'They Sat on Our Money': TDI Repeatedly Fines UnitedHealthcare for Late Claims Payment

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Cover Story - February 2008  



By  Crystal Conde
Associate Editor  

North Houston Gastroenterology Clinic PA awoke to a real-life nightmare in January 2007. Rhonda Herrera, who handles billing for the office, discovered the practice hadn't been paid for approximately $300,000 in outstanding claims from UnitedHealthcare of Texas Inc. for November and December 2006.

"After we did year-end reports in January, we started seeing a slow-down in checks coming in, especially for big payments," she said.

Barry Winston, MD, the gastroenterologist who manages the clinic, contacted the local post office to determine the checks' whereabouts. The clinic had moved to a new location in December and notified each of its insurance carriers of the updated address. After post office employees said they didn't have the checks, Ms. Herrera began pursuing an answer from United.

"We went about calling and calling and calling United. The first story I got in early February was that they had a check-writing problem and a glitch in the system that caused one of the printers not to print checks to doctors," she said. "The second story was that all checks were going to be reprinted and would go out. They said we would get the checks within seven to 10 business days."

Unfortunately, the checks didn't start pouring in. It would take eight months of single-handed efforts by Ms. Herrera to resolve the problem.

The clinic was the victim of prompt pay violations, to which United is no stranger. Since 2001, the Texas Department of Insurance (TDI) has fined the health care payment plan four times for the way it pays claims.

Three of those fines have been for failing to adhere fully to a state law that physicians, mobilized by the Texas Medical Association and county medical societies, convinced the legislature to pass in 2003. Senate Bill 418, better known as the Prompt Payment Law, was six years and four legislative sessions in the making. When signed by Gov. Rick Perry, the law established prompt payment requirements for transactions between physicians and insurers.

United, which contracts with more than 29,000 physicians and 420 hospitals in Texas and covers about 2.5 million insureds, is the only health care payment plan in Texas to have been fined specifically for prompt pay violations since the passage of SB 418.

According to Leah Gillum, JD, TDI staff attorney, other companies have been disciplined by TDI for late payment of claims that were inappropriately denied, but United stands out in the prompt pay violation arena.

Most recently, TDI fined United $4.4 million in November for prompt pay and complaint log violations. Tyler Mason, spokesperson for United, says a system malfunction in the third quarter of 2006 temporarily delayed some checks from being mailed to physicians.

TMA lobbyist Patricia Kolodzey says United's growth through acquisitions and mergers will increase the probability of computer system errors and malfunctions as the company inherits different claims-payment platforms.

"It's going to be exceedingly difficult for United to make timely and correct claims payments to physicians and other health care professionals," said Ms. Kolodzey, a former prepayment specialist in the Surveillance and Utilization Review Unit for Texas Medicaid at National Heritage Insurance Company. She also worked as senior patient care coordinator for Travelers HMO/PPO and for PCA Health Plans of Texas and FirstCare, implementing Medicaid and Medicare risk products and ensuring contract compliance.

The Minneapolis-St. Paul Star Tribune reported in December that United has acquired 70 companies since 2000 and insures or manages health benefits for 70 million people nationwide. At a New York investor conference, United's executives attributed poor customer service to rapid expansion, complex medical reimbursements, and failed efforts to identify errors that lead to claims mistakes.

United's rapid expansion and the bureaucratic hassles that go along with it, combined with its record of prompt pay infringements, worry physicians. They call on TDI to continue to monitor compliance closely. They say TMA and county medical societies must encourage higher standards of business practice among the state's largest insurers. 

The Problem With Payment             

As Dr. Winston's clinic battled United to get claims paid in a timely manner, it surprised him to learn that many of his colleagues were unfamiliar with the prompt payment law provision that entitles physicians to penalties and interest for late payments. Under the statute, insurers have 30 days to pay electronic clean claims and 45 days for paper clean 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.

In total, United delayed payment to the clinic on 220 outstanding claims that amounted to $750,000. After adjusting for the contracted fee, the amount was more than $250,000 in outstanding claims owed to the clinic. When all was said and done, Dr. Winston's clinic recouped $80,000 in interest and penalties from United in addition to the $250,000 in outstanding claims United was late in paying.

