An inside look at what drives insurers to refuse to negotiate, require more prior auths and deny claims
Ask any doctor what they think of payers and they’ll likely say things that can’t be printed.
The relationship between physicians and payers has always been turbulent, mainly because they serve two different masters: Doctors are trying to provide the best care possible while maximizing revenue to their practices; most insurance companies are trying to provide the best care while increasing profit for shareholders and minimizing costs to employers.
With employers putting increasing pressure on insurers to freeze or lower prices, physicians often get caught in cost-reduction efforts from payers. Throw in a dose of government regulations that make doing business more complicated and you create an environment that can lead to frustration for physicians, as evidenced by the Medical Economics Payer Scorecard, which shows an overall low opinion of payers among physicians.
Insurance companies score low (under five on a 10-point scale) in customer service, payment, patient information and communication with practices. Doctors feel increasingly helpless and confused by what payers are doing and question how payers’ policies are saving money or improving care. They see insurers as “playing doctor”-making decisions on what treatments are proper-and ignoring their medical training and familiarity with the patient.
“Most of our time is spent doing soul-crushing paperwork for no reason-it doesn’t help with anything,” says David Belk, MD, who runs a solo internal medicine practice in the San Francisco Bay area. “They [commercial payers] are trying to distract everyone with this image they are saving the healthcare system money when in reality, their revenue keeps going up and up.”
Bottom line: independent physicians struggle with cash flow, hoping to get paid properly and in a timely manner while health industry juggernauts post multi-billion dollar profits.
What physicians consider necessary and practical care is often challenged by insurers who have no relationship with the patient. For example, ordering a CT scan for a possible case of diverticulitis requires a prior authorization, which appears to Belk as though the insurance company is trying to be the doctor.
“I don’t get paid extra for the scan. Why does a nurse from an insurance company have to sign off on that? How is that about saving money?” says Belk. He points out that the bigger risk to the insurer is waiting too long for the scan, which could lead to severe consequences for the patient.
“I’m prescribing what I think is necessary and I have no financial incentive to do so,” says Belk. “And why are they issuing denials on meds that cost less than the copay?”
According to our survey, three areas stand out as the biggest frustrations for doctors: an increase in prior authorizations, an unwillingness by payers to negotiate reimbursement rates and an uptick in claim denials. Here’s why payers are taking these actions.
Physicians are baffled by payers’ requirements of prior authorizations for what they say are often routine, low-cost treatments or for drugs that have already proven effective for a particular patient for years, but suddenly need payer approval.
Jeff Kagan, MD, a Newington, Connecticut-based internist, treated a patient with a chronic lung disease who had been hospitalized twice in a seven-month span. After putting her on a particular medication to treat the condition, she went 23 months without a hospital stay.
The insurance company decided not to cover the drug any longer, requiring him to go through the appeal process-all for what amounted to a $30-per-month price difference. “Just one hospitalization would have blown all their savings,” says Kagan, who is a member of the Medical Economics editorial advisory board.
The appeal was approved eventually, but Kagan couldn’t get his time back. He estimates his staff spends 20 hours a week on prior authorizations, which doesn’t include his additional time to get approvals. “There are more and more things that need prior auths, which just puts me further behind schedule everyday.”
Aparna Higgins, senior vice president, private market innovations, for America’s Health Insurance Plans (AHIP), the industry trade group for healthcare payers, says that the goal of payer prior authorizations are to make sure patients are getting the proper care and most efficient care.
“Sometimes the clinical evidence changes or there are changes to the formulary,” she says. “There is a process that every company has in place that is based on evidence. They do an evidence-based review to decide which treatments and interventions are going to require prior authorizations. This is not something that is just decided by a group of health plan executives.”
She adds the reviews are based on a variety of sources, including information from the FDA and peer-reviewed journals.
Experts say prior authorizations exist because physicians don’t always agree on the best treatment for a patient. A payer’s physician panel may recommend a course of treatment for an ailment that is based on the latest studies, but that won’t always meet a patient’s needs as determined by their doctor.
Prior auths are also a way to reel in physicians who are overtesting or not following accepted guidelines, which can hurt profits or possibly the patient.
“Every provider out there believes they are the best practice with the best doctors, and while they would never do anything to cause harm, there is a tremendous variation in care that is given and what treatments look like,” says Zach Hafner, a partner at Advisory Board, a healthcare consulting firm, who works with payers on contract negotiations. “Plans have an increasing focus on doing the homework and research to really determine whether certain types of treatment or care deliver the benefit the consumer is hoping for. The only leverage the payers have to create a gate there is a prior auth.”
And with the number of individuals payers cover, a $10 monthly increase by the manufacturer to a generic drug price multiplied across tens of thousands of plan participants can quickly add up, which may cause a payer to remove it from the formulary if an equally effective-but cheaper-option is available.
