Claims Detectives

Auditors Make Sure Physicians Paid Properly 

 Texas Medicine Logo 

Practice Management Feature – August 2013 

Tex Med. 2013;109(8):57-60.

By Crystal Zuzek 
Associate Editor  

Many physicians suspect insurance companies pay them too little too late. Many feel they lack the time and resources to do much about it. Plus, let's face it: The thought of holding big businesses accountable for coughing up the dough they owe is an intimidating endeavor, to say the least.

But one physician made the decision in 2011 to do just that. Juliet Breeze, MD, former chief executive officer of Richmond Bone and Joint Clinic, knew some insurance companies didn't always pay the 19 physicians in the group on time. But she believed chasing down claims one-by-one would be a futile undertaking for her billing staff.

"We had a great billing department that managed the practice's revenue cycle carefully. We were very aware some payers weren't paying us in a timely manner, but it seemed like a waste of time to try to enforce prompt pay compliance on a claim-by-claim basis. We'd end up spending more money trying to recover the penalty than we were owed," Dr. Breeze said.

Dr. Breeze, who's now chief executive officer of Next Level Urgent Care in Sugar Land, refers to Texas' prompt pay law, which gives the Texas Department of Insurance (TDI) authority over payments from fully insured commercial health insurance plans. The law entitles physicians to penalties and interest for late payments and underpayments that occurred over the past four years. (See "TMA Wins Passage of Prompt Pay Law.")

Frustrated, Dr. Breeze resolved to take control of the practice's payment concerns with insurers. She hired nVenio Analytics of Austin to analyze the practice's payer contracts and fee schedules to determine whether they were in accordance with contract terms and to identify late payments.

nVenio is one of several Texas companies that use auditing software to provide such services to medical practices.

"The practice saw a benefit in having a third party examine our contracts and payments. We wanted someone to audit the whole process to determine how the payers we contracted with were performing," she said.

The analysis findings were eye-opening, Dr. Breeze says. Not only did she discover the practice was paid late on many occasions, but also a fee schedule error by one carrier resulted in tens of thousands of claims either underpaid or paid in violation of the prompt pay statute over about two years.

"nVenio found that if we were to be paid the actual penalties provided by the prompt pay statute, that one payer could owe the practice more than $2 million," she said.

During their analysis, nVenio auditors discovered the payer had given the practice a fee schedule that didn't correspond to the one agreed to in the contract.

"I requested the fee schedule on a CD from the payer so that I could load it into our practice management system. I thought we were being paid correctly for two years, but it turned out we were receiving rates that were incorrect compared to the rates we'd negotiated in our contract," she said.

Richmond Bone and Joint Clinic – now part of the Memorial Hermann Health System – has an arbitration meeting with the payer in January.

"We're still sorting out the recovery process. I can safely say that had I not hired nVenio, we wouldn't have uncovered the egregious payment errors and wouldn't be pursuing the money we're owed," said Dr. Breeze.

Payment Errors, Violations Abound 

Bill Reynolds, nVenio Analytics founder and chief operating officer, says he helped medical practices recover more than $20 million in prompt pay and contract violations from 2003 to 2012. That includes inappropriately bundled and downcoded claims, in addition to delayed payments and improperly discounted payments from third-party administrators. Mr. Reynolds helped one 12-physician orthopedic practice in Texas recover about $2.5 million in prompt pay penalties from four payers.

While not every analysis yields such lucrative recoveries, Mr. Reynolds says the initial, in-depth analysis of a practice's past four years of claims is valuable in more ways than one. Following the analysis of a practice's financial data and the resolution process with payers, nVenio focuses on educating physicians and helping practices improve their billing and collections processes.

"One of the things we find is that a practice's billing system typically isn't configured in a way that helps the practice to monitor and expose prompt pay violations. Claims paid 31 to 45 days late may not be getting flagged. We can help practices use these systems better to help them stay on top of late payments and penalties owed," Mr. Reynolds said.

Dr. Breeze says she learned a lot from the analysis.

"Now I never take any information given to me from a payer at face value. I triple-check that the information is correct and is what was promised to me," she said.

Justin Demerath, an attorney with Austin-based law firm O'Hanlon, McCollom & Demerath, says that in his experience, prompt pay violations are commonplace in most medical practices. The firm uses specialized software, developed in conjunction with its litigation partners, to analyze insurance claims to identify late payments and underpayments to health professionals, including physicians.

Dr. Breeze hopes that as more physicians use these kinds of auditing services, insurance carriers will adhere more closely to prompt pay regulations and perform better overall.

"My experience is that payers improve immediately following an analysis, but over the next year or so, payment problems start cropping up again. I think medical claims complexities contribute to late payments and system-wide lapses on the part of the payers," Mr. Reynolds said.

Physicians Seek Outside Help 

Combing through four years' worth of claims and memorizing contract terms are neither feasible nor realistic tasks for the majority of medical practices. That's why many physicians turn to independent auditing firms to delve into how they're being paid. Both nVenio and O'Hanlon, McCollom & Demerath have processes for holding payers accountable to the prompt pay law.

