Special E-Mail Bulletin
March 2001
States begin to crack down on retro-active denials
Special E-Mail Bulletin
Hi, everyone.
Over the past couple years I've kept you updated on prompt-payment activities around the country. Now here's news on another important reimbursement issue -- retroactive denials.
One of managed care's most aggravating problems is when a payor authorizes services and pays you for them but then later decides the payment was in error and demands the money back. This story, from the current issue of AMNews, details the first activities at the state level to curb a payor's ability to recover such payments. It will certainly be interesting to see how these efforts evolve and how effectively they are enforced.
Gil Weber
BUSINESS
States get tough on retroactive denials
Laws limiting retroactive denial of claims have been passed in two states; a third state is considering similar proposals.
By Leigh Page, AMNews staff. March 12, 2001.
Florida and Washington have begun to limit retroactive denials of physicians' claims, while Georgia and perhaps other states could begin doing so this year.
In making retroactive denials, health plans use software to determine mistaken payments as far back as four or five years, then demand refunds. If doctors don't repay, plans often simply take the money out of the next payment owed to the physician.
The new Florida law would limit retroactive denials to the previous four months. Washington's new statute forces plans to pay for services that they previously approved, even if by mistake. And two proposals in Georgia would limit denials to the previous 12 to 18 months.
Over 40% of physicians report that at least one-tenth of their claims are denied in this way, according to an AMA Council on Medical Service report released in December 2000. Physicians say such denials can involve large claims of $1,000 or more.
"You get paid and then three years later they say, 'Oops, these people weren't covered and we want you to refund the money. And if you don't, we'll take it out of the next payment,' " said Michael Wasylik, MD, a Tampa, Fla., orthopedic surgeon who said his practice has been retroactively dunned several times over eight years.
The AMA report said the most frequent reasons for retroactive denials were that the service was not medically necessary (27% of cases) and not covered (26% of cases).
The plan may have correctly determined that it shouldn't have paid the claim, but practices have difficulty checking their records years later. Moreover, the plan often authorized the payment, giving doctors permission to go ahead with the service, practices said. They report that patients rarely agree to pick up an old bill, and the unanticipated payments can disrupt a practice's budget.
"If I am denied payment in a reasonable period of time, I can go back to the patient and find another source of payment," said Dr. Wasylik, a member of the managed care committee of the Florida Medical Assn. "But when they call years later, the physician has no chance of collecting payment."
Practices and their advisers have fingered UnitedHealthcare, Oxford Health Plan, Humana Inc. and several state Blue Cross and Blue Shield plans for using retroactive denials.
When contacted, officials at UnitedHealthcare and Blue Cross and Blue Shield of Georgia would not discuss the matter.
Meanwhile, despite the new law enforcing previous authorizations of care, Washington state recently began retroactive denials for its Medicaid program, according to the state medical association.
Laws taking effect
Dr. Wasylik says he is waiting to see if Florida's new law will cut down on retroactive denials.
The law, which was backed by the FMA and took effect Jan. 1, bars plans from rescinding payment more than 120 days after receiving the claim unless it identifies a problem with the claim in that time period.
The Florida Insurance Dept. reported in February that it had not received any reports of possible violations of the new provision.
Taking another tack, a Washington law passed in 2000 bars plans from refusing to pay for treatment they previously authorized, the Washington State Medical Assn. reports.
In Georgia, both the Medical Assn. of Georgia and Insurance Commissioner John Oxendine are proposing limitations on retroactive denials.
The medical association's proposal, part of its Fair Insurance Business Practices Act that was introduced in the Legislature in February, would bar plans from denying payments more than 1 year old.
Meanwhile, Oxendine said insurers and doctors on an advisory committee he chairs have agreed to an 18-month limit that may take the form of a regulation.
"It's a fairness issue," he said. The proposal his group is hammering out would set the same 18-month time limit on doctors' ability to update their claims, such as adding a bill for an x-ray to a previous submission. Plans usually limit such updating to six or 12 months, according to the medical association.
But state laws and regulations on retroactive denials will not affect self-insured companies, which are some of the worst offenders and are protected by the Employee Retirement Income Security Act of 1974, according to Teresa Devine, director of the health care financing department at the Texas Medical Assn.
She said Texas insurers most often retroactively deny claims in their role as third-party administrators for self-insured employers. She added that one of the companies that is most intent on issuing retroactive denials is one of the largest employers in the country.
Devine said the Texas Medical Assn. has considered legislation to bar retroactive denials but does not plan to introduce such a bill this year. Officials at several medical societies said other states have also passed laws and more are considering them, but they could not identify states.
What else can be done?
Doctors still have some options in states with no laws against retroactive denials.
Devine said that in Texas, at least, practices have the right under case law to refuse to repay such bills as long as repayment was not specified in the contract. But she added that physicians may be powerless if the plan simply subtracts the amount out of the next payment.
Meanwhile, hospitals and large practices are beginning to remove provisions for retroactive denials from their contracts and to bar the practice in new contracts.
Last August, after months of negotiation, San Francisco-based Catholic Healthcare West, one of the largest hospital networks in the nation, won a new contract with Blue Cross of California that erased the provision.
Physicians have less luck amending their contracts unless they are in groups big enough to have some negotiating clout. For example, both Longview Surgery Group in Longview, Wash., and NeuroMedical Center in Baton Rouge, La., each with 22 physicians, report that they have barred retrospective denials in some contracts but not in others.
At the AMA Interim Meeting in December 2000, delegates approved a policy calling for health plans that retroactively deny claims to promptly inform the physician and patient in writing regarding the reason and to detail the appeals process.
Return to top