'Prudent layperson' is here: Watch out for managed care maneuvers

New legislation is huge step for emergency medicine, but conflicts remain

It's been one of the biggest battles between insurers and ED managers: health plans frequently base claims decisions on a patient's eventual diagnosis, instead of their presenting symptoms. Recent federal legislation has mandated that claims decisions for Medicare and Medicaid patients be based on the average person's-or "prudent layperson's"-definition of an emergency, and this is a clear victory for patients and ED managers, say emergency medicine experts.

But, the battle is far from over. "Passage of this legislation is just a start," emphasizes Nancy J. Auer, MD, FACEP, current president of the American College of Emergency Physicians (ACEP) and medical director for emergency services at Swedish Hospital in Seattle, WA. "We need to monitor the insurers to see how this plays out and be sure patients aren't being denied their rights."

ED managers should prepare themselves for resistance from managed care organizations (MCOs), warns Mason A. Smith, MD, FACEP, president of Lynx Medical Systems in Bellevue, WA, and chairman of ACEP's reimbursement committee. "This is such a radical rebalancing of power, there are bound to be problems. The managed care plans will not want to give up that power without a fight."

Some patients are now protected

The tactics used by health insurers to deny claims are twofold: requiring a patient to obtain prior authorization for seeking medical treatment in the ED and retrospective denial of payment for treatment already received but deemed "non-emergent." "In the case of a medical emergency, we don't want patients to spend time on telephone trying to get approval," says Cris V. Mandrey, MD, FACEP, director of the emergency medicine residency program at Earl K. Long Medical Center in Baton Rouge, LA, and president of the Louisiana chapter of ACEP.

Some insurers deny claims based on the patient's diagnosis, without taking into account the severity of the presenting symptoms. "The good news is, it's not a heart attack, the bad news is they won't pay because it was only indigestion," says Mandrey.

Patients with insurance have been getting swindled by managed care plans, he says. "These are insured patients who have paid premiums for coverage they're not getting," Mandrey explains. "They go to the ED with the idea they have coverage, and when it turns out not to be less than a true emergency, insurance won't pay, even though there was no way to know that ahead of time."

The patients are billed for the ED visit, which should have been covered by their insurance. "These patients, who are generally responsible people, are paying for their premiums and then paying the hospital directly because the insurer won't pay for that legitimate ED visit-so they're basically paying twice for that emergency," says Mandrey.

The Medicare/Medicaid legislation bars these practices and protects patients from improperly denied ED claims. "There are two benefits-it stops the foolishness of prior authorization, and also bases the payment decision on the final diagnosis," says Mandrey.

The legislation is the first and only national definition of an emergency and standard for how insurers must deal with emergency claims, says Todd Taylor, MD, FACEP, attending emergency physician at Good Samaritan Regional Medical Center and Phoenix Children's Hospital in Phoenix, AZ. "Heretofore, insurance carriers have been able to `game the system' by defining what they consider an emergency after the fact, when examinations and tests have already eliminated an emergency medical condition," he says.

In the past, insurers have argued that patients should be educated about what constitutes an appropriate visit to the ED, but that is not an effective solution, says Charlotte Yeh, MD, FACEP, chief of emergency medicine at New England Medical Center in Boston, MA. "We can focus a lot of attention on education, but, realistically, we will never make patients as knowledgeable as health care providers. It has taken 20 or 30 years to get the message about smoking across, so we can't expect that patients can be uniformly educated about this overnight."

Instead of putting the burden on patients to determine an appropriate visit, that responsibility should be shared with health care providers, she recommends. "That's much more rational and consistent with how we practice," Yeh says. "Instead of forcing risk on the consumer, we ought to be forcing participation between the emergency physicians, primary care providers, and managed care."

ED's bottom line

Although the Medicare legislation will protect many patients' rights, it isn't likely to have a major impact on the ED's bottom line, Smith predicts. "Before the legislation went into effect, if an employed individual had coverage denied, then we were allowed to bill the individual, and [we] generally got full recovery. So, in that sense, it really doesn't change anything with Medicare," he says.

However, some managed care contracts actually prohibit balance billing the patient for denied claims. "With Medicaid, you can't bill the patient, even though they've declared it an uncovered service, which technically you're allowed to bill for. But, most states still have prohibition against billing Medicaid recipients. So, it is potentially a major financial benefit there," Smith notes.

Some Medicaid plans have as much as a 90% denial rate for ED visits, he points out. "That much money is probably going to require a fight, because until now the plans have just been saying no and getting away with it," Smith says. "It's unlikely that Medicaid plans will fork over all this authority without being forced. That may occur at the level of the insurance commissioner of the state or in court."

