FDA has recently approved the new use of Wegovy or Semaglutide reduce the risk of cardiovascular death, heart disease, strokes in adults with cardiovascular [00:11:00] diseases or also overweight or obese, which makes Wegovy the first weight loss medication to be approved for both weight management and cardiovascular risk reduction, which is amazing to see just the application that is being used for this particular drug.
Jay: Yeah. And so what better alignment for a cardiology group offering a service line that was scientifically being proven to reduce cardiovascular risk? But just bringing it in to deal with its approved use wasn’t really what Dr. Arnett had in mind and was his vision. He really was pushing them to expand its use and offer to patients on the purely elective basis.
Michael: We’re hearing that more and more, I’m guessing though, Jay, since we’re only partly through the story and there’s yet to be an unintended consequence that they decided to go for it.
Jay: Yep, you’re right. They decided to take the leap begin offering weight loss as a new service line by CAD Group.
Brad: [00:12:00] So Jay, there’s a lot of different ways to incorporate it. How do they deal with their practice?
Jay: So they wanted to model the service line offering similar to what others in the industry and some of their peers were doing in order to stay competitive and reach as broad a patient base as possible. And since it was elective and the way these types of weight loss programs tended to work, they were focusing on structuring as a cash-only service line.
Michael: And I’m guessing here is where we get to the unintended consequence part of the story.
Jay: Yep. You see, for the most part it was straightforward, but most of their patients seeking weight loss happily paid their cash, didn’t think twice about it. But as with every story, there’s that one that causes chaos. And this is where we meet our patient, Mr. Hayes.
Michael: Hey, Brad. Oh, I’m sorry. I got lost for a second. Yes. Well, good name. You got them all in now. What was Mr. Hayes’s issue?
Jay: Yeah, so Mr. Hayes was a patient who finally inquired about the weight loss service line during one of his visits. [00:13:00] And after a few consultations, he elected to move forward with the weight loss because he’d been trying to lose weight for years and just felt like he never could get over the hump, and he just needed a little bit of help.
Brad: You know, as someone who’s as buff as I am, and as trimming fit, I really can’t relate to what Mr. Hayes is going through trying to drop a couple of pounds here and there. But for Mr. Hayes, unlike Brad, no relations, did it work for him?
Jay: Yes. Medically speaking, there was no problem. After just a few months, he started to see a real difference.
Michael: Okay, Jay, usually it’s angry patients that can cause chaos and have these unintended consequences pop up. But Mr. Hayes seems to be happy in this story.
Jay: Yeah, I mean, during this period of time, he was happily signing all the documents, paid all of his fees, like every other patient. But at some point, Mr. Hayes heard that, you know what, these treatments could possibly be covered by insurance, which CAD Group was in network with. [00:14:00] And so he immediately reached out to CAD Group and asked if they could refund his money and submit the claims through his insurance.
Brad: Now, if this was the Golden Globe Show, this is where the music would start playing, allowing the audience to know the tension was being built up here. So how did they approach this conversation?
Jay: Well, they started by engaging just a friendly kind of conversation with Mr. Hayes about how the weight loss program worked, reminding him of all the documentation he had signed and everything that talked about the financial policy surrounding it being cash, and him acknowledging that financial responsibility, just kind of revisiting what they had already done before.
Michael: I’m going to guess that that didn’t end the conversation.
Jay: What? No. Things went quiet for a couple weeks. But then Mr. Hayes began reaching out to CAD Group’s office staff even more asking for documentation and information.
Michael: Like what?
Jay: So he was trying to submit claims for reimbursement himself. So he was looking for CPT codes and documentation about [00:15:00] medical necessity, medical records to support the diagnosis and being sophisticated in this area, you know, most patients are – he was asking the office staff to help fill out the claim forms for him with all the information.
Brad: This does sound like a disaster TV show in the making.
Michael: Yeah. Okay. So tell me more.
Jay: Yeah. So this is when we got involved because Dr. Arnett, Dr. Bateman wanted to know, not only how to deal with Mr. Hayes and his request, but more importantly, what was the exposure liability or what could potentially happen here.
Michael: Okay. That seems like we’re at a good break off point to go on a break, and then we can come back and explore what some of those issues are that Mr. Hayes’s situation brought up.
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Brad: Welcome back to Legal 123s with ByrdAdatto. I’m your host Brad Adatto, with my co-host, Michael Byrd, and series regular, Jay Reyero is here with us. Now, Michael, this season, our theme is Unintended Consequences. And Jay just dropped a serious story on us, didn’t he?
Michael: Yeah. So we have a Ohio practice, Cardiac Arrested Development Group, or CAD Group. We have two doctors, Dr. Bateman and Dr. Arnett. And we have that pesky patient, Dr. Hayes.
Brad: That’s Mr. Hayes, sir.
