"When Payers Don't Pay"


"When Payers Don't Pay"

How do they get away with it? And what can you do to get your money sooner?

by Gil Weber, MBA

Adapted with permission from Ophthalmology Management
© Copyright, 1999. All rights reserved.
December 1999

Ophthalmology practices everywhere are struggling more than ever to collect money that health plans owe them. Over the past 18 to 24 months, we've heard a steady stream of news about payment problems and delays (or even defaults) associated with some big name payers. One of the newest trends, for example, is payers increasingly "downcoding" claims - changing codes to lower-paying codes so they can pay less for the claims.

Prompt, accurate payment and unacceptably extended receivables have become such a problem that legislators in 27 states have adopted prompt payment laws.

But payers are finding ways to get around the laws - or even ignore them - and absorb fines as the cost of doing business. In this article, I'll review how this happens and offer advice on how you can counter these unsavory tactics.

Payment problems have surfaced up and down the East Coast, particularly in New Jersey and Florida. I've also heard of problems with physician practice management companies (PPMCs) and independent practice associations (IPAs) in the Southwest.

In Florida, lawsuits against HIP and United Health Care, a pending suit against Prudential and a government audit of Physicians Healthcare Plans of Tampa represent just the tip of an immense iceberg. State legislation aimed at curbing these abuses vary widely. The toughest laws are in Georgia and Nebraska, which both require payers to pay or deny a claim within 15 days, and require payers to request additional information within 15 days before downcoding. In Florida, considered the nation's managed care snake pit by many, a recent law allows 35 days for payment of "clean" claims and 120 days for disputed ones.

But even with these laws, many claims are not being processed promptly, or paid as submitted, or sometimes paid at all. Why? In part, because the fines, when imposed, haven't been sufficient to stop some payers from continuing to process claims outside the allowed time frames.

For example, Modern Healthcare reported (June 21, 1999) that New York regulators had fined 16 health plans a total $188,000. That amount is almost laughable when divided among 16 payers. The Miami Herald reported (July 29, 1999) that Physicians Healthcare Plans of Tampa was hit with a $13,500 fine and ordered to reprocess its Medicaid claims. Considering the much larger amounts payers can save by arbitrarily downcoding and delaying payments, one is understandably inclined to view such slaps on the wrist with skepticism.

The latest tactics

The new reality is that many payers have learned to use downcoding in creative ways as a simple yet highly effective cash flow tool. Beneath the entire process of downcoding and associated claims delay is the simple fact that payers can cause a claim to be unpayable or underpaid by declaring it not "clean" -- that is, saying data is missing or insufficiently documented to justify the service level indicated.

Unfortunately, a clear definition of clean slipped through the cracks when prompt payment laws were adopted. Without a standard to which all plans in a state are held accountable, providers and administrators have to deal with numerous plan-specific requirements.

How ridiculous can it get?

Just getting your claims to the payer can be an arduous task. As part of my research for this article, I solicited letters from practices across the country that have been victimized by unsavory claims processing. One ophthalmologist wrote:

"There are at least two insurers that have changed their post office box numbers without notifying the post office of the change. The claims get returned after 10 to 15 days, delaying the payment. One company has changed its phone number, too, so you can't even call to find out where to send claims."

And when the claims arrive on the claim examiner's desk, they still may not get paid quickly. This doctor told me in the same letter: "I now receive paper referrals before I see patients. This is because . . . the PCPs (primary care physicians) may want me to see the patients on the basis of a phone request.

"Now (there's) a new twist. Even if I receive a paper referral by fax or by mail, the insurer will not pay if the claim .. . . arrives before the PCP can get his copy of the referral sheet to (the insurer) so (the insurer) can 'authorize' it. I've called the medical director of the culprit insurer and he has agreed to pay some claims but he's getting tired of my calls. It was easy to get him on the phone last month. It's not so easy now."

More of those "horror" stories

Once the claims examiner has the claim and any necessary referral, downcoding raises its ugly head. Here's a sampling of stories from several practices.

One administrator wrote: "We are a practice limited to retina. Virtually all of the HMOs in our area have been downcoding consultations since the first of the year. They do this without investigation or request for documentation."

