Physicians have been complaining for years about decreased, delayed, or discounted reimbursements from insurance companies and health plans. Partial payments, delays, and discounts can affect both a medical practice's cash flow and its bottom line.
Very soon, we expect to see a proliferation of lawsuits brought against insurers and managed care companies alleging that such delays, discounts, and reductions in payments are not only invalid or illegal, but intentional as well.
Here are some of the tactics that are sure to be the focus of litigation:
Downcoding or bundling. Some insurers and third-party review companies automatically and systematically downcode claimed services to less complex and lower paying services. Similarly, separately billed services are bundled in a way that lowers reimbursement. This is accomplished by a computer program that is designed to bundle and "reprice" services, resulting in lower levels of reimbursement. The medical records are not reviewed before a bill is downcoded. Only a handful of providers challenge the downcoding, generating a substantial savings for the insurers.
The "silent PPO." You may know the "silent PPO" as a nondirected PPO, voluntary PPO, wrap-around PPO, or blind PPO. The AMA says a silent PPO is created when indemnity insurers and third-party billing companies — whose clients are not participants in a PPO — apply discounted rates to physicians without their consent.
Generally, PPO discounts that a physician agrees to provide to insurers that offer a PPO plan (i.e., financial incentives to treat in-network as opposed to out-of-network) to insured employees may not be applied by indemnity insurers (e.g., automobile insurers) or third-party review companies that reprice bills for indemnity insurers.
For example, "ACME Insurance Co." may not discount automobile medical expense claims based on a physician's preferred provider agreement with a national health care PPO unless the insurer is offering a managed care automobile policy. Indemnity insurers such as ACME Insurance Co. ordinarily do not have managed care plans with financial incentives (e.g., lower copay, deductible) for in-network treatment, provider directories, or even ID cards. The indemnity insurers and third-party review companies are applying physician discounts to reduce the amount of benefits they pay out.
What to look for
The following may indicate that unauthorized discounts are being applied: 1) the patient is not aware of the PPO upon intake, lacks an ID card, never received a provider directory, or was not referred or steered to the physician's office, but a PPO discount was applied to the physician's bill nonetheless by an indemnity insurer; 2) where explanation-of-benefits forms do not specifically identify the PPO whose discount is supposedly being used; 3) where EOBs have the name of a bill review repricing company or repricing software on the top of the EOB or indicate that the physician's bill was "repriced" or that a "repricing analysis" was conducted; or 4) where an insurer cannot produce a plan summary or written confirmation that it has incentives in its plan design to direct patients to the physician's facility.
Delayed payment. Some payers delay payment as a matter of policy or practice. Managed care contracts sometimes contain a specific payment period or provide that payment must be made within a "reasonable" time period for clean claims. Although rare, some managed care contracts even state that payers forfeit the discount if they do not pay on time. Delayed payment schemes in most circumstances are a breach of the managed care contract; delayed payments should be made with interest. Also, since payment is a material responsibility of the payer, it can be argued that a payer who breaches the payment term may forfeit the discount altogether.
Failure to pay according to the agreed fee schedule. Audits of physician receivables have revealed that payers routinely and systematically fail to pay providers according to the agreed fee schedule. The computer-generated EOBs often contain the wrong reimbursement amounts.
Changing the fee schedule without notice and consent. Payers will sometimes make drastic changes to the agreed fee schedule without notifying the physician. Often, payers also fail to convert to a new, higher fee schedule in a timely manner. Both of these occurrences could result in significant losses if not challenged.
Computers determining the necessity of care. Insurers and third-party review companies have started to use computer programs to determine the necessity of care. Repricing programs contain a database of alleged treatment protocols that deny or reduce payment for treatment that does not fit the payer's protocols. There is no review of the medical records before the computer conducts its analysis. Standard, computer-generated EOBs will show reference codes that indicate that treatment was not necessary or was otherwise inappropriate. This is tantamount to the unauthorized practice of medicine.
Usual-and-customary reviews. Physicians receive from time to time an EOB saying something like, "The charge was reduced for exceeding the usual, customary, and reasonable charge for your geographic region." Almost all payers use computers and a proprietary database to review fees to determine if charges are "usual and customary." Bills are compared for a physician's alleged "geographic region" (usually the first three digits of your ZIP code). The data in the database often contains Medicare, CHAMPUS, workers compensation, and managed care contract payment rates.
The data often are skewed artificially low — which becomes apparent where virtually all providers in each geographic region are having their bills reduced. Also, the database review is specialty-blind, meaning it does not take into account the training, expertise, experience, or success rate of the physician.
Such actions constitute breach of the physician-payer provider contract. Doctors who suspect foul play have filed complaints with state insurance commissions with varying degrees of success. Soon, we expect to see the filing of lawsuits intending to put to an end these kinds of practices and to seek recovery of unpaid reimbursement, with interest and penalties to boot. Things should get real interesting.
Mark D. Abruzzo, J.D., specializes in health care law at the Berwyn, Pa.-based law firm of Wade, Goldstein, Landau & Abruzzo.