LegalEase

If payer is slow, try sending a speed letter’

Don’t get caught providing services for free

By Elizabeth Hogue, JD
Health Care Attorney
Elizabeth Hogue Chartered
Burtonsville, MD

Has your agency ever been retroactively denied payment for services even after the payer had "preauthorized" care for a patient? Of course, this usually happens only after extensive services have been delivered for the home care patient. And you are left holding the unpaid bill while the payer takes its sweet time getting back to you.

Understandably frustrated by such tactics, many hospital-affiliated home health agency directors, nonetheless, find it difficult to remedy such unsavory situations. Is there a solution?

The best strategy for providers is to make sure they confirm in writing every verbal conversation involving payment issues with representatives of payer organizations. Because of the timing of payment decisions, immediate written confirmation is absolutely essential.

A case of detrimental reliance’

The best way to accomplish this is to develop a form for this purpose, similar to multi-part "speed letters" that businesses have been using for years. During each telephone conversation with a payer, your staff should fill out the form confirming the agreement reached. This confirmation may read as shown in the sample form. (See box at right.)

One copy of the form should be faxed immediately to the payer. Providers should also keep a copy for their files.

The language in the letter regarding reliance by providers on payers’ agreements to pay is especially important because it sets up a theory of contract law often referred to as "detrimental reliance." This theory basically says that when one party, such as a payer, agrees to do something such as pay for services and the other party relies on this agreement, the party that made the promise to pay must do so. In other words, when providers rely "to their detriment" on payers’ promises, agreements to pay are enforceable even though payers frequently indicate the contrary in so-called disclaimers.

A recent case, Florence Nightingale Nursing Services v. Blue Cross/Blue Shield of Alabama, CA 11, Nos. 93-6867, 93-6819 (January 9, 1995), illustrates the usefulness of this strategy for providers. In this case, a nursing agency provided skilled care to a patient who had a diagnosis of AIDS. The patient’s insurance, which was administered by Blue Cross and Blue Shield, provided coverage for "medically necessary" nursing care, but not for "custodial care."

Nightingale received verbal assurances from Blue Cross and Blue Shield that services to be rendered to the patient were covered. The agency sent a letter to Blue Cross and Blue Shield to confirm its agreement to pay. Blue Cross and Blue Shield did not respond to the agency’s correspondence.

Blue Cross subsequently refused to pay the agency for some services and paid for other services at a rate that was much lower than agreed upon. Blue Cross also refused to pay on the basis that some of the care provided was "custodial."

The court rejected those arguments and ordered Blue Cross to pay for the services rendered at the rates claimed by the provider. The court took into account the provider’s written confirmation of the payer’s agreement to pay. Since no response was received from the payer, the provider was entitled to rely on this agreement when it provided services to the patient.

Staff responsibilities for payment may respond to these suggestions by saying that payers frequently give so-called "disclaimers" that seem to indicate that preauthorization does not necessarily mean they will pay for services. Providers should simply ignore these disclaimers and proceed as described above. Based upon the Nightingale case, it seems likely that courts will discount such disclaimers and insist on payment.

Although time is certainly in short supply for providers, polices and procedures that require written confirmation of verbal agreements with payers will pay off handsomely. Taking the time to follow this practice may make the crucial difference in whether agencies are ultimately paid for services rendered.

Editor’s note: To obtain a copy of Managed Care Contracting, including additional information about how to handle adverse payment decisions, send a check for $25, made payable to Elizabeth E. Hogue, at 15118 Liberty Grove, Burtonsville, MD 20866.