Full Disclosure: Finding Out What Insurers Pay Is Not Always Easy

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Law Feature -- March 2001  

By Walt Borges
Associate Editor

It seems like common sense: Never sign a contract without knowing what is required and what is being offered in return. For physicians, that means trying to identify how and how much an insurer will pay for particular services provided by a physician. Because that's a time-consuming process, many physicians may forego the full effort needed to pin down reimbursement, and even if they succeed, they are likely to end up in a tangle of confusion.

"The insurer may say that the physician will be paid a percentage of the Medicare rate, and that's helpful," said Texas Medical Association General Counsel Donald P. Wilcox, JD. "But you need to ask which Medicare schedule, for what year, and in what part of the state."

And that's not all. Mr. Wilcox points out that even if an insurer discloses the method of calculating payments, the formula can change at the company's discretion, adding to the difficulty in monitoring payments.

"It's hard to get any fee structure information out of insurance companies," said Tom Moore, founder and owner of TK Systems, an Austin-based design firm for medical billing systems. "Even with a contract that says you can get the information, it's the last thing you get out of them."

Problems have been frequent enough to warrant TMA action. During a meeting with Texas Department of Insurance (TDI) officials in November, TMA representatives contended that the 1999 legislation revising the state's prompt payment law included language requiring health maintenance organizations (HMOs) to give claims-processing policies and procedures to doctors contracting with their plans. TDI officials said they were unaware of the requirement and suggested TMA formally ask for clarification of TDI's interpretation of the provision.

In a Jan. 2, 2001, letter to TDI, Mr. Wilcox and TMA Associate General Counsel Lee Spangler, JD, asked the agency to define the scope of the requirement for HMOs. (Mr. Spangler said the Texas Insurance Code provisions also apply to preferred provider organizations [PPOs].)

"It is TMA's understanding that this requires an HMO to provide a physician with bundling logic, frequency parameters of services, any limitations on coverage (such as procedure to diagnosis edits), quantity billing parameters, and medical review policies. Currently, this information is not provided by HMOs," they said in the letter. "The absence of this information can severely impact a medical practice and, eventually, the delivery of health care."

The TMA lawyers also told TDI that one example of the impact was the use of computer programs by HMOs "to rebundle the claim and reimburse at lower levels. Access to [the program's bundling] logic ... would provide the physician with the knowledge he or she needs to adequately predict future claims payment. The ability to predict claims payment is extremely important to physicians, as it would be for any small business."

A TDI spokesman said on Jan. 23 that a departmental response was in the works. [ Read about TDI's response received after press time .]  

Mr. Wilcox says physicians usually "have no control over price of their services or how their services are bundled." He suggests doctors get specifics on prices and bundling from insurers before signing contracts.

Physicians also should insist that they must agree to changes to fees and bundling methods that are enacted by insurers during the middle of a contract, Mr. Wilcox says. At the very least, insurers should have to provide 90 days notice before making changes. In its recent settlement with the Texas attorney general, Aetna agreed to provide such notice, Mr. Wilcox says.

Georgia takes action  

Texas physicians are not alone in their concern over disclosure of fee schedules. Doctors in Georgia took the matter to court and won a favorable ruling from the Georgia Supreme Court.

On Jan. 10, with a brief docket notation, Georgia's highest court refused to hear an appeal of a landmark lower court decision that ordered an insurer to disclose its fee schedules to physicians and tell them how it calculates those fees. In what appeared to be the first court decision ordering such disclosure, a three-judge panel of the Georgia Court of Appeals previously ordered Blue Cross and Blue Shield (BCBS) of Georgia to give participating physicians and the Medical Association of Georgia (MAG) its fee schedules and the precise methodology for determining payments so that they could protect their rights under their contracts.

The Georgia challenge was filed in 1997 by four physicians who contracted with BCBS of Georgia to provide medical services in exchange for reimbursement by "uniform, customary, and reasonable" fees for services. Under the contract, BCBS of Georgia was able to change reimbursement programs on 30 days notice.

In 1997, BCBS of Georgia notified physicians that it had altered its meaning of "uniform, customary, and reasonable" as it related to fees. A "uniform, customary, and reasonable" fee had meant the fee that doctors usually charge for a particular service. After the BCBS change, it referred to the fee that doctors in a geographic region usually received .

MAG General Counsel David Cook, JD, says doctors nicknamed the fee policy "the death spiral" because it would lead to ever-decreasing reimbursements for doctors. If doctors were charging $100 for a particular service under the old definition and were being reimbursed by BCBS of Georgia at 90 percent of that charge, they would receive a $90 payment. But under the new definition, the reimbursement under the next contractwould be 90 percent of the received fee of $90, or $81.

Mr. Cook says BCBS of Georgia refused to give the plaintiffs its fee schedules and the methodology for calculating fees for specific services. The Georgia Court of Appeals noted in its opinion in Medical Association of Georgia et al. v. Blue Cross & Blue Shield of Georgia Inc. that the insurer admitted its refusal.

MAG asked the American Medical Association to join the case. Leonard Nelson, JD, head of the AMA's Litigation Center, says AMA supported the case "financially, with our name, and with our legal skills."

MAG and its doctors won its other point in the Court of Appeals.

"We agree with the doctors that Blue Cross' refusal to provide participating physicians with a fee schedule and the precise methodology used to determine the uniform, customary, and reasonable fee for services is improper," wrote First Division Chief Judge Edward H. Johnson. "A promise of future compensation must be for an exact amount or based on a formula or method for determining the exact amount, and that formula should be ascertainable from the contract."

