Law Feature - May 2008
By Crystal Conde
The veil of secrecy that health insurance companies use to determine "usual, customary, and reasonable" (UCR) charges for out-of-network physician services has caught New York Attorney General Andrew Cuomo's attention. UnitedHealthcare is facing litigation over its assessment of UCR charges and is at the center of Mr. Cuomo's industry-wide probe of insurance companies' payment practices and the databases they use.
The outcome could affect physicians and patients nationwide.
Physicians increasingly are demanding that insurance companies shed light on the data behind their payment schemes, honor the payment promises they make in their contracts, and reform a system doctors say is covert and unfair.
Patients insured by a United plan pay a higher premium for the right to choose out-of-network physicians. United agrees to pay up to 80 percent of billed charges or its determination of UCR charges, reserving the right to reimburse the lower amount of the two.
When no contractual agreement exists, an out-of-network physician's claim is processed through an assignment from the patient. The American Medical Association has been pursuing United's determination of out-of-network charges for the past eight years in a separate lawsuit filed in New York.
In February, Mr. Cuomo announced his intent to sue UnitedHealth Group and its subsidiaries, United HealthCare Insurance Company of New York, United HealthCare of New York Inc., United HealthCare Services Inc., and Ingenix Inc. He contends United HealthCare of New YorkandUnited HealthCare Insurance Company of New York used Ingenix to determine UCR charges, even though Ingenix acknowledges in its licensing agreement that its database is inappropriate for determining such charges. Mr. Cuomo also maintains United should have revealed its ownership interest in Ingenix and its innate conflict of interest to patients.
An earlier six-month probe by Mr. Cuomo's office examined whether patients were billed more than they owed when physicians or hospitals outside United's network treated them. The investigators concluded the health plan defrauds consumers by operating a defective and manipulated database, Ingenix, to establish artificially low reimbursement rates for out-of-network medical care.
Attorney General Cuomo said at a news conference that he had served 16 subpoenas to the nation's largest health insurance companies -including Aetna, CIGNA, and Empire Blue Cross Blue Shield - requesting documents showing how they compute UCR charges, as well as copies of member complaints and appeals, and communications about UCR charges with members, and between Ingenix and the insurers.
Mr. Cuomo had not filed the lawsuit as of mid-March. Texas Medical Association Vice President and General Counsel Donald P. Wilcox, JD, says it typically takes many months for a lawsuit to be filed after the notice of proposed litigation goes to the defendant.
The anticipated class action lawsuit on behalf of consumers, physicians, and medical associations, including AMA, and a Massachusetts court decision against Ingenix, call into question how insurers calculate out-of-network reimbursement rates and focus national attention on the database at the root of the lawsuit. The Texas Department of Insurance (TDI) hasn't spoken out regarding how insurance companies determine UCR, but has formed a workgroup, as directed by the legislature, to examine network adequacy.
The Magic Word: Transparency
TMA President William W. Hinchey, MD, says the New York lawsuit alerts health plans that they're going to be held responsible for how they calculate reimbursement rates, ultimately lending greater transparency to the plans' business practices.
"It's [lawsuit] definitely sending notice that there's going to be accountability, as well as an explanation of how and why," he said. "How did you get to this number? Is it arbitrary? What's being used to make calculations? If it's all brought out correctly, it's going to lend transparency to health care."
AMA President-Elect Nancy Nielsen, MD, PhD, attended the Cuomo press conference and echoed Dr. Hinchey's sentiment. She applauds Attorney General Cuomo's investigation and efforts to protect patients from deceptive payment schemes.
AMA has been involved in a lawsuit - American Medical Association v. UnitedHealthcare - since March 2000 for allegations that United uses invalid databases that reduce proper reimbursements for physicians who are out of network.
"Health insurers have profited from skewed UCR data, while forcing patients to absorb a higher share of the costs passed on by the insurers," Dr. Nielsen said. "Patients who challenge the costs assigned by the insurer are met with a brick wall of secrecy. This effort to conceal the payment process ensures that patients and physicians don't have the necessary information to hold United accountable to its payment obligations."
