"When a Covered Service is Not a Covered Service"


"When a Covered Service is Not a Covered Service"

Be Careful of this Insurance "Booby-Trap"

Gil Weber, M.B.A.

Adapted with permission from Podiatry Management
© Copyright, 2008. All rights reserved.
September 2008

Consider this nightmarish scenario...

One Monday morning you see patients John Smith and Tom Wilson. Both present with identical foot injuries received the day before. Smith received his while playing soccer; Wilson received his from a hard landing while skydiving.

Smith and Wilson are insured by the same company and have identical benefits available through their employers. Your staff jumps through all the right hoops and confirms eligibility and benefits. Everything is verified and documented, and you have what is needed to provide care to both patients.

Each patient pays his co-payment, you provide the care, and all goes well. Staff submits claims and a few weeks later you receive the proper payment for Smith, but a rejection for Wilson -- "non-covered service."

That seems odd, so your office manager goes through the records and verifies that Wilson was confirmed as eligible, that everything had been properly recorded in the chart, and that the claim was properly and completely documented. She confirms that both claims for identical services should have been paid.

So the office manager calls the payor to find out what happened. And she learns the following. Mr. Wilson was eligible, and the injury treatment was a covered benefit, but in this instance it was not covered. The claim was denied because of the nature of the injury -- that Wilson was hurt while participating in an activity the payor considers high-risk.

And the payor further states that an injury received while participating in such an activity is not covered for Wilson even though the identical injury would have been covered had he incurred it in another manner. And when you hear that your response is, "What? Did we just fall down the rabbit hole?"

"Then you should say what you mean," the March Hare went on. "I do," Alice hastily replied; "at least -- at least I mean what I say -- that's the same thing, you know."

Lewis Carroll
Alice's Adventures in Wonderland

A little "booby-trap" in HIPAA

There is an almost universally unrecognized "booby-trap" in the HIPAA regulations. That provision allows an insurer to declare certain activities as high-risk and, further, to deny coverage to its insureds who are injured while participating in such activities. In other words, the insurance company can say that a specific service, or any service you provide is covered in some cases, but not in others.

And your immediate response must be, "How I am to know any of this? And how am I to know which activities are on a payor's black list?"

But it gets more aggravating and infuriating. Having been denied by the payor, you also may find that you cannot collect from the patient. And your response would naturally be, "But wait. If the plan says it's not a covered service, why can't I charge the patient?" And the answer may be because it is a covered service, even though the payor seemingly is talking out of both sides of its mouth by saying the covered service is not eligible for reimbursement. And since it is a covered service your provider agreement likely says that you can't look to the patient for payment.


We're from the government, and we're here to help

So how did this nasty little surprise package get into HIPAA? Look no further than the authors -- our federal government. It's all a result of some non-discrimination provisions written into HIPAA -- provisions that seemed a good idea when implemented a few years ago.

Previously, insurers had been able to deny coverage (refuse insurance) to anyone who might, on average, need more services than the general population. This might be because the person was sicker or, perhaps, because he or she participated in activities that might result in them having a higher chance of needing services over the course of the time they were insured.

Well that wasn't fair, of course, and HIPAA correctly closed that door. But at the same time HIPAA created a new and highly problematic concern.

While requiring insurers to enroll these "undesirables," HIPAA simultaneously allowed the insurers to deny coverage selectively for an injury based solely on how that injury was acquired. The only caveat was that the insurer could not place this sort of restriction on an individual -- it had to be applied to anyone who was injured in that manner.

So an insurer could no longer discriminate against Mr. Wilson and deny him coverage because he was a skydiver, but it could say that he was covered only during those times he was not skydiving. This, then, is how your patient Smith could be covered, while Wilson, insured through the same company with an identical benefit plan, would not be covered for an identical injury.

And, surprise, you only find out about this after the fact. Shades of Alice in Wonderland.

So who decides what's covered, and when?

We might have hoped that the HIPAA regulations would spell-out clearly which are the high-risk activities that allow payors to declare a covered service to be not a covered service. No such luck. And though state laws vary, it's also more likely than not that your state does not define in unambiguous detail what an insurer must cover. It's left to the insurers to define -- with obvious self-serving interest -- those activities they deem high-risk, or dangerous.