Dr. Winston and Ms. Herrera say United didn't start to act until May, after the clinic contacted TMA's Payment Advocacy Department and Dr. Winston threatened United with legal action. Ms. Herrera attended a TMA-sponsored prompt payment seminar in early 2007 that she said was invaluable in arming her with the information she needed and that put her in touch with a TMA reimbursement specialist who helped her navigate United's customer service and billing systems. According to Ms. Herrera, TMA's Payment Advocacy Department helped her more than anyone she contacted throughout the clinic's ordeal. (See " TMA Resources Reduce Payment Hassles for Physicians .")

Along the way, United attributed the delay to an address malfunction in its system. The last digit in the suite number was cut off in the computer system's address field.

"You've got to get up a little earlier and come up with a better story for me than that," Ms. Herrera said. "What I honestly believe is they probably got a few checks back in the mail and saw this as an opportunity to sit on the checks and gain interest. They sat on our money."

Ms. Herrera feels justified in her suspicion, given the fact that once payments did begin trickling in on Feb. 12, the issue dates differed from the postmarks. For instance, two checks received Feb. 15 featuring the correct address were postmarked Feb. 12 but had an issue date of Dec. 14, 2006. Sixteen checks received Feb. 23, also with the correct address, were postmarked Feb. 21 but had issue dates of Dec. 20, 2006.

Dr. Winston says he doesn't believe United was that sinister.

"I think it's bureaucracy and the fact that no one is taking responsibility until you finally find someone - after months and months of dealing with underlings - who realizes the magnitude of the problem and the legal ramifications," he said.

Dr. Winston is referring to Michelle Brownell, United's regional director of the Southwest Division. Ms. Brownell informed Ms. Herrera she'd corrected the address. The clinic received more checks in March, but United instructed Ms. Herrera not to deposit them because they were listed on a spreadsheet United required Ms. Herrera to file. 

Because a vast majority of the checks were missing, throughout the process, United's claims employees required Ms. Herrera to submit spreadsheets in order to have her problem reconciled. The spreadsheets had to contain the clinic's member identification number, check numbers, dates of check issue, and dates of service for each month of outstanding claims. For each claim submitted on a spreadsheet, payment would be stopped. United's representatives reminded her they had 30 days to reissue checks from the time payment was stopped.

Finally in May, miraculously, "United found all the envelopes and all the checks," Dr. Winston said.

After locating the mail, Ms. Herrera says it still took United two more months to remedy the situation. The clinic resolved a vast majority of its problems with United in late July through August. According to Ms. Herrera, she's still waiting to hear from United about six checks. She says she hasn't had this magnitude of payment problem with any other insurance company with which the clinic contracts.

Dr. Winston says he didn't consider dropping United because the company insures about 30 percent of his patients.

"I can tell you that United has performed very, very well since we settled with them. They're paying us promptly now," he said. 

A History of Noncompliance  

United has a history of prompt pay violations, which, as Susan Strate, MD, immediate past chair of TMA's Council on Socioeconomics, explains, cause a significant financial headache for medical practices.

"For many practices, there's a narrow margin of profit. Physicians do have to pay nurses and other office staff, and if they have discounted fees and payments are delayed, that creates a cash flow problem," she said.

TMA's 2006 Survey of Texas Physicians addressed the economic and business issues physician practices face. Fifty-five percent of physicians reported that their income from medical practice had decreased in the two years before the survey. The percentage of physicians indicating cash flow problems jumped to 71 percent when dealing with slow payment from insurance companies or the government. Specialists reporting the highest incidence of payment-related cash flow problems are orthopedic surgeons at 92 percent, and neurologists and general surgeons at 81 percent each.

In 2001, before passage of SB 418, TDI fined United and 16 other health care payment plans. TDI ordered each company to pay $1.25 million for neglecting to pay 85 percent of a claim when an audit was necessary.

