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Can you survive being out of network?
How to win as David in a Goliath world
It is viable for your facility to be out of network in a world dominated by powerful insurance payers? The answer is a definite . . . maybe.
"It depends on the market, the payers, and the physicians," says John R. Seitz, CEO and founder of Ambulatory Surgical Group (ASG), an El Segundo, CA-based company that develops and manages surgery centers without the prerequisite of purchasing equity. "There are still many markets, including California, where the differential between the in-network and out-of-network rates are so significant that you need to really look at it," he says.
Being out of network causes more work for your staff and some hassle for patients, he says. Additionally, the billing staff need to know how to handle balance billing and any write-off amounts, Seitz adds. "As always, you need to know your cost, know your margins, and understand your contracts," he says.
Payers have attempted to make it difficult for ambulatory surgery centers and other providers to remain out of network, says Thomas J. Pliura, MD, JD, PC, physician and attorney at law in Le Roy, IL. "The legality of those steps taken remain to be seen," says Pliura, who noted that several lawsuits are being tried.
Unless you challenge payers, they can make life difficult for out-of-network providers, he says. "They're doing things like asking the doctor to sign a sheet on every patient, if you want to provide surgery in an out-of-network facility," Pliura says. "We could have never envisioned that."
In essence, payers are selling a PPO product to patients, with the perception that patients have a choice to go out of network, he says. However, they charge patients a higher fee for that choice and adopt internal procedures that effectively prohibit patients from going out of network, Pliura says. For example, when patients seek preauthorization, the payer representative will say, "That's not an authorized surgery center," he says. "It's very vague what constitutes an authorized surgery center," Pliura adds.
Payers will scare patients with threats that they will be responsible for larger portions of the bill if they go out of network, regardless of what that provider might have chosen to charge that out-of-network patient for the surgery, he says. And in what Pliura calls "one of the most egregious situations," payers have developed two fee schedules for approved fees, "so in essence, they're setting a fee schedule that is lower for out-of-network facilities than in-network facilities."
While patients might be willing to pay 40% of a bill for the benefit of having a choice in where they go, "in reality, that's just the appearance of choice," Pliura says. "They adopt additional copays and deductibles, adopt a fictional fee schedule that would say: Even if you want to go out of network, in essence, you'll pay the entire fee."
Going out of network is practical if the insurance company pays you based on a reasonable rate, and your state allows you to go out of network under anti-fraud acts, says Beverly A. Kirchner, RN, BSN, CNOR, CASC, CEO and president of Genesee Associates, a Highland Village, TX-based company owned by nurses that develops, manages, and consults with hospitals and physicians to develop freestanding surgery centers. Kirchner says there are times you have to go out of network because what some payers offer "is too low to survive." For example, companies that pay 125% of Medicare and less than Medicare on some claims are not worth working with, she says.
When looking at whether you can accept payers' rates, there are several costs to consider, including equipment, malpractice insurance, and utilities, Pliura says. "Every surgery center is different geographically, economically, and in their service area, it depends on what the malpractice rate is and facility costs are," he says.
Many managers are saying that they can't accept Medicaid rates for commercial patients, "and that's where we're headed," Pliura says. "Every surgery center needs to know that number where it becomes financially irresponsible to say, 'I'll accept these rates for this particular procedure across the board,' because at some point, I'm going so low, I'm losing money on every case."
Each provider must face this decision, Pliura says. The question is, "Am I better off? Or I can see fewer patients and make more money than running myself ragged and losing money on patients?" he says.
Out-of-network status will be a part, though probably a smaller part, of the outpatient surgery world for years to come, Seitz says. "You need to know how to contract, how to analyze what you are getting paid, and where the trade-offs are," he says.
Pieces of ammunition in the out-of-network war
When considering out-of-network status, beware of rate-limiting plans, says Beverly A. Kirchner, RN, BSN, CNOR, CASC, CEO and president of Genesee Associates, a Highland Village, TX-based company owned by nurses that develops, manages, and consults with hospitals and physicians to develop freestanding surgery centers.
Recently, Kirchner opened a new surgery center in the south and was approached by a payer. The payer said there would be no negotiation, she says. "We decided to wait until we had been open a few months, so we understood our cost and types of cases we were going to perform that might need to be carved out," Kirchner says.
The payer did not inform the center that it had one fee schedule for ambulatory care and that if the center stayed out of network, they would penalize the center by taking 30% off the in-network fee schedule, she says. Subsequently, the payer didn't follow its own policy and instead imposed a 50% penalty on most cases and even more on others, Kirchner says.
"Our attorney informed us we had no leg to stand on in court since we did not have a contract," she says. "When does it become right that a managed care company can tell us what we are worth and what our costs are to provide care? When is it right for a managed care company to not event attempt to negotiate in good faith?"
Beware of the abbreviations MNRP, NAP, and FAC when you see them on a patient's insurance card, says Catherine A. Meredith, RN, CASC, vice president of finance for Hanover, MA-based Ambulatory Surgical Centers of America. They are reimbursement rate-limiting plans, she warns. "Insurance companies are selling these plans at lower premiums," she says. "The insurance company is fixing the out-of-network reimbursement to around 110% of Medicare."
Consider these other suggestions:
Surgeons should review their contracts carefully.
Around the country there are reports of physicians being pressured or threatened to refer in-network. Several insurance companies have clauses in their physician contracts that they must use a participating (par) provider unless the service is not offered, Meredith says. "Physicians were using our center who were out of network with the payer, and the payer sent certified letters threatening to cancel their par status if they continued using our surgery center," she says. "Of course, by the time they enforced that clause, they had reduced out-of-network allowables down to in-network rates."
This problem is difficult to address if the physicians have executed a contract with the payer, Meredith notes. "Many times, the physicians have no idea that this clause exists," she says.
Get your patients involved.
When doctors are being pressured to refer in network, consider getting your patients involved, suggests Kathy Bryant, president of the Ambulatory Surgery Center Association.
"In some cases, you can talk to patients and get them to weigh in with their insurers," she says. "You're clearly in a difficult situation. Most doctors are going to be concerned about going against the insurance company."
Beware of rental or leasing networks in which providers are given access to a payer and its members in return for discounted services.
Managers at the health care facility might think they are going to receive 80% of billed charges, Meredith says. "The 80% comes off the allowable, not the billed charges," she says. In other words, the provider receives 80% of what the primary insurance sends to the rental companies as their reimbursement.
Address assignment of benefits.
Out-of-network providers should have patients sign an agreement saying all payments go to the center, says John R. Seitz, CEO and founder of Ambulatory Surgical Group (ASG), an El Segundo, CA-based company that provides development and management of surgical centers without the prerequisite of purchasing equity.
"This needs to be clearly discussed with the patient," Seitz says. "The surgeon must be completely on board and willing to intervene if necessary."
Kirchner has heard of some facilities that take a predated check for the amount the patient is estimated to owe. The facility cashes the check it if the patient does not bring in the insurance check. "Our attorney tells us this is illegal," Kirchner says.