Paper Tiger

Physicians Hope to Sharpen the Teeth of Clean Claims Rules

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Medical Economics Feature -- January 2001

By Walt Borges
Associate Editor

When a managed care organization (MCO) fails to pay physicians promptly, the result is havoc within a medical practice and, in some cases, financial insolvency and bankruptcy.

That's why the Texas Legislature enacted prompt payment legislation in 1997 and 1999 that requires MCOs to pay physicians and other health care professionals within 45 days of receiving clean claims that include enough information for insurers to evaluate them.

But in the view of many physicians, the prompt payment legislation has turned out to be something of a paper tiger because it has done little to curtail delays while transferring part of the administrative burden of claims administration from the insurers to doctors and hospitals.

Physicians are prompting a push for new legislation to close a glaring loophole in the prompt payment law that allows health maintenance organizations (HMOs), preferred provider organizations (PPOs), and their third-party administrators (TPAs) to change the definition of what constitutes a clean claim and to avoid statutory penalties.

The Texas Medical Association and several county medical societies also are targeting legislative changes to revise statutes that make physicians maintain signed statements from patients as to whether they have other insurance coverage. The requirement, known by practice and hospital administrators as the "11(d)" problem, in reference to the check-off box on one common claim form, has been coupled with insurer demands that photocopies of the statement accompany claims, effectively curtailing electronic filing of claims with some insurers.

The Texas Department of Insurance (TDI) is also in the sights: Some physicians and medical societies have complained to TMA that TDI's regulations to implement the law place an unacceptable burden on physicians and other health care entities to prove that insurers are delaying payment of valid claims. TDI has not yet levied administrative fines or tracked complaints to the point that some physicians are calling for the legislature to instruct Insurance Commissioner Jose Montemayor to enforce the law.

"TMA has met with the commissioner to raise these concerns and we hope the agency will either take a harder line with plans or support our efforts to strengthen the statute. The status quo is untenable," said Robert W. Sloane, MD, of Fort Worth, chair of the TMA Council on Legislation.

Clean claims is now a constant topic at meetings between TMA's Council on Socioeconomics' dispute resolution team and insurance carriers, says Paul Handel, MD, of Houston, chair of the council. "We've been meeting with the carriers for a decade," Dr. Handel said. "In the past year, clean claims activity is a high priority."

While efforts are already under way to fix some of the problems by amending TDI rules, an approach to the Texas Legislature in 2001 is in the offing.

"We want to fix the clean claims statute so that the penalties in the statute cannot be negated by contract," explained Connie Barron, TMA's associate director of legislative affairs. "And we will want to revisit what a 'clean claim' is."

At the heart of the effort are the attempts by the legislature to ensure that physicians are paid promptly by insurers. In 1997, legislators required HMOs and PPOs to pay doctors and other health care entities within 45 days of receiving a clean claim for services. Because the statute contained no meaningful penalties for health plans and insurers who delayed payment and because the time period for prompt payment could be modified by contract, insurers largely ignored the law.

The legislature took a second crack at the problem in 1999, prompted by estimates that physicians and other health care professionals were owed millions of dollars. House Bill 610 was the vehicle for the statutory crackdown, and this time the prompt payment bill contained penalties and administrative fines for slow payment of clean claims. The bill also contained provisions that allow physicians to collect attorneys' fees if they must use legal action to recover late payments.

HB 610 also required TDI regulators to define exactly what information constitutes a clean claim that starts the 45-day clock ticking. The regulations TDI came up with took effect Aug. 1, 2000.

The contract loophole

But the law contains what many physicians and practice administrators believe to be a fatal loophole: An MCO can substitute its own requirements for what constitutes a clean claim and impose those requirements through contract. To enact contractual clean claims provisions, MCOs need only to provide 60 days' notice.

"Contracting will be a major issue for HMOs in the legislature because many have claims elements that are unique to them and their insurer contracts," said Leah Rummel, acting executive director of the Texas Association of Health Plans.

HMOs are reluctant to make costly changes to their claims systems to meet state laws and regulations before federal authorities issue guidelines for electronic health care information exchange under the Health Insurance Portability and Accountability Act (HIPAA), Ms. Rummel says.

"HMOs don't want to spend millions on changes that may not meet the HIPAA requirements," she said.

On Oct. 10, 2000, Kevin Pressman, practice administrator for Primary Pediatric Medical Association of Seguin, wrote Humana to protest some of the additional information required by the company (in this case, medical records required for certain diagnoses and treatments, and the beginning and ending dates of prior insurance coverage).