In some instances, however, there may be only one accepted treatment or one test every patient should receive, but it still requires a prior auth. In those cases, it may just be a matter of the insurance company going too far, says Joel Shalowitz, MD, MBA, FACP, a professor at Northwestern University who teaches MBA and MPH students about the U.S. health insurance system.
“They probably shouldn’t care about low-cost tests,” says Shalowitz. “It’s a drain of the doctors’ time, a drain on the insurers’ money and adds a hassle factor. But it may also be something [employers] are asking for, even if it doesn’t necessarily make sense.”
Hafner agrees, noting that, “docs are blaming prior auths on insurance companies, but in fact, it is consumers and employers who are designing the benefit that sits behind it. The insurance company is just administering it.”
Payers and employers both benefit financially when patients don’t receive unnecessary care, incenting both to avoid it when possible. As consumers absorb more of their medical expenses, Hafner expects physicians to face similar prior auth questions from them: Is this test absolutely necessary? Are there other drugs that are cheaper that still work? Is there a different treatment plan that costs less?
Payers are increasingly moving toward value-based reimbursement models and are less interested in negotiating individual fee-for-service schedules, says AHIP’s Higgins. Similar to the way Medicare is shifting some risk to providers, insurance companies are looking for partnerships to provide quality care while sharing in any savings the partnership generates.
“A lot of plans are partnering with physician groups and helping them move toward value-based care, because that’s where healthcare is moving,” says Higgins. “The big difference we see is that it is more challenging for the plans to tailor each contract to an independent practice.”
The trend toward value-based care has also created a greater administrative burden on plans, because the contracts are more complicated than traditional fee-for-service agreements, says Hafner.
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“The administrative costs of custom fee schedules are real, and the plans have a huge focus on efficiency, standardization and streamlining,” he says. “It’s just not possible to be dealing with individual line items for each participant, and with value-based payment models, it becomes unadministrable.”
Payers have to negotiate with employers along with health networks, preferred providers, physician groups, ACOs and other entities, each with its own wants and needs. The more value a provider group brings to the payer, the more open the insurance company will be to negotiating better terms. The more standardization the payers can implement across all these contracts, the more they will save in administrative costs.
Hafner says future negotiations with small practices may occur, but the context will change. “The negotiations are going to be on upside risk and performance-based payments, if anything,” he says. “The focus will be on shared savings and will not be on unit pricing of fee-for-service that sits beneath it. That’s not where the upside opportunity for payers is.”
The good news for physicians is that the U.S. Justice Department’s prevention of the two recent attempted mega-mergers in the payer industry-Aetna and Humana; Anthem and Cigna-should help maintain competition and not make negotiations even harder for physicians.
The growing number of claim denials is a third source of frustration for physicians, according to the Payer Perspectives Study, delaying payments that are often vital to cash flow. This increase may be due in part to a greater use of automated systems and analytics within the industry. “Payers have to build systems so they are not manually reviewing every case,” says Shalowitz.
A mismatched diagnosis and CPT code might flag a claim for rejection. An annual exam that happens a few days earlier than the previous year might also cause a denial, notes Shalowitz.
“It’s not just the complexity of coding, but the sophistication of the insurance company to detect and deny inaccurate claims,” says Hafner, adding that payers aren’t necessarily improperly denying more claims, they are just getting better at flagging those that should have been denied in the past.
Higgins points out that all payers have educational programs for how claims should be submitted and how to code, and that if providers have questions about why claims are continually being denied, they should contact the payer to get more information regarding claim submission requirements.
Naresh Rao, DO, a primary care physician in New York City, sees claim denials as not just a frustration but a negative influence on how his patients view his practice. So he has taken a proactive approach to minimizing them.
“Trying to check on what’s covered and what’s not with the patient in the office detracts from building positive patient relations,” says Rao. He outsources insurance verification so he knows before a patient arrives exactly what is and isn’t covered. That saves time and allows him to focus more on patient care and less on insurance issues.
Rao, whose father was also a physician, has heard the same complaints about payers for most of his life and thinks that the changes rippling through healthcare present opportunities for himself and his practice partners. “We are willing to work harder to work with the insurance companies to compromise and find that win-win,” he says. He adds that payers could do a better job of understanding the challenges doctors face.
While doctors are frustrated with payers, the converse is not true, says Hafner, because payers are focused on different priorities.
“Payers are struggling with macro issues,” he says. “Employers are not willing or able to absorb significant increases in costs, so they are clamping down on prior auth issues and managing denials. I think it is becoming clearer to physicians that healthcare is a big business and a big machine and that all the personalization is being wrung out of it.”