Judge Johnson added, "Without such fee information, there is no way for doctors to calculate for themselves whether they have been fully paid for a particular service under the plan. ... [T]he doctors never agreed to allow Blue Cross to keep its fee schedules and methods for determining fees secret. Such information is critical to the doctors so that they can ensure that Blue Cross is fulfilling its obligations under the contracts."

MAG and the physicians argued that BCBS of Georgia lacked the authority to change the "usual, customary, and reasonable" definition and that doing so would breach a duty to perform its contracts in good faith. However, the appellate panel held that BCBS of Georgia was expressly allowed to change the definition under its contracts. Mr. Cook says that has led BCBS of Georgia to claim victory in the case.

Mr. Nelson says that while MAG and the doctors didn't win all their points, "the appeals court held our way enough to make this a big case. For this plan, for this state, physicians are now entitled to see the fee schedule and how it's calculated."

While Texas physicians have problems similar to their Georgia counterparts, Mr. Wilcox says, the Georgia case, other than creating a novel precedent, has little application in Texas. That's because of the aforementioned Texas Insurance Code's requirement that HMOs and PPOs give participating physicians applicable claims-processing policies and procedures.

But, he says, the Georgia case should serve as a reminder to physicians to be vigilant when considering the contracts offered by insurers.

"When the doctors ask, 'What will I get paid?' the insurer says, 'You will be paid according to the schedule,'" Mr. Wilcox explained. "You really have no clue what you're going to get paid because you don't know how they will bundle your procedures. You have no idea what you'll be paid, even when a schedule is attached to the contract."

Smoke screens in the billings  

By introducing a large number of variables in reimbursement formulas, insurers make it hard to track exactly how an insurer's calculation system works, says Mr. Moore of TK Systems. Those variables include reimbursement differences according to the geographic location of a practice, the grouping of multiple physician services around the treatment of a particular medical condition (bundling), multiple fee schedules, and coding revisions within the payment process (often called "downcoding"), Mr. Moore says. The variables are worked into reimbursement formulas contained in computer programs that insurers use to analyze physician claims, he says.

Mr. Moore's billing systems incorporate feedback loops that allow practice administrators and physicians to evaluate whether they have been paid the proper amount. But checking the reimbursement only works if the analyst knows what formulas the insurer used.

"It's a necessity for small practices, like any small businesses, to predict their income, but the insurers make it hard to do that. If you know what they're using for rules, you can predict. But they won't give you the rules," he said.

"The medical business is an artificial market," Mr. Moore said. "Most businesses are subject to the balance of supply and demand, but in medicine, the physicians are the suppliers and the patients are the demand, but it's the insurers sitting in the middle that dictate to both sides."

Monitoring and assessing the accuracy of insurer reimbursements is time-consuming and requires a level of business and technological acumen that few doctors have acquired, he says. Big practices can hire staff to monitor contracts and reimbursements, but small practices lack the resources in people and technology to be always vigilant. Some physicians, Mr. Moore says, accept what they are paid, while others seek to join bigger practices.

"The net effect is that it's nearly impossible to be a stand-alone physician. It's hard to have the expertise to stay in business by yourself."

Walt Borges can be reached at (800) 880-1300, ext. 1385, or (512) 370-1385; or by email at Walt Borges.  

TDI responds  

In the March 2001 Texas Medicine article "Full Disclosure: Finding Out What Insurers Pay Is Not Always Easy," TMA General Counsel Donald P. Wilcox, JD, drew a contrast between Texas and Georgia, where the state courts there recently ordered insurers to provide fee schedules and fee calculation methods to contracted doctors.

Mr. Wilcox explained that the Georgia case had little application in Texas, in part because the Texas Insurance Code requires that managed care organizations provide physicians participating in their plans with applicable claims-processing policies and procedures.

On Feb. 8, several days after the March issue was sent to the printer, TMA received a letter from Texas Insurance Commissioner José Montemayor stating that the Texas Department of Insurance (TDI) did not agree with TMA's broad reading of the code.

The Insurance Code provisions mandating disclosure of payment policies and procedures apply only to those "necessary for notifying physicians of the information needed to file a clean claim and of when they may expect to be paid," Commissioner Montemayor wrote.

In a response written by Mr. Wilcox and Assistant General Counsel Lee A. Spangler, JD, TMA said Commissioner Montemayor was taking a narrow view of the law that was intended to be read broadly under language in House Bill 610, the 1999 legislation that called for the disclosure.

The TMA letter also raised questions about Commissioner Montemayor's statements in his letter that TDI could not address insurers' practices to reduce reimbursement to physicians because those practices stemmed from physician-insurer contracts. Commissioner Montemayor said in his letter that TDI was reviewing complaints about "inappropriate downcoding" -- insurers' practice of reducing expensive treatment to codes that pay physicians less -- but could not address "bundling" -- insurers' practice of combining several billed treatments as a single procedure to reimburse physicians at a lower rate.

In the TMA response, Mr. Wilcox and Mr. Spangler wrote that "TMA views both downcoding and bundling as tools used by HMOs (health maintenance organizations) to accomplish the same goal -- to pay less for health care services than is due."

Back to article  

 Letter from TMA to TDI requesting clarification -- Jan. 2, 2001
 Response letter from TDI -- Feb. 5, 2001
 Response letter from TMA -- Feb. 28, 2001

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