The Sequel -- Texas Physicians Preparing for Another Battle Over Late Payments

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Legislative Affairs Feature -- November 2002  

By  Ken Ortolon
Senior Editor  

It's been almost 18 months since Gov. Rick Perry vetoed legislation to force health plans to pay doctors on time, and Texas physicians, some of whom say they are facing financial ruin because of insurance companies' failure to pay their claims promptly, once again are gearing up to carry the prompt pay fight to the legislature.

Physicians say little has changed despite the governor admonishing health plans to pay up and more than $50 million in fines and restitution levied against several plans by Insurance Commissioner José Montemayor.

"Prompt pay problems continue to plague our physicians, and they continue to plague them to such a serious degree that doctors are having to take out loans and take other drastic measures just to stay in business," said Waco internist Joe Cunningham, MD, chair of Texas Medical Association's Council on Legislation.

Dr. Cunningham says physicians have little choice but to go back to the legislature because the efforts of the governor and insurance commissioner have had little or no impact. "We've seen no meaningful improvement," Dr. Cunningham said. "It's going to take legislative action."

Indeed, the problems appear to be getting worse. According to TMA's 2002 physician survey, 71 percent of Texas doctors are experiencing cash flow problems because of third-party payers. That compares to 60 percent in 2000. And, the number of physicians drawing from personal funds and taking out commercial loans to solve cash flow problems also increased substantially from the 2000 survey.

Fighting on Multiple Fronts  

Since the June 2001 veto of House Bill 1862, the prompt pay bill, TMA has continued to address prompt payment issues on several different fronts. It has joined state and federal lawsuits against health plans. In a federal suit pending in Miami, TMA, several other state medical societies, and numerous individual physicians contend that health plans defrauded physicians by acting in concert to delay and wrongfully deny claims.

U.S. District Judge Federico Moreno handed the plaintiffs a huge victory in that case in September when he certified a class representing up to 600,000 physicians to bring that suit. A trial date has been set for May 19, 2003.

Meanwhile, TMA scored another victory in May when Texas Attorney General John Cornyn issued an opinion that the Texas Department of Insurance (TDI) can require health plans to disclose their fee schedules and reimbursement practices, such as downcoding and bundling, to physicians. General Cornyn rejected TDI's arguments that it did not have authority to require such disclosure, and Governor Perry ordered TDI to immediately begin developing rules.

The final rules issued by TDI allow health plans to keep some information confidential if it is copyrighted or if they have a licensing agreement that requires them to maintain confidentiality. However, the rules do require information to be released in sufficient detail to allow physicians to calculate their payments. (See "Full Disclosure?")

Finally, TMA has started discussions with two major health plans -- PacifiCare and Blue Cross and Blue Shield of Texas -- to resolve some differences. Kim Ross, TMA's vice president for public policy, says those "friendly" discussions have been productive. "Those two plans in particular have been forthcoming in trying to meet us halfway," he said.

The Interim Two-Step  

But none of that has lessened the need for prompt pay legislation, and lawmakers are already preparing legislation to be introduced in January.

Last summer, Lt. Gov. Bill Ratliff appointed a special Senate Committee on Prompt Payment of Health Care Providers to examine prompt pay problems and make recommendations. Chaired by Sen. Jane Nelson (R-Flower Mound), the committee held hearings across the state at which TMA physician leaders testified extensively about their payment problems. Speaking at TMA's Summit 2002 in September, Senator Nelson said she had trouble getting any of the health plans to appear before the committee.

Her committee was scheduled to issue its recommendations in mid-October, and Senator Nelson is poised to sponsor a revised version of HB 1862 that likely will delete the arbitration language that prompted Governor Perry's veto in 2001. Dr. Cunningham says TMA would support that.

HB 1862 would have required health plans to pay clean claims within 45 days or pay the physician the lesser of either billed charges plus 15 percent interest or double the contract rate plus 15 percent interest. The bill would have defined a clean claim as a properly executed HCFA-1500 form, made health plans responsible for determining coordination of benefits, limited the amount of time plans would have to recoup any overpayments, and prohibited plans from requiring physicians to waive the prompt pay provisions by contract. It also would have prohibited plans from requiring binding arbitration to settle any disputes between a plan and a physician.

The governor said when he vetoed the bill that it undermined insurers' ability to use binding arbitration and other alternatives to litigation to settle disputes over claims and payments.