Dr. Breeze encourages physicians to have an outside company perform an in-depth audit of payer contracts and claims data.

"That initial, comprehensive analysis shows medical practices how they're faring with each payer. We were able to identify which payers were performing well, paying us correctly and on time, and which payers had deficiencies, violating the prompt pay law and underpaying," she said.

To determine whether commercial payers comply with the prompt pay law, nVenio analyzes payer contracts and examines the fee schedules. Its auditing technology extracts all encounter, patient, insurance, claim, payment, and collection data from the practice management system.

After analyzing claim submission and payment receipt verification, along with other information, nVenio gives physician clients a breakdown of all late and underpaid claims plus a calculation of prompt pay penalties.

Once nVenio identifies a practice's underpayments and penalties, it begins working with physicians to develop financial recovery strategies.

"We're not a law firm, so in some cases, instead of pursuing a legal recovery, a practice may find that as a result of our analysis it's best to pursue an alternative recovery strategy, such as contract renegotiations," Mr. Reynolds said. "We'll guide them through that process, and if it doesn't produce results the practice wants, we can proceed to arbitration."

Both nVenio and O'Hanlon, McCollom & Demerath work on a contingency fee basis and receive a percentage of the money the companies recoup for the practice. Physicians often are surprised by nVenio's findings, Mr. Reynolds says.

"I've been involved in prompt pay analysis for the past 10 years, and in that time, I've never examined a practice that doesn't have prompt pay violations," he said.

The software O'Hanlon, McCollom & Demerath uses examines the day the practice submitted each claim going back four years and compares it with the day the insurance company paid it. Mr. Demerath says the firm uses the prompt pay law to supplement a practice's collection procedures and ensures that when claims haven't been paid in full and on time, physicians receive all statutory penalties, interest, and attorneys' fees the law allows.

After analyzing claims and calculating the amount insurance companies owe in prompt pay violations and underpayments, the firm either submits a demand letter to the insurance company or begins the arbitration process. Mr. Demerath says arbitration is often beneficial because an independent third party determines how much the physician should be awarded. Mr. Demerath said he could not ethically disclose the amount of money his firm has recouped for physicians but did say his clients find the analysis and recovery process to be financially worthwhile.

Prompt Pay Actions, Resources 

TDI levied its last high-profile prompt pay action in 2007 against UnitedHealthcare. TDI fined United $4.4 million for failing to achieve 98-percent prompt pay compliance during the third quarter of 2006 and for neglecting to submit complete and accurate quarterly complaint logs for all of 2006 and the first quarter of 2007.

In addition to the fine, TDI ordered United to: 

  • Continue to file complaint logs with TDI for an additional two years;
  • Appoint an employee responsible for legal and regulatory matters relative to United's compliance with Texas insurance laws; and
  • Resubmit corrected complaint logs for 2006 and the first quarter of 2007.  

Since 2001, TDI has fined United four times for the way it pays claims. United isn't the only company to struggle with prompt pay, however. In 2008, TDI fined MEGA Life and Health Insurance $225,000, Mercy Health Plans of Missouri, Inc. $100,000, and Community First Health Plans, Inc. and MedImpact Healthcare Systems, Inc. $200,000 for failing to pay clean claims in a timely manner.

For a full list of TDI disciplinary actions against insurance companies for prompt pay, silent PPO, and other violations, visit the TDI website to view disciplinary orders beginning in 2007.

TMA staff and members of the TMA Council on Socioeconomics meet regularly with representatives of health plans to discuss insurance matters affecting physicians statewide.

Physicians and health care professionals can submit compliance complaints on TDI's website. Additional information is available on TDI's Prompt Pay FAQs webpage.

TMA's Payment Advocacy Department can help physicians and office staff members deal with claims-payment problems through the Hassle Factor Log, which is free to TMA members. Physicians can get answers to questions about correct coding, claims appeals, prompt pay, and other insurance matters by contacting the TMA Billing and Coding Hotline. Call (800) 880-1300, ext. 1414, or (512) 370-1414, or visit the TMA website for additional information about the Hassle Factor Log and the Billing and Coding Hotline.

Crystal Zuzek can be reached by telephone at (800) 880-1300, ext. 1385, or (512) 370-1385; by fax at (512) 370-1629; or by email. 


TMA Wins Passage of Prompt Pay Law 

Thanks to TMA's advocacy in 2003, state lawmakers passed legislation requiring insurers to pay claims promptly.

The law gives insurers 30 days to pay clean electronic claims and 45 days to pay clean paper claims. Failure to do so results in penalties calculated on the difference between a physician's billed charges and the contracted rate.

Penalties are 50 percent of the difference during the first 45 days after the payment deadline and 100 percent of the difference for late payment 46 to 90 days after the deadline. Beyond 90 days of the deadline, insurers are liable for 18-percent annual interest on the unpaid claim. TDI can and has fined insurance companies that violate the prompt pay law.

Back to article 

August 2013 Texas Medicine Contents
Texas Medicine Main Page