The administrators said payers have given him a variety of reasons for downcoding, including:

  • The decision was made by the director of the utilization committee. "If your doctors don't like it, they'll have to take it up with him personally," he was told.
  • Claims aren't supported by diagnosis. Payers request no documentation or conduct any investigation.
  • It was a decision by a coding consultant group, in accordance with the Health Care Financing Administration.

"In no case have we been asked for copies of records or evidence to support the code we submitted," he said. "I've even been told that there's no reason for the downcoding."

A second ophthalmologist wrote: "XYZ health plan will pre-authorize a visit based on a patient's initial complaint. Then, when an exam is completed and a medical diagnosis is provided, they will not reimburse at that level, but may reimburse just for a refraction 00001 code, which really does not exist. Also, when we see patients in the hospital, they will reimburse not as an inpatient consultation but just for a routine visit. We are living a nightmare."

When the physician is at fault

Although payers may seem to have a free pass to create their mischief, we need to keep in mind that claim abuse is not entirely a one-way street. I think we all recognize that certain providers habitually code "creatively." Certainly we can't fault a third-party payer for monitoring service intensity and investigating a stream of claims that are seemingly out of line.

But evidence of random and clearly wholesale downcoding suggests that nearly every provider is seen as an outlier. And when those wholesale downcodings become standard practice, every provider faces a very serious financial issue that needs immediate attention at the highest levels.

Humana has been the most aggressive health plan with automatic downcoding. The AMA News (Aug. 23-30, 1999) reported that on July 1 Humana sent letters to physicians requesting copies of patient charts on all level 4 and 5 claims in Florida, Texas and Kentucky. Letters warned that if doctors didn't send information within 14 days, their claims would automatically be downcoded one level. On Aug. 1, Humana expanded the program to all states, requiring physicians to send patient records to a chart review company in Florida.

Humana only got so far with these strategies. In response to pressure from physician organizations and regulators, the company recently backed off and said it would review level 4 and 5 claims only when the physician's profile was ". . ..outside the norm," according to an Oct. 11 report in AMA News.

Some positive news?

It's encouraging to see state regulators or other authorities stop certain payers from abusing doctors. In a bulletin issued Sept. 3, for example, Florida regulators told payers that they weren't to automatically downcode claims because the practice violated Florida's Unfair Claims Settlement Practice law.

Also, we've recently seen some insurers pulling back from aggressive, anti-provider approaches. For example, United Health recently agreed to grant physicians a final say on treatments for their patients, within United Health's contract limitations.

Critics say managed care companies are now trying to improve their images and their relationships with doctors for a strategic reason - to quell growing public sentiment against HMOs and to head off reform legislation.

In this environment, you can take actions to help your practice. First, however, recognize that I can offer no simple solutions - no "killer" words I can suggest to communicate to a payer and force the situation to change entirely. Sadly, nothing will make this payment nightmare go away quickly.

Third-party payers continue to act in their own best interests, particularly if they're for-profit, publicly held companies concerned about Wall Street performance and quarterly reports. They're turning to aggressive downcoding and payment delay tactics to achieve savings whenever possible.

How you can help yourself

Until insurers are forced to change, providers are almost, but not quite, on their own. Here are some strategies you can try to collect appropriate reimbursements.

Get it in writing. Ask plan administrators to send you written descriptions of their requirements for various levels of service. And be certain that such requirements are tied to the provider agreement. For example, precisely what needs to be documented to justify a Level 4 Evaluation and Management (E&M) code? If the payer can't or won't provide written documentation, be prepared for unending downcoding disputes.

Find out who's reviewing your claims. Ask if the payer is using an outside agency to review its claims and to make downcoding decisions. If the answer is yes, demand written documentation of the standards that the outside agency uses to judge the validity of your claims. And be sure you know your rights under your state law, including the number of days your state specifies that you have to submit any supplementary documentation. Don't automatically accept the payer's statement that you have only "X" days to submit or otherwise the file will be closed on your claim.

Get a definition of a "clean" claim. It should be in your provider agreement or, at least, a document incorporated by reference. If it's not defined now, then try to have your provider agreement amended as soon as possible.

Bring your staff up to speed. Make sure your billing assistants know the requirements for each plan. You may find it helpful to create a submission matrix for each plan and have your claims software automatically flag any required field not completed according to the payer's standards.

Make it as difficult as possible for the payer to hold your payments beyond the time that is specified in your provider agreement.