Senator Nelson said the bill that will be proposed next year is "going to be very similar to [HB] 1862. I think we've learned some things and there were some rules that TDI has developed that I think we can put into statute. So it will be a little bit different, but the basic tenets of the bill will be very closely aligned with what was in 1862."

She believes the bill will pass easily with bipartisan support. "We are going to pass a bill. I think the support is there, and I don't think it's going to be a partisan issue. This is an issue, in fact, where members of both parties have constituents who are being severely impacted. I expect to have three-fourths of the Senate as cosponsors, if not all of them."

The Bomer Principles  

Senator Nelson's committee is not the only attempt to develop new legislation. Earlier this year, Governor Perry asked former Insurance Commissioner Elton Bomer to study prompt pay problems. After meeting several times with various stakeholder groups, including TMA and the Texas Association of Health Plans (TAHP), Mr. Bomer issued seven "principles" of a prompt pay bill. They cover the definition of a clean claim, verification of eligibility, penalties for late payment or underpayment, prompt pay compliance, claims auditing and recoupment, electronic claims filing, and binding arbitration.

In an Aug. 6 letter, Mr. Bomer asked TMA and the other stakeholders to sign off on the principles. TAHP did, but TMA did not.

"In general, our industry has agreed that we would support those recommendations as they are," said Leah Rummel, TAHP executive director.

Darren Rodgers, vice president of health care management for Blue Cross and Blue Shield of Texas, says health plans were concerned over penalties for late payment.

"Try as we might, we're not going to be a perfect organization," he said. "So the absolute standard of being held to 100 percent of all claims being paid within 45 days and the fact that the penalties were billed charges were really the two pieces that we were looking for some moderation on."

Mr. Bomer's recommendation addressed those issues in the health plans' favor, limiting penalties on claims paid between 46 and 90 days to half the difference between the contracted rate and "reasonable and customary charges." After 90 days, the penalty would be 100 percent of reasonable and customary charges.

TMA does not believe the standard for reasonable and customary charges should be promulgated in state law because there is no standard definition of what constitutes such charges. Also, TDI has included the reasonable and customary standard in current prompt pay rules, which TMA contends contradicts prompt pay provisions of HB 610, passed in 1999. That law requires payment of billed charges as submitted on the claim if a claim is not paid, denied, or audited within 45 days.

TMA declined to sign off on Mr. Bomer's principles because it had problems with several of them, including allowing TDI's Clean Claim Working Group to recommend what should be in a standard set of elements for a clean claim and the provisions on graduated penalties. In addition, some important issues, such as coordination of benefits and bundling and downcoding, are not addressed.

In an Aug. 13 letter, TMA President Fred Merian, MD, and Rich Johnson, director of TMA's Division of Medical Economics, told Mr. Bomer that his efforts had helped all parties "better understand the task we face in preparing to resolve this issue during next year's session of the legislature" but that TMA could not endorse his recommendations. "After an extensive vetting among our physician leadership, county and specialty medical societies, and senior management of physicians' offices, we regret to tell you that we cannot sign on to the principles you forwarded to us. While there are some issues on which we agree in principle, there are many more where that is not the case," the letter said.

Dr. Cunningham called Mr. Bomer's principles "less than a third of a loaf."

Teresa Devine, director of TMA's Health Care Financing Department, says the only principle that everyone appeared to agree on was that binding arbitration should not be addressed in any new prompt pay legislation.

Some issues not addressed by Mr. Bomer's principles are being discussed in meetings between TMA and Blue Cross and Blue Shield, says Mr. Rodgers. They include coordination of benefits, definition of a clean claim, and recoupment of payments based on retroactive determination that a patient is no longer covered. He hopes they can come to some common ground on those issues and get other plans to go along, as well. 

Who's in Charge?  

Even if physicians and insurance carriers can agree, there almost certainly will be lively debate over the issue in next year's legislative session. The outcome may depend on who is elected governor in the general election this month.

Democrat Tony Sanchez already has pledged to make prompt pay an emergency issue, allowing lawmakers to take up a bill immediately in January. And, Governor Perry has said he would sign prompt pay legislation if the arbitration language were removed.

"The governor has told us that, minus the arbitration language, he will sign HB 1862," Dr. Cunningham said. "We would certainly like to take him at his word."

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

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