Lapsed Licenses: Bad, but Probably Less Bad than You Think

If you employ licensed professionals, it is nearly inevitable that at some point, one of those individuals will fail to properly renew their license. It is widely assumed that any licensor lapse automatically results in an overpayment.

I understand that thinking. For many services, licensure is a condition of payment. 

But if you find yourself in a situation where care was provided by a qualified professional who failed to pay a registration fee or otherwise made some ministerial error, there can be a number of defenses that might help you avoid a refund. 

First, many licensing bodies will reinstate a license retroactively if payment is made. It certainly is not universally true, but often, if you review the licensing body’s website, they may show the professional as being continuously in good standing once payment is made. When boards use that practice, I think there is a credible argument that the individual was effectively licensed during the period of nonpayment. 

Second, depending on the circumstances, there may be solid arguments that the particular individual’s license was not essential to the coverage of the service. For example, in some states, physicians are permitted to delegate authority to any individual who is qualified to perform a service. In my home state of Minnesota, as long as the physician is providing oversight, he or she can delegate any service to a qualified person.

While the person being delegated to may be licensed, that license is not necessary. If the physician is overseeing physical therapy or injections, the professional rendering the service need not be licensed as a physical therapist or nurse. The physician’s license is sufficient.

Third, there may be situations in which the service provided by the unlicensed professional is of such a minor scope that it does not interfere with the ability to bill a service. For example, I would argue that if an unlicensed nurse sees a patient in a medical clinic, the lack of license shouldn’t have an impact on services, like for an evaluation and management (E&M) encounter.  The professional wasn’t performing an independently billable service.

To be clear, I am not minimizing the significance of a license lapse. There can be times where the error will result in an obligation to refund.

For example, when an unlicensed physician provides services, that is often a problem under the Medicare program. Moreover, you likely have a duty to report the license lapse to the relevant licensing board.

And you may be violating payor contracts and, if you are in a facility, Conditions of Participation. But while license lapses are bad, remember that there may be many cases where a refund is unnecessary.