United ran into trouble in 2004, as well. The insurance carrier had problems giving physicians fee schedules in a timely manner and paying claims correctly. After receiving a large volume of complaints from physicians, TDI investigated the company for violating the 2001 commissioner's order and prompt payment laws, failing to respond to department inquiries, not paying certain claims for injuries arising from motor vehicle accidents, and not filing certain small employer plan forms with TDI.

TDI fined UnitedHealthcare Insurance Co. and UnitedHealthcare of Texas $30,000. UnitedHealthcare of Texas paid $10,500, and the two companies together paid $200,000, for a total of $240,500 in additional penalties.

PacifiCare, which UnitedHealthcare Insurance purchased in 2005, also faced scrutiny over noncompliance with prompt pay laws in a lawsuit that TMA and several physician groups filed in 2003. The lawsuit hinged on a four-year battle over PacifiCare's contention that it should not be responsible for unpaid claims by contracted independent practice associations (IPAs).

The decision by State District Judge John Dietz came Aug. 27 and said that when an HMO enters into a delegation agreement it "may not avoid its ultimate liability for the delegated entity's failure to comply with the applicable statutes and regulations" and remains subject to state insurance code requirements "for prompt payment of providers for services rendered."

The order covers Fort Worth-based Medical Select Management, Dallas-based Heritage Southwest Medical Group PA, and San Antonio-based Quantum Southwest Medical Associates. The three IPAs declared bankruptcy after failing to pay tens of thousands of claims. PacifiCare agreed to a settlement in bankruptcy court concerning each company.

Physicians who agreed to the bankruptcy settlements received a certain percentage of what they were owed. Those who opted out of the settlement and remained with TMA in the lawsuit will benefit from this court decision, says TMA General Counsel Donald P. Wilcox, JD.

Heritage Physician Network (HPN), a Houston-based company, was the one delegated entity that avoided bankruptcy. Two years ago, physicians received 100 percent of their HPN contractual rates from PacifiCare, approximately $3 million. About a year later, PacifiCare paid the attorney fees and costs of the litigation for this part of the case. HPN cooperated with TMA in reaching this settlement.

More than 100 Texas medical practices stand to recover about $8 million in unpaid insurance claims. An appeal is possible, or the parties could settle the issues and the damages paid to physicians.

In 2005, TDI fined United $4 million for violating a state law requiring health plans to pay 98 percent of clean claims on time and for failing to file accurate and complete claims data reports.

Under the 2005 TDI order, United agreed to adhere to at least a 98-percent compliance standard each quarter from January 2006 to June 2007. The penalty for noncompliance: $3 million for each quarter the company fell short. The company missed the mark in the third quarter of 2006, with 97.97 percent of clean claims paid on time.

In the 2005 agreement, United also promised to:

  • Submit to verification of its compliance by an independent certified public accountant,
  • File timely quarterly complaint records that are "true, correct, and complete in all material respects," and
  • Pay additional penalties of $1.5 million should it not file timely reports.

TDI administered another financial blow to United last November for the same infringements. Insurance Commissioner Mike Geeslin ordered the company to pay $3 million for not achieving 98-percent compliance in the third quarter of 2006. This time TDI also levied a $1.4 million fine because United neglected to submit complete and accurate quarterly complaint logs for all of 2006 and the first quarter of 2007. The total: $4.4 million.

Mr. Mason, the United spokesperson, says the company discussed with TDI whether the system malfunction that led to the company's failure to pay promptly really constituted a violation of the 2005 consent order. He says United's average prompt pay performance during the six quarters following the 2005 consent order had been 98.62 percent.

"We respected the TDI's final decision regarding the fine, but note that focusing on the 97.97 percent obscures and undervalues our overall pronounced compliance performance since the beginning of 2006. To that end, we point out that the most recent report to the TDI - third quarter 2007 - indicates a notable prompt-pay percentage of more than 99 percent," Mr. Mason said.

In addition to the monetary penalty, United must:

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

Should United violate the terms of this order, it will face an additional penalty of $3 million.

Mr. Mason says United has appointed Ryan Tredway to oversee the company's compliance with Texas insurance laws. Mr. Tredway worked in United's legal department before the appointment and was a staff attorney and director of project development at TDI before joining United. 

