A Two-Front War: Prompt Pay Fight Takes Two Tracks

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Law Feature - November 2001

By Walt Borges
Associate Editor

As the nation turned its thoughts and prayers to the tragedies in New York and Washington, D.C., Texas physicians prepared to fight a two-front conflict over prompt pay.

On Sept. 12, the Texas Department of Insurance (TDI) issued the prompt pay rules that regulators and Gov. Rick Perry believed would take the sting out of the governor's veto of the prompt pay legislation, House Bill 1862. But assessments by doctors and physician leaders of the Texas Medical Association found that the new rules fall far short of the protections for physicians that were in the vetoed bill.

A little more than two weeks later, three physicians and three medical groups filed suit against CIGNA HealthCare of Texas, Inc., in state district court in Austin seeking to recover damages for a class of physicians who have not been properly paid by CIGNA. The plaintiffs are David E. Rogers, MD, of Allen; Margaret Draeger, MD, of Round Rock; Bohn D. Allen, MD, of Arlington; Austin Area Obstetrics, Gynecology and Fertility; Texas Ear, Nose & Throat Specialists of Houston; and Dallas-based Pediatric Pulmonary Associates of North Texas. They accuse CIGNA of failing to pay a reasonable amount for their services, breaching their contracts with physicians, breaching their duty to contracted doctors and groups to deal fairly and in good faith, and intentionally securing the services of physicians with no intent to pay for the services.

The suit targets CIGNA's processing of fee-for-service billings through its preferred provider organizations (PPOs) although noncontracted doctors who receive CIGNA health maintenance organization (HMO) fee-for-service payments could also be included in the class .

"It is deplorable that we have been backed into a corner so that physicians are having to seek relief in the courts to help their practices survive," said Robert T. Gunby Jr., MD, chair of TMA's Council on Socioeconomics. "Class action suits are what it is going to take to stop these [insurer] practices."

"I wrote an article a few years ago in which I said that class action suits were one possible solution," Dr. Rogers recounted. "Before it ran in Medical Economics , I asked the CEO at the local hospital where I was to become chief of staff if that was a problem. He suggested I try to change [insurer] behaviors through the legislative process before going to the courthouse. That's when I became involved with TMA and the legislative effort. We've done a wonderful job of trying to change, but we haven't had much success."

Dr. Rogers said CIGNA was chosen as the target of the lawsuit because the patients it covers are a significant part of his practice and because "CIGNA is the most blatant in their lack of recognition of coding issues. CIGNA is so arrogant it doesn't recognize modifiers," Dr. Rogers explained. "You have to be from the Stone Age not to recognize modifiers."

"We believe this suit is unwarranted," said Tania K. Graves, CIGNA's regional director of public relations. "CIGNA HealthCare has a strong commitment to delivering access to quality, affordable health care. Our procedures and practices support this commitment. Our physician medical directors share the same commitment to quality care as other physicians in Texas and across the nation. In fact, through our efforts with the Coalition for Affordable Quality Healthcare, we have been working with doctors and other health care advocates to improve health care quality and simplify administrative practices. We take our claims-processing and payment responsibilities very seriously. We make every effort to pay properly coded and legitimate claims promptly and accurately on behalf of our 14.3 million plan participants nationwide. We value our relationships with physicians, providers, and regulators. Maintaining those positive relations by paying them fairly is important to us and makes good business sense."

A Smoke Screen?

The release of TDI's new prompt pay rules was disappointing for many physicians.

In vetoing the prompt pay legislation backed by TMA, Governor Perry insisted the bill would undermine insurers' contract clauses requiring physicians to use arbitration rather than lawsuits to settle payment disputes. Given that rationale, TDI's rules could have been expected to adopt the legislation's other provisions while leaving the arbitration clauses intact.

Such is not the case.

"Of the 14 changes TMA requested, 10 were settled for the insurance companies, and four decisions were considered neutral in their influence," Dr. Gunby said. "Does this sound like anyone is trying to appease physicians for the veto of House Bill 1862?"

But Michael McKinney, MD, appointed the governor's chief of staff in August, says Texas physicians should focus on the efforts by the governor and state agencies to ensure prompt pay.

"It's not about the veto, it's about prompt pay," said Dr. McKinney.

Since the veto, TDI has levied fines of $9.25 million against 17 of 23 insurers with the most payment complaints. Those same insurers agreed to pay restitution for clean claims that were not paid promptly, a sum that will be much greater than the fines, Dr. McKinney notes.

"I'm asking physicians to give us a chance," he said. "We will insist on prompt payment. There is no such thing as an 'un-veto,' so what we have to work with is enforcement. Give us time to work within the executive branch on enforcement. If that doesn't work, we will work with physicians to design legislation that can be proposed in the next legislature."

Dr. McKinney told TMA leaders attending TMA Summit on Sept. 21 that "it will take two months to enforce prompt pay and six months for physicians to believe it."