Michael: Oh yeah. Excuse me. Yeah, you’re right, Mr. Hayes. Thanks for the correction. And then the whole story is somewhat about adding weight loss to a practice, [00:16:00] but really what we’re noticing is an issue, unintended consequence that came with the way they decided to bill by grafting that service line into their practice, because they made it a cash-based model. And so where we left off was, it was just starting to reveal itself as an issue because Mr. Hayes was wanting reimbursement and wanting to go through his insurance, and there was some friction that we were starting to pick up.
Jay: Yeah. So last season in the billing and coding episode, we talked about a cash only plastic surgery practice that brought on a new physician, introduced insurance reimbursement in the world, and talked a lot about how the lack of experience in that process really caused chaos within the practice. Well, here we have the opposite. So we don’t have the same lack of experience issues, but there are other frictions created, and one of the technical ones is charging cash to insurance patients, Brad, that I know we talked to a lot of clients about.
Brad: [00:18:00] And this is a contract issue to start off with. So understand, an in-network provider has an obligation via contract to first seek payment from the patient’s insurance for whatever the covered, again, covered services for the billing of those services. This process is often called Primary Payer Responsible, or in the street, PPR – because everyone loves that one, ensures that the insurance benefits are being utilized appropriately and that the patients, they’re not unfairly charged for services that were covered under this plan. Now, of course, the patient still has responsibilities to pay copays, deductibles, and other co-insurance. We said that earlier, but the provider will just submit that claim to the insurance company and of course, be paid according to the insurance policy claim. So that’s the contract aspect of what they’re supposed to be doing.
Jay: Yeah. And so, this contract issue has come up several times with clients over the years. And I’ll give you a great example. So there was a client that had a patient who asked for a medical [00:19:00] necessity letter and had already paid for cash and was going through exactly what Mr. Hayes was going through, and ended up submitting that letter along with their own claim form to the insurance company. Well, when the insurance company gets it and they start processing that claim, their flag goes up saying, “Hey, this isn’t a network contract, and why was it being submitted by a patient and not the practice?” And lo and behold, we’ve seen practices get those nasty demand letters saying, “Hey, you are in network. You have contractual obligations. You’re supposed to go through us first. You didn’t. We’ve processed the claim. It says that you get X you need to refund the patient the difference.” And we’re talking several thousand dollars many times.
Michael: Yeah. It can definitely get tricky fast when you have kind of these multiple payment systems or payment models in your practice. Of course, in this case, we’re talking about these private insurance contracts and a cash-based system.
Jay: Yeah. And Brad, you mentioned covered services, and that’s a key term, right? [00:20:00] But even when the services aren’t going to be covered, a lot of times the contracts will have details on the specific steps you have to have for non-covered services before charging a patient. And so again, you have to know and be able to follow these rules because you’re under a contractual obligation, otherwise, you are going to be in breach of contract and have the potential in-network contract go away. And so, these are all, again, simple contractual issues, but introduce Medicare into the equation, and now we’re talking about even more complex. Medicare rules are very strict on how to handle covered services and non-covered services, it get into the participating provider, non-participating provider, opt-out provider discussions. You have to be really, really well versed in this area to know what you’re doing and to follow the rules. Otherwise, you’re going to create a significant risk of liability. And sometimes it can be difficult to thread the needle, which is why a lot of practices choose to kind of stay away from that game.
Brad: Yeah, I totally agree with that statement. [00:21:00] I mean, anytime you introduce a program payer; Medicare, Medicaid, Tricare, that just adds a whole new layer of rules. And that the practice, if they don’t understand, will significantly impact what’s going to happen to them, the practice. So they need to pause for adding these kind of payers and adjust their model as may be needed. But Jay, what other friction points were there? Yeah,
Jay: Another friction point is with the patients. Patients benefit and appreciate certainty and familiarity, especially when they have an ongoing relationship with the practice. And so when you change things on them, you have to be prepared for it to not go smoothly. And in this case, CAD Group had been training its patients to expect to use their insurance for their visits. And now you’re introducing a cash service line, you’re changing the game on the patients. And so most of the time it may not be a problem. Most patients will happily pay, it’s great, it’s totally fine, but then it only takes one as we saw with Mr. Hayes.
Michael: So how do you prepare for that? [00:22:00]
Jay: So, great question. I think first you like everything we always talk about you have to know the rules and you have to have the right processes in place. But I think more importantly, you have to be prepared to invest, not only in understanding the rules, but implementing them. And this is going to help kind of fortify the defenses, if you will, against potential issues down the road. So, it’s about patient education; making sure the patients are informed, aware of the new rules of the processes, if they’re comfortable with them, and I think importantly they know why it is this way.
