Budget law could make claims denials easier for HMOs; Should you care?
Budget law could make claims denials easier for HMOs; Should you care?
ED providers will have to face billing patients or taking a loss on claims
As Congress legislates patients' rights protections under managed care, one troubling and unexpected result of the debate has begun to surface. In the future, it may become more difficult for both patients and emergency medical providers to appeal claims denials through formal arbitration.
Emergency department (ED) claims rarely, if ever, go to formal arbitration. But, with the large volume of claims generated by EDs annually, the number of claims likely to go unpaid could increase substantially as a result of narrowing arbitration opportunities, according to some legal observers.
In fact, despite growing efforts by lawmakers and the public to curb managed care organizations' powers, emergency providers may see little or no advances in achieving payment equity under managed care, according to some emergency physicians.
In July, the American Arbitration Association (AAA) in New York, NY, the nation's most influential dispute-resolution body, warned the medical community and the public that it was considering a decision to refuse administering mandatory arbitration of disputes involving medical claims. Mandatory arbitration, while used largely in employment disputes, has also been used in resolving some conflicts concerning payments. The panel's decision would not affect AAA's instances when parties voluntarily agree to arbitration.
Managed care reform may not be reform
The AAA stated that it is responding to federal initiatives. Proposals currently being discussed in Congress as part of managed care reform legislation would require that contested medical claims be reviewed by a disinterested outside party whenever they are denied. If passed, the measure would weaken the power of most health plan medical directors in being the final arbiters of medical necessity.
But ironically, while the legislation would make it easier for patients and emergency providers to seek outside appeals, it would make seeking mandatory arbitration almost impossible. The AAA's refusal to administer mandatory arbitration would, in effect, nullify any potential gains from the federal patients' rights legislation, according to some analysts.
Few disputes arising from emergency medical care are currently appealed, unless the dollar amounts involved are enormous, as they are in heart operations or organ transplants. Few emergency procedures cost as much. Yet, the diverse, unscheduled nature of patient visits and presenting complaints in emergency medicine has long exposed providers to financial losses at the hands of patients or health plans who either refuse or cannot afford to pay for rendered services.
Any narrowing of opportunities to go outside the system to appeal denied claims would blunt one of managed care reform's biggest benefits to providers, critics say. Emergency professionals are losing enormous revenue on many procedures due to heavy price discounting and mounting charity care. Discouraging appeal opportunities might exacerbate an already difficult situation, says Linda DeFeo, MD, JD, chairman of emergency medicine at 300-bed Harbor Hospital Center in Baltimore, MD.
But how important is the appeals process to emergency physicians? To most emergency practitioners who have spoken to The Managed Care Emergency Department, the issue is clear-cut: If every effort to get approval for coverage from a payer is exhausted, the patient should be made responsible for the bill. Furthermore, most emergency physicians, aside from administrators, don't involve themselves directly in reimbursement issues, says DeFeo. "Therefore, the question of who gets stuck with the bill-the health plan or the patient-becomes a moot point," DeFeo says.
But the matter isn't that simple, observes managed care attorney Philip Stoffan, JD, with Lague, Newman and Irish in Muskegon, MI. "What if the patient is unable to pay a bill for services that involve more than mending a simple cut or scrape? The emergency physician in that case is unintentionally adding to the hospital's and medical group's uncompensated care problem," Stoffan notes.
Providers shouldn't pursue claims appeals
But is it worth the huge trouble and cost to providers to press for an appeal in hopes of changing a payer's mind? In most cases, the answer is no, opines DeFeo. For one, it should not be the average working physician's responsibility to pursue unpaid bills. Most rank-and-file providers are too busy to actively pursue health plans individually.
And then there simply are too many denied claims for any one physician to tackle with any hope of success, DeFeo adds. At Harbor Hospital, for example, administrators have enough to do to monitor the 2500 ED visits they get monthly. With 28% of patients who are uninsured, the risk of under-payment is enormous, DeFeo says. Even if 10% of claims were dubiously denied as medically unnecessary, which isn't extraordinary for a hospital such as Harbor, it would mean that some 250 claims would have to be appealed.