The TDI rules fall short in at least seven major areas, according to TMA leaders:

  • Fee schedules : Many doctors complain that claim payments are impossible to track because the doctors cannot obtain current fee schedules used to process the claims. HB 1862 was passed with a specific requirement to provide fee schedules and the processes and coding edits that reduce payments to physicians. The new prompt pay rules don't require these disclosures. TDI has specifically rejected TMA's interpretation of the Insurance Code that such disclosures are required, although regulators said they would monitor the issue.
  • Changing rules by contract : The new TDI rules backtracked on a provision included in HB 1862 that cut off insurers' ability to change the required information for clean claims and rule-imposed deadlines on 60 days notice. HB 1862 included a mandate that all claims would include an information format that could not be altered by contract. The new prompt pay rules allow contracts to override the provisions in several ways, e.g., the presumption that a claim is received within three days of being mailed can be altered by contract under the new rules.
  • Multiple requests for information : Health insurers were blocked from making multiple requests for additional information under HB 1862, and the requests were restricted to information related to the specific act of medical care. TDI's new prompt pay rules allow multiple requests for additional information, as long as insurers provide notice that the additional information will be requested. The insurer-requested information can come from medical or billing records and is not required to relate directly to treatment, a change that lets insurers place the administrative burden for insurance checks on the physicians.
  • Late payment penalties : HB 1862 required insurers to pay penalties that were the lesser of billed charges plus 15 percent annual interest or 200 percent of the discounted contract rate plus 15 percent annual interest. TDI allows insurers to choose between paying the billed charges in full or the discounted rate plus the contract penalty rate, which is often 1 percent per month in simple interest. TMA President Tom B. Hancher, MD, says the TDI rules provide lesser penalties than the vetoed HB 1862.
  • Billed charges : TMA objected to TDI definitions that allow insurers to pay penalties based on "usual and customary" fees -- an arbitrary fee for a procedure set by an insurer -- rather than the "billed charges" submitted by physicians. HB 1862 allowed the billed charges to be based on a physician's established fee schedule, but the new clean claims rules dropped that language, allowing the use of usual and customary fees as a basis for penalties.
  • Overpayments and audits : HB 1862 attempted to end the common practice by insurers of requesting repayment of claims erroneously overpaid as much as three to four years before. HB 1862 had a 180-day deadline to complete health insurer investigations of overpayments. The TDI rules maintain the deadline of 180 days for audits, but provide a loophole for insurers by allowing them unlimited time to investigate and recoup alleged overpayments.
  • Unaddressed issues : HB 1862 included a number of provisions governing coordination of benefits, preauthorization, and verification of patient membership in a health plan. The TDI rules fail to address these issues, and while TDI may take up the slack in the future, there is no guarantee that such action by regulators is forthcoming.

The Charges

In the suit, filed Sept. 28, attorneys for the doctors and physician groups allege that CIGNA knows it has great power over physicians who treat the patients it insures.

"CIGNA purposely and without cause delays payment, uses computer software programs to arbitrarily reduce the amounts they owe physicians, rejects just claims outright, and imposes ever more complicated and more onerous procedural requirements for claims processing," attorneys for the plaintiffs wrote in their petition. The CIGNA actions were "all intended to either delay payments, reduce required payments, or avoid making required payments altogether."

A key allegation made by the doctors is that the contracts "force the Plaintiffs into one-sided and fundamentally unfair arrangements that are characterized by the inability of Plaintiffs to determine at the onset the amount of the fees they will be paid by CIGNA for the services they are to provide under the contracts and by the inability of Plaintiffs to determine the procedures they will be required to comply with in order to be reimbursed under the contracts."

The doctors said in their petition that there are unexplained variations in reimbursement amounts for the procedures performed within the same time periods, a problem attributed to CIGNA's failure to provide fee schedules to physicians.

They point out that CIGNA's contract with physicians specifies that the doctors will receive payments set forth in "program attachments" that provide no specific fee information.

"CIGNA routinely fails to provide its 'maximum fee schedule' to Plaintiffs as part of their written reimbursement agreement," the physicians said in their petition.

CIGNA also violated its duty to physicians to deal fairly, the suit claims. "CIGNA takes creative steps to lower the amount it will agree to pay Plaintiffs, or to avoid those payments altogether," Drs. Rogers and Draeger allege.

Downcoding -- unilaterally substituting a lower paying code for what is actually billed -- is one example, the doctors allege. "CIGNA does not pay for the actual procedures or services rendered and billed for; instead, CIGNA decides to pay only for some and then decides the others are 'incidental' and should not be reimbursed," the petition said.

CIGNA's "computerized, automatic, and pervasive" downcoding affects the whole class of physicians contracted to CIGNA. The same can be said for bundling, the doctors say.

Bundling is the combining of two or more Current Procedural Terminology (CPT) codes into a single code that pays less than if the codes were paid separately. Another form of bundling by CIGNA is its refusal to recognize CPT modifiers that increase reimbursement levels for complicated treatment, the doctors allege. The physicians also complain that CIGNA arbitrarily refuses to pay for treatment and medical services that occur within "global periods" of up to 90 days following major and some minor surgeries.

Finally, they charge that after submitting properly documented medical claims, CIGNA requests additional documents and information. "These requests are simply tactics for delay employed by CIGNA to enable it to delay payment to the Plaintiffs as long as possible," the physicians allege.

In addition to asking for compensatory payments for the usual and customary charges they billed, the plaintiffs also seek damages from CIGNA for breaching the duty to act in good faith and deal fairly with the doctors, for breaching the contracts with physicians by bundling and downcoding, and for theft of service.

Patrick Reznik, JD, one of the lawyers working on the case, says the class action suit could encompass thousands of Texas physicians who signed contracts with CIGNA during the last five years. A similar class action suit was filed last year in state court in Illinois, but 400 Texas physicians opted out of that class, Mr. Reznik notes. At the very least, their claims will be tried through the Texas suit, he says.

An estimate of damages has not been made, Mr. Reznik says.

TMA, through its general counsel, Donald P. Wilcox, JD, has been instrumental in preparing the case. Dr. Rogers, one of the plaintiffs, is a member of the association's Council on Socioeconomics.

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