Are your physicians finding problems with the prudent layperson standard? You're not alone

While hospitals and emergency physicians have seen payment denials improve overall, some health plans are still denying claims

While the health care industry waits out the slow passage of a federal patients' bill of rights, emergency providers nationwide appear to be embroiled in their own battles involving payers attempting to gain universal acceptance of a prudent layperson standard for hospital emergency department (ED) visits. In states that have passed a version of the standard, the laws have achieved significant payment protections for providers and patients, physicians say.

The rule has effectively reduced the number of payment denials for initial screening and stabilization of cases that turned out to be non-emergent, and has simplified matters for both health plans and providers.

But the concept has yet to become a household term, especially with recalcitrant insurers who appear to routinely shun the rule and have proceeded with a "business-as-usual" attitude toward payment denials. Despite passage of laws in some 22 states, health plans are often still ignoring the rule, and continue to deny claims on grounds of questionable medical necessity.

The occurrences, albeit, are relatively few, according to providers in many states. But they are happening often enough to incense physicians and raise doubts about the enforcement effectiveness of legislation in curbing alleged health plan abuses.

Insurers are flouting prudent layperson standards

Many insurers are still flouting the rule in places where the standard has been law for more than a year, and physicians have viewed the violations as flagrant acts of disregarding the statutes. In fact, emergency physicians are being cautioned about looking to the standard for any easy solutions to their disagreements with health plans over coverage.

"Getting a law passed is one thing. Forcing health plans to comply with it is quite another," observes Larry Linder, MD, assistant director of emergency medicine at 350-bed North Arundel Hospital in Glen Burnie, MD, and president of the Maryland chapter of the American College of Emergency Physicians in Baltimore.

In July, emergency physicians from 13 Maryland hospitals filed a formal complaint with the Maryland insurance commissioner blasting certain insurers for refusing to conform to stipulations of a 1993 law that ushered in the nation's first prudent layperson standard for covering ED visits. (For details of the complaint, see the related article on p. 97.)

Yet, other states have seen fewer problems in implementing their own versions of the rule. And according to many observers, the fact that local interpretations of the standard vary, often widely from state to state, may account for both its widespread acceptance in many places and its checkered experience in others.

Regions of the country with relatively low managed care penetration and less rigid controls by health plans are generally seeing fewer problems with payment approvals, according to managed care observers. At the same time, mature markets where large, self-insured employers maintain tight controls over health care expenditures, such as in Minneapolis, MN, the dispute over covering emergency visits have reportedly been rare occurrences.

The reason: The system has built-in safeguards, such as large co-payments for visiting the ED, compared with an urgent care clinic or physician's office visit. The co-payments discourage patients from using the ED for primary care services.

The problem with the prudent layperson standard generally surfaces in highly competitive and growing managed care markets in which providers are vying aggressively for contracts and managed care organizations (MCOs) tend to dominate the reimbursement system, according to many emergency providers.

"Part of the problem with prudent layperson has been definitional," according to John Stimler, DO, assistant professor of emergency medicine at University Medical Center in Jacksonville, FL. "Who ultimately determines when a covered emergency has occurred even with a prudent layperson's standard? Is it the payer, the prudent layperson, or the state?"

Creating standards alone isn't enough

Stimler, who also serves as president of the Florida chapter of ACEP in Orlando, says applying a formal standard alone isn't enough. Health plans, he says, are resorting to craft in circumventing compliance of laws that have established a prudent layperson standard.

While they aren't absolutely denying payments under state law, they are bickering with providers over payment levels and forcibly down-coding claims to lesser levels of emergency care after covering the initial screening and stabilization.

In states such as Florida and Maryland, the problem has not been with the law but with agreeing to a universal definition of a prudent layperson's view of an emergency, according to physicians interviewed by The Managed Care Emergency Department.

For this reason, providers are waiting for approval of a federal prudent layperson's standard that would be viewed as a benchmark for all states. But for months, Capitol lawmakers have been debating how far to go in applying the standard as part of a larger package of patients' rights legislation. The issue has been bogged down in partisan politics too, with Republicans and Democrats presenting their own versions of the standard.

