Prompt-pay law in effect, but the problem continues

New York providers raise ruckus over slow pay

Despite a prompt-payment law that took effect a year ago in New York, managed care plans have been paying their providers bills even later than usual, alleges the Healthcare Association of New York State (HANYS).

New York’s prompt-pay law requires payment of clean provider claims within 45 days. However, a study released in November by HANYS found the average number of days it took managed care plans to pay their claims grew by 37%, from 47 days during the first half of 1997 to 64 days during the first half of 1998. The study is based on reports filed with the State Insurance Department by 24 managed care plans.

"Apparently, the definition of clean’ is somewhat muddy to the plans," says HANYS’ president Daniel Sisto. "The increase in unpaid claims demonstrates that New York’s prompt-payment law requires prompt attention from the legislature when it reconvenes in 1999 so doctors and hospitals aren’t left hurting when they heal plan enrollees," he says.

"This situation is not unique to New York," says Sisto. "Nationally, the managed care industry has been been having a very difficult time financially. What it looks like is many HMOs are trying to finance some of their operating losses with the cash flow that should be used to pay claims."

But Nicole Reilly, a spokeswoman for Oxford Health Plans of New York, disagrees. "These allegations show a complete lack of understanding of HMO claims-payment practices," she claims. Reilly says the information filed with the insurance department on which the HANYS study was based has little to do with calculating days of unpaid claims.

"The health care association is relying on data about financial reserves, the amount held to pay claims. This money has nothing to do with how long it takes to pay claims," she says. "In fact, reserves are mostly for claims yet to be received. They’re looking at money that hasn’t even been claimed yet."

HANYS officials acknowledge that while their calculations are not exact, they represent an accurate picture of the overall situation: Despite the enactment of a prompt-pay statute, there has been a recent increase in the percentage of providers not being being paid within the 45-day time limit, causing providers’ level of accounts receivable to increase.

The situation has gotten so bad that many plans are withholding payment for preauthorized care, claims HANYS. "We think that if a plan preauthorizes a patient to receive medical services, it should pay for that service," says Sisto.

According to HANYS, 14 of the 24 plans operating in New York state saw their unpaid claims rate increase last year. Eleven of these plans had 60 or more days of unpaid claims during the first half of 1998. The largest percentage increase was by Kaiser Foundation Health Plan of New York in White Plains, with a 105% rise to 64 days. Other plans with 60 or more days of unpaid claims during the first half of 1998 included:

— Oxford Health Plans, with 72 days’ worth of unpaid claims, up 74%;
— Aetna U.S. HealthCare, with 76 days of unpaid claims, up 53%;
— MVP Health Plan, with 80 days of unpaid claims, up 40%.

Despite this overall poor showing, 10 plans still managed to reduce their unpaid claim days. The plan with the biggest reported percentage decline was MetroPlus Health Plan of New York City, which trimmed its payment delays by 30%, from 195 days to 137 days.