But the question of whether emergency physicians should directly concern themselves with who ultimately pays the medical claim is an ethical quandary that most providers apparently have difficulty answering with any certainty. Emergency physicians, especially, view themselves as "advocates" for patients who in many cases lack the ability to pay for their services. Yet, at the same time, these same providers have a responsibility for the financial viability of their hospitals, says DeFeo.
Simultaneously, every time a provider avoids the payment question and allows the patient to be billed, the physician risks alienating the same patient he or she has sworn to advocate for and further risks harming the provider contract over a potentially adverse patient satisfaction issue, adds DeFeo.
The dilemma posed by patient "balance-billing," so called because the patient is made responsible to pay for any unpaid balance, has become a huge problem in emergency medicine. And, it's one that isn't getting sufficient attention by the emergency medical community, says B. Joshua Rubin, MD, chief medical officer of 250-member Emergency Physicians' Medical Group in Roseville, CA. But whether emergency physicians or directors should involve themselves in appeals is another matter.
Appeals are usually "painful, time-consuming, and costly," Rubin says. In addition, in many states such as California, appeals pursued directly by physicians (rather than a billing company or hospital) can be construed as infringing dangerously close to laws that bar the practice of corporate medicine, Rubin adds.
According to Stoffan, 95% of emergency medical claims that are submitted for payment are genuinely medically necessary. The remaining 5% are debatable but should be "aggressively appealed" by providers because many stand a good chance of being reversed on appeal, Stoffan advises. In most cases, the assumption is that if the physician felt a medical necessity to treat the patient in the manner chosen, then medical necessity isn't the issue. The issue is whether the procedure is a covered benefit, Stoffan adds.
Payers aren't complying with prudent layperson
This means that even the 5% of claims that can be legitimately appealed can drop to a much lower number "if providers simply bothered to read their contracts," Stoffan states. In the majority of cases, the dilemma of who should pay would be avoided if providers were better informed about coverage limits. All health plan agreements with providers specify the services that are covered under the benefit plan, and most include payment information.
But physicians aren't always to blame when health plans renege on payments. Despite recent enactment of federal and state laws establishing prudent layperson standards for emergency visits, payers are waffling individually on approving certain claims, according to a growing consensus of emergency physicians. Health maintenance organizations (HMOs) have been slow to respond to prudent layperson statutes mainly because of a lack of enforcement muscle by states, DeFeo complains.
Despite provisions in last year's federal Balance Budget Act of 1997, which legitimized the prudent layperson standard for Medicare and Medicaid, many HMOs have lagged in complying with the laws. In some cases, they have even found ways to circumvent the statutes, says Larry Linder, MD, assistant director of emergency medicine at North Arundel Hospital in Glen Burnie, MD. (The September 1998 cover story of The Managed Care Emergency Department will feature an in-depth report on the effects of prudent layperson legislation on providers.)
In July, a cadre of physicians representing 13 Maryland hospital EDs formally complained to the state's insurance commission that HMOs were illegally denying claims in violation of Maryland's 1993 prudent layperson law. Among the types of "illegal denials" cited by the complaint were: non-payment of ED visits by patients whose presenting complaints met the state's definition of a medical emergency, payment denials due to lack of pre-authorization by a payer, and non-payment of medical screenings that were guaranteed by state law. (See the article on p. 93 for more details.)
Maryland providers face a second dire consequence stemming from their recalcitrant HMOs. State laws, which regulate payment rates to hospitals, base their rate-setting formulas partly on the amount of each hospital's uncompensated care. Hospital rates are set higher with increasing levels of uncompensated care. In effect, whenever an HMO refuses payment, the state ends up subsidizing hospitals with higher bad debt ratios, DeFeo says.
Short of a national healthcare policy, physicians such as Rubin see capitation as a solution to the problem of balance billing and costly appeals. Another suggestion involves using the evaluation and management (E & M) codes as a guideline. Because 50% of claims that are contested fall within level III of the E & M range, those should be most closely watched by administrators as potentially running the highest risk of denial and being the most likely to be appealed. "Hospitals and HMOs should agree on how these level III claims will be handled to avoid repeated denials," DeFeo says.
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