HIPAA catalogs some activities that might be deemed dangerous and having inherently higher-risk -- for example, skydiving and snowmobiling. But skiing is also mentioned, as is horseback riding, two very common activities not generally perceived as "high-risk" (certainly not compared to the dangers of driving the freeways in any major US city).

Insurers are left essentially free to dump any activity into this category. And so bungee jumping, mountain bike riding, scuba diving, flying a private aircraft, or any team sport might be added at a plan's sole discretion.

How this HIPAA "booby trap" could cost your practice big dollars

And here's the nightmare that can result when the collateral financial damage of this HIPAA surprise package crashes squarely on your practice's bottom line. Having jumped through all the administrative hoops before seeing the patient, and then jumping through more hoops to file the claim, you're faced with the prospect of not being paid, or having the payor do a retroactive take-back of monies already paid, or offsetting the amount against future payments. None of those are appetizing.

The insurer is no help. As far as it's concerned the benefits have been applied as described in the patient's certificate of coverage. (But, typically, the patient has not read that of course, and it's as if payors expect you to know the minutiae of every patient's insurance contract.)

That patient who comes in with a foot or ankle injury covered in any other circumstance has now thrown your business office and, in fact, your entire practice, into disarray. Staff has done everything right, yet everything has turned out wrong. And now you're faced with only one, unsettling prospect -- trying to collect from the patient, assuming that's even allowed by your provider agreement, and assuming that months have not gone by and the patient is long gone.

So what can you do to keep from falling down the rabbit hole?

Your practice can take a few steps to reduce, perhaps even preclude this nightmarish scenario. As with everything else in managed care, your success will be payor-specific. Here's what you can do.

Review and renegotiate third-party provider agreements -- Pay particular attention to verbiage dealing with covered and non-covered services. While historically what is and is not covered has been clear and consistent patient to patient with the same benefits, as shown in this article, it's just not that simple any longer.

In all the time since HIPAA came into effect I cannot recall a single provider agreement I've reviewed that allowed the physician to bill a patient for services denied due to the source of injury. Typically the contracts will say that the physician may charge the patient for non-covered services, but they also always say that the physician can look only to the payor for reimbursement of covered services -- period, end of discussion.

Now it's up to the practice to negotiate the contractual right to charge the patient when source of injury is the reason for payment denial. Be sure to work with your attorney to get the verbiage correct so that this HIPAA technicality allows the reclassification of an otherwise covered service into a non-covered service for which the patient can be charged.

Note also that a payor may tell you it does not deny coverage based on source of injury, and that it's not necessary to amend your provider agreement. A verbal representation to this effect is not sufficient. Get it in writing.

Document, document, document -- It's more important than ever before for staff to meticulously document all details relating to why patients are in your office. Given the danger of this source of injury "booby-trap," it's now become a real financial risk not to ask how patients acquired any injuries, and then to verify with each payor that the care you intend to provide is covered no matter the source of injury.

If you are told the care is covered despite the source of injury, document that in the chart, and include the time and date, and the name and phone number of the payor's representative who told you this. Similarly, if you learn that your recommended care is not covered based on the source of injury then that fact must be communicated to the patient prior to care, and everything must be documented in the chart, including the patient's acknowledgement of financial responsibility.

Collect, collect, collect -- And that brings us to the third thing every practice should do to reduce the chance it will fall down the HIPAA rabbit hole. Conduct a thorough examination and analysis of your patient financial responsibility paperwork, and update as necessary.

Whether that financial responsibility is established in a new-patient ("Welcome to our office") form or is contained in separate documentation, review it with your attorney so that it is clearly and appropriately established to the patient that he or she is responsible for any services denied by the insurer, including denials of otherwise covered services if the reason is the source of injury. The wording of this revised form is critical, and it must not conflict with your provider agreement or with any state or federal "hold-harmless" verbiage forbidding balance billing of covered services.

Gil Weber is a nationally recognized author, lecturer and practice management/managed care consultant to physicians and industry. He has also served as Director of Managed Care for the American Academy of Ophthalmology. He can be reached at (321) 433-0623 or by e-mail through his website contact page.

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