Mr. Pressman stated that nearly 15 percent of the cases in the practice were covered by the requirements involving medical records. "This type of blanket requirement of including medical record documentation by your company is placing an unreasonable burden on itself and providers," Mr. Pressman wrote. "This type of across-the-board requirement for medical record documentation will ultimately contribute to ever-increasing health care cost. Your company will be required to hire more MEDICALLY QUALIFIED staff (i.e., physicians, not nurses) to review the documentation."

He also gigged Humana for requiring physicians to collect the effective and termination dates of prior insurance for their patients. Since most patients don't know that information off the top of their heads, it would force the practice to hire more staff to provide the information.

MCOs also may use their contracts with physicians to alter the penalty provisions. Under HB 610, physicians who were victims of slow pay were entitled to collect the full amount of the billed charges rather than the discounted rate that is usually paid. Doctors, hospitals, and other health care entities also may recover attorneys' fees when they have to take legal action to collect delayed payments of clean claims.

A recent Aetna contract submitted to TDI for approval eliminated the statutory penalties by stating: "Physician shall not be entitled to billed charges for any Clean Claim or attorneys' fees required to recover payment on any plan." Instead, the contract levied a penalty of between 1 percent and 20 percent per month -- the percentage would vary contract to contract -- on the unpaid portion of the claim. When TMA confronted Aetna over the provision, it was dropped.

Dr. Handel says TMA wants a basic principle upheld by carriers that use contracts to specify their information requirements. "Their contract language should never try to circumvent state law," he said.

He also believes physician vigilance is warranted to prevent doctors from signing away their rights into a system that looks favorably on delay.

"Any other business would not tolerate being forced to wait for payments after rendering services," Dr. Handel points out.

Problem 11(d)

HB 610 and the new regulations require that doctors maintain a signed statement by the patient as to whether the patient has other insurance. This written statement must be submitted with the claim, which some physicians and administrators say makes it impossible to submit electronic claims.

John R. Green, managed care director of the Dallas-based North Texas Heart Center, sees the requirement as an effort to shift a portion of costly benefit coordination from the MCOs to physicians and hospitals that provide medical care. Instead of accepting a physician's claim documentation showing that the patient has no other insurance as reported in field 11(d) of the Health Care Financing Administration's Form 1500 -- as the federal government and other states do -- HB 610 and TDI require a hard copy of the no-other-insurance statement to be submitted.

Mr. Green says the center submits 80 percent of its claims electronically. "One hundred percent of our claims that can go electronically are submitted electronically," he said.

"Everybody in the health care industry wants to cut overhead and cut costs, and the way to do that is to make sure we can do things electronically to cut down on the paper," Mr. Green continued. "The managed care payers are saying, 'We don't want to deal with this, so through the legislation we'll make the providers responsible for doing this.'"

TMA officials agree with Mr. Green's perspective. In a letter sent to Commissioner Montemayor on Sept. 11, 2000, TMA's Division of Medical Economics Director Rich Johnson and Health Care Delivery Department Director Michael Cushman asked TDI to change its rules to recognize the administrative burden being placed on physicians. (See " Clean Claims ," July 2000 Texas Medicine, pages 26-31).

"For TDI to place any other requirements on the physicians in this regard would, in effect, shift a major business function of insurance onto the physicians," they wrote. "The practice of medicine is best suited as a profession that provides patients with the best health care possible. Insurance companies are in the most appropriate position to actually take care of coordination of benefit issues, as they are a function of the business of insurance."

Mr. Green says the staff and resources needed to run the traps on individual patients' health insurance are financially draining.

"A lot of times these are claims for $35," he said. "And by the time we get our payment back and we get our $12.15 that we negotiated as a discount, we've spent $18 or $25 trying to get that money."

Although TDI initially ignored predictions from physicians and TMA that the 11(d) provision would halt electronic claims filing, it has since acknowledged a potential problem.

Blake Brodersen, TDI deputy insurance commissioner for HMOs, says physician complaints have been taken to heart. If TDI adopts proposed amended regulations published Oct. 20, submitted claims do not need to be accompanied by the written no-other-insurance form to be considered clean. However, the insurer can still request the written form after the initial submission, Mr. Brodersen noted.

The change is not enough to ensure that MCOs will not request the forms to create further delays in payments, Ms. Barron says. TMA will seek legislation to eliminate the requirement for written forms in the 2001 legislative session.

Ms. Rummel says the change is a good one. HMOs agree that the written attachment is usually not needed with the original submission, she says, but adds that physicians should be willing to collect information that will help them get their claims processed promptly.

Ignoring HB 610

For some plans, HB 610 and its prompt payment provisions are something to be ignored. One Dallas County health care administrator who asked that his name not be used says Aetna adopted that attitude when renegotiating contracts with his entity.