Further Scrutiny Required  

Regardless of United's current efforts, the health care payment plan's string of infringements puzzles Lewis Foxhall, MD, a Houston family physician and former chair of the TMA Council on Socioeconomics.

"With one of the plans being fined again, it makes you wonder if they just see it as the cost of doing business," Dr. Foxhall said. "It may be they save so much on not paying people on time and in keeping those premiums in their investments longer that it's a cost-effective strategy for them. I'm not saying that's what they're doing, but it certainly makes you wonder. Maybe it's simply a lack of good business practices or ineptness on the part of the plans. It's hard for me to understand."

Keith Bourgeois, MD, chair of the Council on Socioeconomics and a Houston ophthalmologist, says the health care industry needs to make it easier to access information about the patient's payment responsibility at the time of service. He says his office accepts more than 100 insurance plans, making it impossible for him and his office staff to memorize all the fee schedules and details.

"It would be nice to have all of the insurance companies get on a common platform that allows a doctor's office to access what a patient's deductible is and how much they have to pay for a procedure. It could go through a type of clearinghouse to find it," he said.

Mr. Mason says the company approached Texas' prompt pay laws seriously from the start by implementing more efficient auto-adjudication and reducing manual, paper-adjudication processes. He agrees with Dr. Bourgeois that the payment system should be easier to use.

"By investing in and applying state-of-the-art technology to health care business processes, we are eliminating paperwork, reducing hassles, and simplifying how the health care system works, and minimizing regulatory concerns," he said.

Dr. Bourgeois says he's a fan of United's Claims Estimator, an Internet-based product that allows his office staff to type in procedure codes and access patients' contracted rates. He says the tool is helpful and quickly gives patients an idea of their procedures' costs before treatment.

Dr. Winston, however, isn't convinced United's technological investments are having a big enough impact on the company's ability to pay claims on time and without error.

"I can tell you that the problem was created by United because they didn't have the right suite number. There's your technical glitch with our account with them," he said. "Once we started talking with them, they should have been able to go and look up our profile on the computer and figure out what's wrong and find the mail. You can have good technology, but if you have people who can't use it to figure out what went wrong, it doesn't matter how good it is."

While investing in technology is an improvement, Dr. Foxhall says exercising sound business practices is essential, and a two-way street.

"I guarantee if premiums are late for enrollees, that won't fly with the insurance companies. I have a feeling they enforce it strictly on the other end," he said. "If they weren't getting their payments, you'd see patients getting dropped from the plans."

Improving insurance companies' business practice standards is one of the goals of the Harris County Medical Society, which released results of a survey it conducted in December. (See " Medical Society Rates Insurance Companies .")

Sixty-nine percent of the 487 respondents indicated that insurance companies often or always fail to reimburse them in a timely manner. United was the third-most-prominent offender in a group that included Aetna, Blue Cross and Blue Shield of Texas, CIGNA, Humana, and UniCare.

Dr. Strate says greater scrutiny of and accountability from health plans is necessary to ensure they follow the rules.

"Generally, from the number of fines imposed upon United, it points out we need to hold health plans accountable for the contractual promises they make to patients, to network physicians, and to employers," she said. "The whole issue of accountability needs to be looked at more critically, both legislatively and in the regulatory arena. We need to ensure TDI holds health plans accountable."

Crystal Conde can be reached at (800) 880-1300, ext. 1385, or (512) 370-1385; by fax at (512) 370-1629; or by e-mail at Crystal Conde .   


TMA Resources Reduce Payment Hassles for Physicians

The Texas Department of Insurance (TDI) reports the number of complaints against health care payment plans is down as a whole. According to the Accident and Health Complaint Index, 1,684 justified complaints were filed in 2006. In 2002, before the passage of SB 418, the total was 5,425.

The TMA Payment Advocacy Department, which is responsible for addressing physician payment complaints, receives fewer prompt pay complaints since SB 418 passed. In 2003, TMA received about 6,000 prompt pay complaints, compared with 1,000 last year. Complaints today are for more complex, systemic problems.

For example, TDI began investigating United's radiology notification program last year based on physicians' complaints about the lengthy notification process the company requires of physicians who order certain imaging procedures for their patients. (See " Doctors vs. United ," December 2007 Texas Medicine , pages 39-42.)