Managed care's scare tactics

Insurers can't argue that it's unfair for them to have to pay for emergency care, says Mandrey. "They can't win with that strategy, because it's too obvious this is right and fair," he says. "So, what they are trying to do is attack it from the perspective of, `We can't afford to do this for patients, it's just too expensive, and it will drive up health care costs.'"

To stave off federal legislation mandating the prudent layperson definition of an emergency, the insurance industry hired Barents Group, a limited liability corporation, to analyze the impact of the Medicare/Medicaid legislation in a report entitled, "The Effect of Legislation Affecting Managed Care on Health Plan Costs." "This group came out with a statement saying that prudent layperson will increase managed care costs by 1-3%," says Mandrey. "This is a first attempt to try to picture this as a terrible thing which will drive costs through the roof, but that's not reality."

The insurance industry's claims are grossly inaccurate, he says. "Their scare tactic has been to claim that this legislation will make policies increase in cost."

ACEP also examined the financial impact of "prudent layperson" legislation in states such as Maryland, which has had legislation in effect for several years. "Their insurance commissioner explained it had not driven up costs," says Mandrey. "The only thing they noticed was that the number of complaints about ED denials dropped 90%."

Because many states already have years of experience with prudent layperson, their experiences should be considered regarding implementation issues. "In Arizona, we spent as much time after the law was passed educating the health plans as we did forwarding the legislation in the first place," Taylor reports. "As has occurred in many states, managed care may simply ignore the law for months to years because they are not aware or do not appreciate its implications." Once insurers understand they have few options, they usually rewrite their procedures to comply, he says.

Conflict will end up in court

Since insurers don't have any mechanism in place to control ED expenses, they are backed into a corner on the issue. "This policy is an entirely new area and is not yet well understood by the insurers or the community," Smith explains. "There is going to be a huge backlash when the first denials come into the ED, and they are likely to end up as court cases because so much money is at stake."

It remains to be seen how the matter will be resolved in court, says Smith. "Prudent layperson is a well-defined legal concept in the courts, but will it be difficult to determine on a case-by-case basis whether the plans have complied to access?" he asks.

Although the issue of access to emergency medical services has broad-based popular support, insurers don't yet realize what they're in for, says Smith. "There will be an angry response when payers figure out what's actually happened," he predicts. "I don't think it's fully appreciated how we can make their lives miserable."

Here are several ways to maximize the impact of "prudent layperson" legislation:

· Educate patients. ED managers should create an information sheet or pamphlet explaining prudent layperson and how it might affect insurance coverage, recommends Smith. "Put the leverage in the hands of the beneficiary," he recommends. "Ideally, we want to have an informed patient population, because we can't fight their battles for them."

· Notify insurers of your interpretation of the law. ED managers should consider sending a notice to health plans about their intentions to comply with the new legislation. "It's not a bad idea to let them know that, effective January 1, we will no longer be able to call for permission to treat because it would be a violation of federal law-unless they have a prudent layperson answering the phone, that is," says Smith. "It's a polite way to put the plan on notice." Before doing so, meet with the hospital attorney to confirm that calling for authorization would violate federal law, he advises.

Simply having a written statement from the MCO agreeing to comply with all local, state, and federal laws would automatically require Medicare and Medicaid insurers to follow the "prudent layperson" definition when considering payment for claims, says Taylor. "Write good contracts and then hold their feet to the fire," he says.

· Take advantage of the precedent set by existing legislation. "The fact that this language is already becoming a common standard despite the lack of codification in law, provides ED managers an opportunity to include it in current contracts," says Taylor.

Some ED managers have been successful in using COBRA/EMTALA regulations to get MCOs to concede that a medical screening, required by federal law, represents a spectrum of medical evaluation including diagnostic tests and specialty consultation rather than just a simple "eyeball" evaluation often expected by insurers.

"We are fortunate in Massachusetts, because our Medicaid has always recognized the constraints under EMTALA, so they have never required prior authorization and have recognized the need to give patients a medical screening-we are one of the few states that it hasn't been an issue," reports Yeh.

When the revised EMTALA administrative guidelines are released this month, it should be a wakeup call for managed care plans. "They explicitly say you cannot require prior authorization, so when the hospitals get wind of that it will become pretty clear," says Yeh.

· Support federal legislation. "This means one must contact their legislators and also consider contributing to ACEP's PAC fund to help forward this legislation," says Taylor. "Without federal legislation, more than half of the states will have little if any bargaining power with managed care, due to no state law affecting this issue." Arizona's state ACEP chapter recently convinced five of the state's six federal representatives to sign on to the Access to Emergency Medical Services Act as co-sponsors, he reports.