"They've said, 'We're going to get our own language, we're going to do it our own way,'" he recalled.

"I don't believe they're doing it in a Machiavellian sense," the administrator said. "I truly believe they don't have the wherewithal to execute [the new law] appropriately, so they have to contract their way out of it. I truly believe that."

Jocelyne Swayze, managed care director for CARUS Healthcare PA in Dallas, says some MCOs think they can ignore the law when negotiating physician contracts.

"The people who sent me three new start-up contracts recently assumed I was ignorant of HB 610," Ms. Swayze said. "When I told them we weren't signing away our rights, they acted surprised and said they would run it by the legal department."

The endless audit

Ms. Swayze also is concerned that no time limit has been placed on the audits conducted by the plans. Under HB 610, MCOs must pay 85 percent of the contracted fee for the services provided within 45 days of receiving a clean claim, even when an audit of the claim is planned. After the audit determines a claim is valid, the insurer has 30 days to pay the remaining 15 percent.

"There's no time limit on the audit, and that's a concern for me," said Ms. Swayze. "It's widely known that insurance companies make a lot of money on the float."

In fact, a 1999 analysis by accounting firm PricewaterhouseCoopers LLP for the American Psychological Association suggests the insurance industry can earn up to $280 million per year in interest income for each 1 percent of claims it denies, then pays fully after a maximum review period estimated at 377 days. The study, which acknowledged that it could not determine the exact level and magnitude of claim delays and payments, said most insurers try to pay 90 percent to 95 percent of their claims within 30 days of receiving a clean claim.

Mr. Brodersen says TDI cannot act to limit audit duration because HB 610 "didn't provide for a time frame on audits." He did, however, indicate that TDI was monitoring carriers' response to the audit requirements and could take future regulatory action should carriers fail to complete audits within a reasonable time frame.

TDI: wait and see

Some physicians and administrators think TDI is acting too hesitantly on clean claims.

Ms. Swayze is unsure why insurance regulators are not more vigorous in requiring prompt payment, but says she shares the perceptions of other health care professionals and administrators who think TDI's main concern is not to burden struggling insurers with additional costs.

"I think the attitude was perfectly clear in the PacifiCare situation after they took over from Harris Methodist Health Plans in Fort Worth," Ms. Swayze said, citing a situation in which PacifiCare blamed payment delays on difficulties in integrating the Harris Methodist claims system into the PacifiCare system.

"There were a reported 100,000 claims that had not been paid," Ms. Swayze recalled, "but the commissioner was saying 'Let's bear with PacifiCare as they work through this.' When a similar thing happened in Georgia, the Georgia insurance commissioner said, 'Upgrade your systems or pay the fines.'"

In fact, TDI placed PacifiCare of Texas on administrative oversight on Nov. 15, 2000. Late payments to physicians were among the reasons TDI listed for the action.

With the system in flux because of the Aug. 1 implementation of the new rules, TDI's regulatory performance is hard to measure. Thus far, it has received what Mr. Brodersen characterized as "a relatively low number of complaints," and the regulators have issued no administrative penalties or fines. Mr. Brodersen says, however, that there are no current plans to process clean claims complaints separately from the other complaints TDI receives on HMOs. Justified clean claims complaints will be identified and closely monitored, and if trends are identified, appropriate action will be taken.

TAHP's Ms. Rummel, who once was a TDI official, says the HMOs won't complain if TDI chooses to sort out clean claims complaints, but says complaints from physicians about the complaint process are often misplaced.

"Physicians always say the HMO isn't paying them, but usually it's a problem with incorrect billing by the physician," she said.

While physicians do make billing errors, these errors do not come close to accounting for the level of failures to pay claims currently experienced by the physicians across the state, Ms. Barron says.

Mr. Brodersen says TDI is listening to the complaints. He notes that the amended rules include a provision that allows physicians more options on repaying fees for claims that have been audited and denied. Where insurers controlled the process and were likely to deduct the overpayments as "charge-backs" against future payments, under the amended rule, physicians may arrange with the carrier to repay the overpayment through alternative means as long as it is done within 30 days.

One TDI complaint-related problem already has been identified. When a physician complains to TDI about a clean claims dispute, the doctor is required by TDI to provide confirmation of submission by electronic filing, certified mail filing, or delivery invoice. Ordinary mail won't do for submitting claims, and neither will a fax, because there is no confirmation of the submission.

To require the use of certified mail or delivery service to prove the claim was submitted is "ridiculous and costly, too," said Ms. Swayze.

Mr. Green agrees. "The U.S. mail just isn't good enough," he said. Proving submission is "an increased cost to the provider.

"We're doing our bit for king and country," Mr. Green said. "The question is, is the payer?"

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