Special E-Mail Bulletin
July 2000
BC/BS Must Reveal Reimbursements
Special E-Mail Bulletin
Hi, everyone.
One of the most absurd examples of the tilted playing field in managed care is when physicians are presented with contracts that don't contain specific reimbursement rates. Healthplans claim the reimbursement rates are proprietary information and you only learn how much you're to be paid after submitting a claim.
It's simply nuts, but here's an interesting story from this week's AM News that indicates things might be changing -- at least in part for BC/BS.
Gil Weber
Ga. court upholds physicians' right to know payment rates
The state appeals decision requires insurers to reveal reimbursements and payment methodologies in advance, so doctors can make an informed decision.
By Leigh Page, AMNews staff. July 31, 2000.
In what is thought to be the first court decision of its kind in the nation, a Georgia appeals panel held that Blue Cross and Blue Shield of Georgia must tell contracted doctors its reimbursement rates and the methodology for calculating those rates.
The appeals court said doctors need to know exactly what they will be paid to make an informed decision when signing the Blue Cross PPO contract, which the company said covers 450,000 members and is signed by 95% of active Georgia physicians.
"A promise of future compensation must be for an exact amount or based on a formula or method for determining the exact amount," the appeals court wrote. "Without such information there is no way for doctors to calculate for themselves whether they have been fully paid for a particular service under the plan."
The appeals court remanded the case back to the trial court, which will decide how its decision will be carried out, including what exact information Blue Cross must present and how it will be made available.
The case -- brought by four doctors, the Medical Assn. of Georgia and the AMA -- applies only to preferred provider contracts in Georgia, and it might yet be appealed.
But attorney Mark Rust, an expert on physicians' contracts at Barnes & Thornburg in Chicago, said he thought the ruling was "going to add persuasive authority" in other state and federal courts for more candor on reimbursement rates.
Rust said many contracts had clear reimbursement methodologies such as a certain percentage of the Medicare rate, and they sometimes attach a list of payments for certain CPT codes. But he has seen quite a few contracts across the country, usually from insurers with large market share, that do not reveal rates or methodologies.
Antitrust laws prevent doctors from comparing reimbursements and coming up with their own estimate of prevailing charges in their area. "This could well be the first case that addresses this issue," Rust said. "A company that wants to [hide rates] just does it and waits until someone sues them."
The decision also shines a light on a broader problem that affects capitated physicians. Doctors know their capitated rates but usually they do not know the methodology used to calculate them, and in states like California doctors complain that some rates have even fallen below their costs.
The California Medical Assn. supports a bill in the Legislature that would require HMOs to "substantiate that the [capitated] rates are adequate," according to a legislative summary of the bill. But the bill, AB 918, is not expected to pass this year.
Mixed decision
Although doctors won the right to know an insurer's reimbursement rate and payment methodology, the appeals court upheld Blue Cross' unilateral change of its reimbursement methodology. For this reason, each side is both declaring a victory and considering an appeal.
The case involved Blue Cross' change of its payment methodology in 1997 from a percentage of what doctors usually charge to what the plan usually pays. Doctors say this led to substantial reductions in payments.
The plaintiffs argued that Blue Cross should have negotiated the change in a new contract with physicians, but the appeals court maintained that Blue Cross had the authority to make that change. Then the court made its ruling that the company must fully reveal its methodology and rates.
Blue Cross spokesman Charlie Harman insisted that the company does reveal at least part of its methodology and rates. He said Blue Cross relies on a combination of Medicare rates and the company's own payment experience, but the exact payment methodology is proprietary information that the company does not want competing insurers or its doctors to know.
Specifically, Harman said Blue Cross reveals what it will pay for 20 to 40 CPT codes if the physician first reveals his or her own charges. He said Blue Cross then compares the doctor's rate to its own proprietary fee schedule and pays whichever is lower.
Harman said that if the company revealed its rates right off the bat, physicians would charge the maximum that Blue Cross allows, and insurance costs would rise.
Richard Coorsh, spokesman for the Health Insurance Assn. of America, said he had not heard of the case.
However, he argued that plans have to establish their own payment methodologies because physicians' charges for the same procedure vary greatly even within the same geographic area.
Bill Pierce, a spokesman for the Blue Cross and Blue Shield Assn., said he could understand both sides' arguments in the Georgia case, which he had not seen.
"I certainly understand why the health plan wouldn't want to release the information," he said. "It's a competitive marketplace."
He added, however, that "disclosure of information seems to be the trend."
Still a victory for doctors
Medicine's victory in the appeals decision outweighs its defeat, said Paul L. Shanor, executive director of the Medical Assn. of Georgia, who is also a lawyer.
"It's hard for anyone in any business to provide a service without knowing what they are getting paid," he said. "A plumber wouldn't do it, an electrician wouldn't do it and Blue Cross and Blue Shield of Georgia wouldn't do it [in contracts with employers]."
Another lawsuit similar to the Georgia case is now making its way through the courts. The AMA and the Medical Society of the State of New York filed a suit in March against Metropolitan Life Insurance Co. Among other things, it contends that Metropolitan Life used fee data that do not reflect prevailing rates. The case was removed to federal court and no decision has been made yet, the AMA reported.
Some doctors don't believe the Georgia decision went far enough.
Anthony Costrini, MD, one of the plaintiffs, said the appeals decision is "a half solution."
Dr. Costrini, CEO of Savannah Sleep Disorders Center, noted that Blue Cross still could change its reimbursement methodology whenever it likes. He said these changes had caused several dramatic drops in Blue Cross reimbursements for sleep studies to the point where they barely cover his costs.
Blue Cross is such a big player in Georgia that "it's not a negotiating process," he said. "They say, 'Here's the rates, take it or leave it.'
But Dr. Costrini conceded that learning Blue Cross' payment methodology could help. Georgia insurers' reimbursements for a sleep study, based on prevailing rates, vary by about $800, and Blue Cross is at the low end, he said.
"I fail to understand how [rates] can be so different," he said. "They won't release the actual data, so I have to take their word for it."
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Case at a glance
Case: Medical Assn. of Georgia v. Blue Cross & Blue Shield of Georgia
Venue: Georgia Court of Appeals
Case No.: A00A0398
At issue: Whether Blue Cross can unilaterally change the methodology for its fee schedule and not disclose how it works and what the fees are.
Ruling: Changing the methodology was allowable under the contract, but the insurer must tell doctors precisely how the methodology works and what the fees are.
Impact: For probably the first time, a court is recognizing that doctors must know what they will be paid and how those fees are computed.
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What the court said
Here is how the Georgia Court of Appeals explained its decision in Medical Assn. of Georgia v. Blue Cross & Blue Shield of Georgia:
"The doctors never agreed to allow Blue Cross to keep its fee schedules and methods for determining fee schedules secret. Such information is critical to the doctors."
"A promise of future compensation must be for an exact amount or based on a formula or method for determining the exact amount. ... Without such information, there is no way for doctors to calculate for themselves whether they have been fully paid for a particular service under the plan."
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