Use electronic billing. This can be especially helpful when your billing system is integrated with a software program that flags questionable information or empty fields. Such an approach should speed up the process and reduce the chances for mischief by the payer.

Document every claim that's been denied, downcoded or delayed. After documenting, report outrageous behavior to your elected representatives and to your state department of insurance. Keep accurate records of claims not paid within stipulated time frames.

If you're asked to provide additional information, document if the request is reasonable and if it's made in a reasonable amount of time. Keep records of the additional documentation that you provide. State prompt pay laws require that payers, when disputing a claim, must request additional data within a defined time frame and then resolve the claim quickly.

Pay attention to the timing of payments spelled out in your provider agreement. You should do this even if your state has a prompt payment law. Far too many provider agreements are signed without payment timing provisions, leaving the door open for payer mischief. Payers can use all sorts of contractual tricks - words such as "Health plan will use its best efforts to pay all claims by the 10th of the month." How can you prove that the payer is not using its best efforts? (See below, "Putting Teeth Into Your HMO Contract.")

Support your state society, state medical society and PAC. As I mentioned, Humana was put under pressure by several state medical societies. Only after organized protest did it back off of its regressive coding and payment protocols.

Remember that the door swings both ways. Anytime a payer is ordered not to use certain downcoding protocols, physicians shouldn't automatically rejoice. Payers are, after all, charged with detecting fraud.

The former HMO executive I spoke to offered these words of wisdom: "I have seen an increase in visit intensity in the last couple of years. Physicians who have too many complex visits should be handled by the HMOs, so physicians need to be very careful with the victory. The moral that I see for physicians is be careful what you wish for, for you may get it. In this case, remove the ability of the HMO to administratively make certain decisions and they will move in the fraud and abuse direction." Certainly something to keep in mind.

Final advice

Above all, you should be prepared to walk away from a provider agreement. If my suggestions don't work for you and a payer simply continues to heap frustration, tension and abuse on your staff (and if collecting a fair and reasonable amount for your work is impossible), then consider dropping the plan. Remember, no deal is better than a bad deal.

Here are but a few problems payers are creating for practices:

One M.D. was denied 92286 reimbursement for pre-phaco patients because the payer called the procedure "experimental." When the M.D. pointed out that Medicare allowed the procedure, if supported by a relevant diagnosis, the payer still refused to pay. "Now they say it's bundled with the A scan!" the M.D. added.

A state society president wrote: "We are facing a new downcoding policy by QQQ health plan. All E&M level 4 and 5 codes are downcoded to a level 3 by an 'independent' agency. We intend to file a complaint with the insurance commissioner."

Another M.D. wrote: "With our Medicaid HMOs, we are seeing many denials because of the way they want things coded. It is very confusing when to use E&M or eye codes."

Because many payers are bundling the refraction (92015) with both E&M codes and ophthalmic codes, one administrator is asking patients to sign a waiver that makes them financially responsible for their refractions if their insurers don't pay for them.


Putting Teeth Into Your HMO Contract

You must negotiate specific payment due dates, including penalties the payer should pay for late payment, if possible, when negotiating an HMO contract. Don't be reluctant to raise the issue of late payment penalties, especially in states with prompt payment laws. You simply can't afford to let a payer misuse your money as its float fund - especially when payers arbitrarily downcode and then force you to submit additional data. That just destroys any chance of you getting paid on time.

Negotiate specific language, such as: "Claims post-marked by the last day of any month will be processed and payments will be mailed to provider by the 25th of the following month." That's specific, it's tight and it's fair. You may also be able to get the payer to agree to surrender a contracted discount if payment is late by more than a specified amount of time.

If a payer won't agree to write tight payment terms, it's showing you a yellow, perhaps red, flag. Be forewarned!


States With Prompt Payment Laws

(as of December 1999)

Alabama Alaska California Colorado Connecticut
Delaware Florida Georgia Illinois Maryland
Minnesota Mississippi Missouri Montana Nebraska
Nevada New Jersey New York N. Carolina Ohio
Oklahoma Pennsylvania Texas Vermont Virginia
Wisconsin Wyoming      

Gil Weber, a nationally recognized managed care and practice management consultant, will join Ophthalmology Management's staff next month as a consulting editor.

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