Battling the Backlog

New Medicaid Provider Struggles to Clear Payment Problems

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Medical Economics Feature -- December 2004

By  Ken Ortolon
Senior Editor

Austin medical office manager Pat Wallis says she has never been more frustrated in dealing with an insurance carrier than she has since Texas Medicaid and Healthcare Partnership (TMHP) became the state's Medicaid carrier in January.

Ms. Wallis, who manages a three-physician practice that includes her husband, Austin pulmonary disease specialist Ted Wallis, MD, says Medicaid claims are repeatedly denied and appeals sometimes take months to resolve. And TMHP claims representatives can't even tell her if a claim has been received.

"The frustrating thing is I've been doing this for 20 years," she said. "I'm pretty good at writing the appeal letters and explaining the problem. But with TMHP, you write the appeal and explain that whatever excuse they used for nonpayment is not valid, and they deny it again with another excuse."

Ms. Wallis is not alone in experiencing claims-payment problems since TMHP took over the Medicaid contract from National Heritage Insurance Company (NHIC). In fact, thousands of physicians, hospitals, and others are in the same boat. During the first nine months of 2004, a backlog of hundreds of thousands of appeals representing millions of dollars in claims built up as TMHP tried to get up to speed.

Company officials say the problems are being resolved and the backlog should be eliminated this month, meaning appeals should be adjudicated within 60 days of receipt by TMHP.

But Ms. Wallis says the delay is putting a big strain on the practice. In September alone she filed 14 appeals for more than $6,000 in unpaid claims.

Starting From Behind

TMHP, a coalition of contractors headed by Dallas-based Affiliated Computer Systems, replaced NHIC as the Texas Medicaid claims payment and primary care case management administrator on Jan. 1.

The transition appeared to be going smoothly, says Lewis Foxhall, MD, chair of Texas Medical Association's Council on Socioeconomics. "But then we began to get reports of difficulties with getting claims paid, and when physicians' offices called for information, they were given conflicting -- or wrong -- information or advised their claims weren't in the system."

The first problems centered on "crossover claims" for psychiatric service for patients eligible for both Medicare and Medicaid, but for which Medicaid should be the primary payer. The claims were submitted to the Medicare carrier, which forwarded them to TMHP for payment. Because of software problems, however, TMHP denied the claims.

"We had a lot of psychiatrists who just were not getting paid at all," Dr. Foxhall said.

TMHP recognized the problem and resolved most of those claims by the end of May. However, there was a larger problem. TMHP officials say they handled initial claims determination quickly, but processing "paper adjustments," or appeals, began to bog down.

Jeff Mullins, TMHP's deputy managing director for the Medicaid contract, says the company encountered two unexpected problems.

"When we assumed operations Jan. 1, we had been told to expect no backlog in claims," Mr. Mullins said. "In fact, what we got was a backlog of unprocessed claims [from NHIC]."

To clear that backlog, TMHP had to get authorization and additional funding from the Texas Health and Human Services Commission (HHSC) to work overtime. "So in February, March, and April we were working overtime to clear that inherited backlog, and we were successful in getting rid of that," Mr. Mullins said.

Attacking a Paper Mountain

The second problem resulted from an underestimation of the volume of paper appeals TMHP would have to handle, Mr. Mullins says. When HHSC sought bids for the Medicaid contract, it estimated the new carrier would receive approximately 3,400 paper appeals per day. But when TMHP began operations, that volume was closer to 10,000 appeals per day, he says.

"So we began receiving in excess of 10,000 a day, but we were staffed to process 3,400 a day," Mr. Mullins said. "You can see the problem right away."

Not only was the volume of paper appeals more than twice what was expected, but also the situation was exacerbated by TMHP's inability to get all of those claims into the payment system promptly. When physicians' offices called to inquire on the status of their appeals, the claims agents frequently told them their claims weren't in the system. The agent would advise them to refile the appeal to ensure that they did not lose out on payment for missing the filing deadline. Mr. Mullins admits that simply further slowed the processing of appeals.

Dr. Foxhall says the backlog has been particularly "burdensome" on physicians with high Medicaid caseloads.

"It's a challenge taking care of Medicaid patients with the low rates of reimbursement on a good day," he said. "So if you throw in slow-pay or no-pay problems that are generated by these administrative issues, it really complicates things."

Mr. Mullins blamed the larger volume of paper appeals on changes in the claims-processing system brought about by the Health Insurance Portability and Accountability Act (HIPAA). Among other things, HIPAA requires standardized national claims coding. Previously, individual state Medicaid programs used numerous "local" codes.

Mr. Mullins says those HIPAA provisions took effect in October 2003, but a number of software edits needed to make the Texas Medicaid claims-processing system HIPAA-compliant were not completed when TMHP assumed operations.

TMHP discussed the appeals volume with HHSC in January and made several edits during the first three months of operation that reduced paper appeals volumes to about 6,000 per day. TMHP, however, did not inform TMA of the backlog problem until August, despite a series of meetings between company officials and TMA representatives. It was not until July 1 that HHSC allowed TMHP to begin making some 200 major modifications and 800 "maintenance" edits that TMHP inherited from NHIC, Mr. Mullins says.

Among the first edits being tackled are those that will help pay physicians and other providers, he says.

By August, the appeals backlog had grown to nearly 600,000, of which some 146,000 were from physicians, Mr. Mullins says. At the end of that month, TMHP again got authority from HHSC to work overtime to cut that backlog. As of late October, all physician appeals had been entered, and the remaining backlog was down to 281,000 paper appeals. Those were mainly Medicare crossover claims and claims for inpatient and outpatient hospital services, ambulance services, and others.       

Ken Ortolon can be reached by telephone at (800) 880-1300, ext. 1392, or (512) 370-1392; by fax at (512) 370-1629; or by email at Ken Ortolon.

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