Brad: So this is all great background and context for the audience, but before we went to commercial, I feel like we’re now at the end of the season here, and we still don’t know what’s going on with Dr. Arnett and Dr. Bateman, and what did they do with Mr. Hayes and what changes did they make? You know, all their insurance relationship. I feel like we have giant cliffhanger. We got to help the audience out here, Jay.
Jay: Well, so for Mr. Hayes, what they ended up doing was they just ended up biting the [00:23:00] bullet and they refunded and submitted the claim on their own to see what would happen and kind of deal with it in the back end. So kind of kicked the can down the road, but satisfied the one patient. But on a larger scale, it ended up actually resolving itself because the end of the drug shortage brought about a critical decision point, not just for them, but for everyone in the industry. And they had to decide, was it worth continuing down this cash pay, weight loss practice path and figure out how to modify it to conform to these changing rules with the drug shortage resolution and FDA stance and all those things that we’ve talked about previously. And what they ultimately decided is that it was such a disruption to their traditional practice in the heart of what they were, and it would require even more investment and time to kind of get in compliance that it just wasn’t worth it. And so they actually shut down their cash elective base weight loss program practice, transitioned all [00:24:00] those patients care to another local practice that had focus exclusively on it and was willing to invest the time and effort.
Michael: Wah, wow. That didn’t end great. But it’s a great story. And one of the things too that we haven’t touched on is the impact to these changes to your team. So, we have had prior episodes talked about the shift of you have a cash-based practice and you add an insurance-based system, and the discipline and the training and the processes are so different that you really have to either outsource it or hire somebody that has those capabilities. Well, it also happens on the inverse. You add cash-based to the system and it changes the way. And so are they collecting those fees upfront, all of them, instead of doing the whatever their traditional process is when [00:25:00] they’re going to be billing for insurance? And so when you’re doing your due diligence on adding a service line, you’re not just looking at compliance and the contractual impact that we, we’ve talked so much about today and the impact of the patients, but you’re also looking at the operational impact. Jay, final thoughts?
Jay: Yeah, I mean everything that we talked about, I think you have to do your homework, you have to know what your rules are, and you have to be willing to invest in the time and effort to implement them, train the staff, but also train the patients. And really, it goes clear communication is essential throughout the whole thing. But clear communication, as we saw with Mr. Hayes, isn’t going to be foolproof, which is why you have to make sure that from a compliance perspective, you’re buttoned up so that when that person or issue does cause chaos, you have good defenses, everything’s set up and you’re good. You got to do your homework and you got to be prepared to invest in that. So Brad, what are your final thoughts? [00:26:00]
Brad: Yeah this is a great example billing a patient directly, what chaos or confusion it can have with the coverage of this unexpected out-of-pocket expenses, which obviously can damage the relationship; you, the provider, have with the patient because now they aren’t sure if they trust or really are satisfied with you. And it also results in you possibly being accused of billing errors or maybe the patients are upset with you or the payer. And obviously, this leads to lots of legal and reputational issues. And additionally, you start thinking about the billing practices that you have; if you start doing this with an in-network patient that could obviously lead to disputes, which then means the insurance companies going to get out on microscope and start looking into you, and they could be delaying other payments that have been done properly. And it just unfortunately undermines the entire expectation set forth in the whole in-network arrangement and as to what they were used to. [00:27:00] The insurance, patient, the providers, that relationship is now being broken up in ways in which they’re not used to. And finally, anytime you’re introducing a new line of medical services patients, you should just, with the practice, no matter who the patient is, just pause, make sure that you’re currently compliant on your current model. And then what other changes, as Michael was saying, and you were saying, do you need to do before even launching this new line of services? All right, Michael, close it out. Final thoughts?
Michael: Yeah, I mean, another way that practices will sometimes try to solve this is through their structure. They’ll say, you know what, I’ve got this new idea, this passion, I’m going to create a new practice entity that’s going to offer these elective services. And so, they’ll go about the process of wanting to modify their business structure and have this separate practice entity, and this can work, but it’s important to understand that this does not eliminate the risk that needs to be addressed and can actually introduce some new regulatory risks, because you now have patients going back and forth between these two entities. And so, you can introduce some state and federal laws that deal with “referrals” from practices back and forth. And so, you have to still do the same due diligence. You may still have the contractual issues to deal with, with your private pay insurance companies. It just may be a little bit cleaner if it makes sense from a business perspective.
Brad: Awesome. Well, Jay, thanks for dropping by again.
Jay: Absolutely.
Brad: Well, audience members, we’re back next Wednesday when we continue to talk about unintended consequences when we bring on Ariel Schmeck from J Taylor to join us. Thanks again for joining us today. And remember, if you like this episode, please subscribe, make sure to give us a five star rating and share with your friends.
Michael: You can also sign up for the ByrdAdatto newsletter by going to our website at byrdadatto.com. [00:29:00]
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