UnitedHealth Group uses Ingenix, which owns the Prevailing Healthcare Charges System and Medical Data Research databases that insurance companies use to manage costs and develop fee schedules for out-of-network and non-negotiated services. Ingenix is the nation's largest provider of health care billing information and contracts with more than 1,500 insurance companies and health plans.
The expected litigation should raise a red flag for insurance companies using the firm's data, according to Brian Hufford, JD, outside counsel representing AMA, the Medical Society of the State of New York, and the Missouri Medical Society.
He cites a recent Massachusetts case involving a chiropractor in which an appellate court found Ingenix data could not be admitted as evidence to support UCR due to the flaws in its data. Specifically, the court rejected the Ingenix 80th percentile provider billing and payment data for two chiropractic CPT codes because, in part, Ingenix relied on a voluntary data contribution program, including unknown numbers of unidentified physicians, instead of collecting and auditing its own billing and payment data. The chiropractor, Michael Davekos, sued to recover billed charges, alleging unfair and deceptive practices by Liberty Mutual after the insurer paid a "fair and reasonable amount" for 47 medically necessary treatments and his initial exam of a patient.
Mr. Hufford says that case, Michael Davekos, P.C. v. Liberty Mutual Insurance Co. , illustrates what could happen if a court reaches a similar decision in another case, such as Mr. Cuomo's suit.
United spokesperson Tyler Mason describes Ingenix's database tools as high-quality and dependable.
"The reference data we use is rigorously developed, geographically specific, comprehensive, and organized using a transparent, longstanding methodology that is very common in the health care industry," Mr. Mason said. "We believe these reference tools add substantial value to the health care system by providing a transparent, consistent, and neutral line of sight into the health care market, its cost, and performance."
Mr. Cuomo asserts that, by under-reimbursing patients for more than 10 years, however, United potentially overcharged insured consumers across the nation hundreds of millions of dollars in out-of-pocket expenses.
"The lack of accuracy, transparency, and independence surrounding United's process for setting a reasonable and customary rate is astounding," Mr. Cuomo said. "United's ownership of Ingenix, coupled with the inherent problems with the data it is using, clearly demonstrates a broken reimbursement system designed to rip off patients and steer them towards in-network doctors that cost the insurer less money."
Whether Texas officials are conducting a similar investigation of United and other insurers is unknown. A Texas Attorney General's Office spokesperson told Texas Medicine that the office "doesn't acknowledge investigations of any kind."
Tackling Network Adequacy
In the TDI Biennial Report to the 2007 Texas Legislature, the department identified four scenarios PPOs use to determine basic reimbursement for out-of-network physicians. Compared to a set reimbursement payment for in-network physicians, a patient's out-of-pocket payment for care from a physician outside the network varies greatly. (See " Reimbursement Rates Compared .")
With concerns over UCR charges becoming more prevalent among patients and physicians, the legislature ordered TDI to form the Health Network Adequacy Advisory Committee to adopt rules for collecting data from carriers. The committee first will determine what questions it needs to ask insurance companies to gather useful and relevant information about the use of non-network physicians by PPO enrollees and payments made to those physicians. The workgroup will request out-of-network payment information for five specialties: pathology, radiology, emergency medicine, neonatology, and anesthesiology.
Dianne Longley, TDI's director of research and analysis for life, health, and licensing, oversees committee meetings and says, depending on the committee's findings from its call for data, UCR could surface as one of the components the committee focuses on.
Ms. Longley says the committee will likely request information from 12 of the state's largest health insurance companies that each have more than 10,000 enrollees and represent 95 percent of the population in PPOs.
TDI will share the information with the committee, which will submit its conclusions to the governor, lieutenant governor, speaker of the House of Representatives, commissioner of insurance, and the chairs of the standing committees of the legislature with primary jurisdiction over health benefit plans by Dec. 1.