Meanwhile, the standard has been effectively established for the Medicare and Medicaid programs through language included in the Balanced Budget Act of 1997. The national office of ACEP in Dallas, TX, has endorsed the now-famous definition of the rule as it appears in the BBA, which defines the existence of an emergency medical condition according to a prudent layperson's opinion:

"The term 'emergency medical condition' means a medical condition manifesting itself by acute symptoms of sufficient severity (including pain) such that a prudent layperson, who possesses an average knowledge of health and medicine, could reasonably expect the absence of immediate medical attention to result in placing the health of the individual (or in the case of a pregnant woman her unborn child) in serious jeopardy, serious impairment of bodily function, or serious dysfunction of any bodily organ or part."

According to the Health Care Financing Administration, which oversees the Medicare and Medicaid programs, the BBA provisions emphasize that MCOs base their coverage decisions for emergency services on "the severity of the symptoms at the time of presentation" rather than on retrospective review.

HCFA mandates fall short on payment protection

In a letter to contracting insurance carriers, HCFA outlined other restrictions of the BBA, including the banning of pre-authorization for payments. It also instructed carriers to halt the practice of retrospective payment denials for screening and stabilization services involving cases that initially appeared to be emergencies but later turned out to be otherwise. The budget law orders contracting MCOs to pay for all screening and stabilization.

Yet, some observers believe that here too, the HCFA mandates fall short of providers' intent. According to Loren A. Johnson, MD, medical director of the emergency department at 49-bed Sutter Davis Hospital in Davis, CA, HCFA has added interpretive materials in its guidelines for surveyors that apparently dilute the original BBA mandates. Johnson, who also directs a private consulting firm specializing in emergency medicine, believes that the BBA's prudent layperson standard inherently suggests an objective third person or a panel of impartial prudent lay people.

However, in its guidelines for site surveyors, HCFA has amended the ACEP version of the standard to define a prudent layperson as someone who is "acting reasonably, given their knowledge, experiences, and state of mind" at the time of presentation. Johnson objects to the additions because they qualify and limit the definition of a prudent layperson in a way that was not intended by either ACEP or the BBA.

The guidelines also include the term "sudden onset" to define symptoms, which, according to Johnson, ACEP dropped from its original definition of the standard. "The term was dropped," Johnson says, because the criteria for emergencies should be severity-based and not necessarily focused on acuity at onset.

Florida lawmakers did away with the linguistic gray-area in defining an ideal prudent layperson. In 1996, the state enacted a law that gives final authority to the attending emergency physician in determining an emergency. The law includes other restrictions on MCOs, including banning pre-authorization and retrospective denials. It also raises reimbursement rates for non-contracting providers and limits the range of options payers have in setting rates to either the physician's charges, usual and customary rates, or a negotiated rate. In effect, the law prohibits MCOs from deviating from one of the three options.

Individuals differ on criteria for emergencies

But do such efforts satisfy what's wrong with a prudent layperson standard? A group of California providers cast doubt on the existence of an absolute prudent layperson. Researchers did not return phone calls to The Managed Care Emergency Department, but according to Johnson of Sutter Davis Hosptial, an informal survey of shopping mall customers conducted at the University of California Davis Medical Center found that opinions varied widely among shoppers when they were asked to assess a medical emergency.

According to Johnson, respondents were less likely to judge a case as an emergency when the presenting complaints came from someone other than themselves. But they were more likely to label the same presenting symptoms as an emergency when they themselves were the patient.

Payers have privately voiced the same confusion. "A prudent layperson's standard sounds objective, but what exactly is a prudent layperson. Who is he [or she] and what qualifies him or her to make these evaluations?" asks Johnson of Sutter Davis.

Lawmakers may not be able to answer these questions, but, according to Linder of Maryland, it may be up to the medical community to legislate enforcement. Already, states such as California have written measures to limit the leeway of payers in circumventing existing statutes. (For details of California's efforts, see the article on p. 97.)

The business community, which pays for health care services through employee benefit plans, has often pushed the limits on payment issues to the extreme, says L. Anthony Cirillo, MD, physician in chief of the department of emergency medicine at 200-bed Memorial Hospital of Rhode Island in Pawtucket.

"The public has been reacting negatively to things like 24-hour mastectomies and drive-through deliveries," says Cirillo, who is also president of the Rhode Island Chapter of ACEP in Newport. "Prudent layperson is that type of social-political issue."