TMA can help physicians and office staff members deal with claims-payment problems. The Hassle Factor Log is free to TMA members. Physicians can get answers to questions about correct coding, claims appeals, prompt pay, and other insurance matters. TMA also can intervene with an insurer or health care payment plan to help resolve a problem. Call (800) 880-1300, ext. 1414, or (512) 370-1414, or visit  the TMA website for additional information about the Hassle Factor Log.

Rhonda Herrera, who oversees billing at North Houston Gastroenterology Clinic PA, credits her ability to get United's attention to TMA's reimbursement specialists, whom she contacted in late February after attending a TMA-sponsored seminar on prompt payment.

"I truly believe TMA is one of the greatest organizations in Texas when it comes to helping doctors," she said.

The Payment Advocacy Department will assist physicians who are having trouble being paid by insurance companies in filing a complaint with TDI. Physicians and health care professionals can submit compliance complaints on TDI's Web site, www.tdi.state.tx.us. Select Complaint Forms from the menu on the left and click on Life/Health Insurance Complaint Forms.

TMA also is a member of TDI's Technical Advisory Committee on Claims Processing, which advises the insurance commissioner on technical aspects of health care services coding and claims development. If TMA receives a large volume of complaints regarding a specific problem, the association refers them to TDI's Provider Ombudsman Program.

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Medical Society Rates Insurance Companies

Health care payment plans got a taste of their own ratings medicine in December when the Harris County Medical Society (HCMS) released results of a survey it conducted with the University of Houston-Clear Lake Master's Program in Healthcare Administration. HCMS sent the survey to 5,708 of its member physicians and asked them to rate Aetna, Blue Cross and Blue Shield of Texas, CIGNA, Humana, UniCare, and UnitedHealthcare of Texas on patient care, payment, and customer service.

Four hundred eighty-seven members responded to the survey. The results were abysmal and showed:

  • More than 65 percent of the doctors reported they have experienced difficulty getting their patients' medical services approved;
  • Seventy percent said that health insurers denied payment of medically necessary care;
  • Seventy-four percent reported that the major health insurers used prescription lists that limited the medications a doctor could prescribe for treatment;
  • Only 15 percent reported that the major health plans always pay for the cost of immunizations;
  • Sixty-nine percent have problems with the largest health insurers paying them on time;
  • Sixty-four percent said they are paid less than their contracted rates with the health insurance companies;
  • Fifty-nine percent said their patients rarely or never understand the benefits, copays, deductibles, and limitations of their coverage;
  • Sixty-seven percent said their patients rarely or never understand the preventive services, care coordination, and other lifestyle modification services available to them;
  • Eighty-three percent said they had to hire one or more full-time employees per doctor just to deal with the extra paperwork;
  • Only 29 percent said the major health plans frequently responded to a phone call promptly;
  • Fifty-six percent said they never or rarely resolved an issue with one phone call to a health plan; and
  • Only 24 percent said it was easy to find important information on the major health insurers' Web sites.

The survey indicated that 39.5 percent of physicians often or always experienced problems with United related to the company's timeliness of reimbursement. UniCare and Humana led the pack in that category, with 43.7 percent and 40.4 percent, respectively.

United rated the lowest in the following categories:

  • Payments less than the contracted rate (39.6 percent),
  • Reimbursements discounted by silent PPOs (26.5 percent),
  • Never or rarely responding to phone calls (45.5 percent),
  • Never or rarely able to resolve a question or problem with one phone call (62.7 percent), and
  • Plan's representatives not helpful in answering questions and resolving problems (37.1 percent).

HCMS President Michael V. Kelly II, MD, said he hopes the survey will spur a dialogue with the health insurance companies on areas to transform.

"Having results such as these for companies that are supposed to be industry leaders is shameful," he said. " It's time the health insurance companies raise their standards for our patients. As physicians, we take an oath to first do no harm. I would like these health insurance companies to follow along our [physicians'] guidelines of care."

Survey report graphs, the full health care survey report, and the press release are available on the HCMS Web site,  www.hcms.org .

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