No Easy Answer
TDI suggested in its biennial report that the legislature set a standard reimbursement level that PPOs would pay out-of-network physicians. Ms. Longley says that while it's not a popular solution, the department's reasoning was to set a standard that would allow physicians and patients to know their out-of-pocket payment expectations in advance. She acknowledges that coming up with a fair formula would be difficult.
"The idea is that it would be a percentage of billed charges, a percentage of the in-network reimbursement rate, or a percentage of the Medicare rate for a service. Or, it could be another formula that everyone agrees to. But I don't think TDI was necessarily tied to one particular formula."
Dr. Hinchey says setting a standard reimbursement level could be tricky.
"The devil's in the details," he said. "It depends on what the standard is, how it's calculated, how it's adjusted, and what it means."
He also says such a solution doesn't address the underlying lack of insurance companies' transparency in determining the amounts they'll use to calculate reimbursement for services.
Keith Bourgeois, MD, chair of TMA's Council on Socioeconomics, believes the answer may lie in the creation of standardized contracts with insurers for out-of-network physicians.
"If there were something like a standardized contract and some easy way to find out what you're supposed to get paid that followed certain rules for bundling across all insurance companies, that would be tremendously helpful," Dr. Bourgeois said.
Out-of-network physicians do have recourse when they deem an amount an insurance carrier has reimbursed to be unreasonable. TDI suggests contacting the plan to resolve the dispute. If they're unable to resolve a payment disagreement, physicians can file a complaint with TDI's Consumer Protection program.
According to TDI, no physicians had filed such complaints against PPOs as of March. The department received only one complaint in 2007 and determined it was unjustified. Unjustified complaints lack an apparent violation of a policy provision, contract provision, rule, or statute.
Little data has been available to TDI on the internal dispute resolution processes insurance companies have developed. Ms. Longley says the network adequacy committee wants to learn the companies' procedures for handling reimbursement complaints through its call for data.
With no cookie-cutter solution to the problem of out-of-network reimbursement, Dr. Hinchey says physicians must be more diligent than ever.
"Physicians need to read their contracts carefully, they need to be willing to negotiate, and they need to be sensitive to the needs of the patients and the hospitals they contract with, as well. They can't give away their services," he said.
In the meantime, TMA is vigorously pursuing issues surrounding the determination of UCR charges. The association encourages physicians with stories illustrating the problems of low out-of-network payments to share them by filling out the Web form online at www.texmed.org/lowball.
Crystal Conde can be reached at (800) 880-1300, ext. 1385, or (512) 370-1385; by fax at (512) 370-1629; or by-email at Crystal Conde .
Reimbursement Rates Compared
The Texas Department of Insurance covers how insurance companies determine usual, customary, and reasonable (UCR) charges in its Biennial Report to the 2007 Texas Legislature. The following example illustrates reimbursement under a preferred provider benefit plan. When seeing an out-of-network specialist, an enrollee may pay anywhere from $75 to $185. Patients seeing an in-network specialist, however, would pay just $30.
Preferred Provider Benefits
Basic Level Benefits
Contracted Rate: $150
80% Reimbursement: $120
Enrollee Coinsurance: $30
Possible Billing #1: Provider bills at in-network rate
Billed at Contracted Rate: $150
50% Reimbursement: $75
Enrollee Responsibility: $75
Possible Billing #2: Insurer reimburses on billed charges
Billed Charges: $250
50% Reimbursement: $125
Enrollee Responsibility: $125
Possible Billing #3: Insurer/provider disagreement
Billed Charges: $250
Insurer 50% Reimbursement (insurer determines reimbursement for the service to be $170): $85
Enrollee Responsibility: $165
Possible Billing #4: Insurer/provider disagreement
Billed Charges: $250
Insurer 50% Reimbursement (insurer determines reimbursement for the service to be $130): $65
Enrollee Responsibility: $185
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