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Are you being paid less than you should?


Unless your billing department is vigilant--and fully staffed--some insurance claims could be coming up dry.


Cover Story

Managed Care Ripoffs

Are you being paid less than you should?

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Choose article section... Scoping out the claims that cost you money A litany of questionable tactics Getting tough with laggard payers

Unless your billing department is vigilant—and fully staffed—some insurance claims could be coming up dry.

By Susan Harrington Preston
Senior Editor

The light dawned for orthopedist Franklin J. Dzida after he opened a satellite office for his four-doctor, Downey, CA, practice. "My patient load there is lighter," he says, "so I've had time to look at my billing a lot more carefully. And what I've found is really aggravating."

What did Dzida find? An insurer paying a discounted fee for emergency surgery, even though Dzida wasn't in the insurer's network. An insurer basing pay for a workers' compensation claim on the state's fee schedule, rather than on the appropriate, and more-generous, federal schedule, for an injury that took place in international waters—and then stonewalling Dzida's efforts to get his proper pay. Insurers using "silent PPOs," in which payers take a discount they're not entitled to.

"It wouldn't be so bad if health plans just made mistakes and you could take care of them with a phone call or two," says Dzida. "But my experience is that these people are playing us for fools."

Dzida's story shows why it's worth checking the accuracy of claims reimbursements: If you don't, your receivables may be leaking away. Texas doctors have learned this since 1991, when the Texas Medical Association started its "Hassle Factor Log," which collects reports of payment problems from TMA members and tries to help solve them. In 1999, complaints to the log topped 1998's tally by nearly 50 percent. Taken together, the 3,322 complaints for 1999 included 4,955 individual payment problems. (A complaint can involve more than one "hassle.")

The single largest of the TMA's 17 categories of payment hassles—delayed payments—accounted for 31 percent of the total. Claims denials were second (20 percent), followed by the need for repeated phone calls for individual claims (19 percent) and excessive time on hold (12 percent). The TMA notes that the top four categories have been consistent since 1991.

Payment delays are getting longer, according to InterStudy Publications, a managed care research organization based in Minneapolis. In its HMO Financial Benchmarking Guide, published this spring, InterStudy reported that claims payment typically took 15 days longer in 1999's third quarter than in 1994's.

Some insurers may not have the cash to pay claims promptly. According to InterStudy, HMOs' liquidity levels overall have dropped since 1994, diminishing the firms' ability to meet "current obligations, such as claims payable to providers."

That appears to be the case with Cleveland-based Medical Mutual of Ohio, the insurer Teri Martell, office manager for Country Square Surgeons in Sylvania, OH, cites as her most difficult payer. Cash holdings at Medical Mutual dropped from over $123 million in 1997 to $22 million in 1998. Meanwhile, unpaid claims stood at $135 million for 1997 and $133 million for 1998.

Medical Mutual takes issue with this interpretation, however. "In a much smaller company, cash flow might affect the speed of payment, but not in a company the size of Medical Mutual," says Rick Chiricosta, the company's vice president for finance. He notes that in 1998, in addition to cash reserves, Medical Mutual had nearly $150 million in investments that could easily have been liquidated to provide cash, and that at the end of 1999, the company's cash reserves stood at $49.5 million.

Whatever the role of tightened cash flow, delayed, downcoded, and otherwise mishandled claims are so common that most of the sources for this story assumed that insurers use payment hassles deliberately for business reasons. There's documentation that some Medicare carriers have indeed engaged in such tactics. A 1999 report by the General Accounting Office details carriers' efforts to save money, often at doctors' expense, by such strategies as discarding claims and falsifying information on payment turnaround time. (You can see this report on the GAO's Web site at Look for report HEHS 99-115.)

Whether the hassles are deliberate or not, you need to look for them diligently, advises Joette P. Derricks, a consultant with Healthcare Management Solutions of Camp Hill, PA—and then, if you find problems, take action.

"You've got to stand up for what is rightfully yours," she says. "Many physicians feel that they either don't have the time, the staffing, or the know-how to do so. And it's a shame."

Scoping out the claims that cost you money

Many practices lack the staff even to find underpaid claims, let alone follow up on them. How many billers is enough differs by practice. Greater Pinole (CA) Physicians Group, a 22-doctor primary care practice, employs eight billers. Country Square Surgeons, a five-doctor practice, employs three.

Adding to a billing department isn't cheap, notes Bob Connelly, a consultant with The Health Care Group in Plymouth Meeting, PA. In Pennsylvania, he says, skilled billing staffers may draw $20 per hour or more, plus benefits. That's considerably higher than the figure reported by the Pensacola, FL-based Professional Association of Health Care Office Managers, which found that for a 40-hour workweek, billing clerks' salaries averaged $27,700 in 1999, not including benefits. That's $13.32 per hour. On the other hand, that salary figure was up nearly 25 percent over 1998. Still, notes Connelly, "in my experience, good billing people can pay for themselves many times over."

Once the practice is properly staffed, set up ways to double-check payments, experts advise. Have your billing staff load fee allowances for each insurer into your computer system and use it as an automatic check when they post payments. This may seem a daunting task, but once the fees are put into the system, they need only be updated.

And you don't need to list every CPT code. "With most practices, 20 percent of the services provide 80 percent of the revenues," says Barry S. Pillow, a consultant with HCI HealthCare in Greensboro, NC. "There are a lot of services that doctors may provide once or twice a year. A 10 percent underpayment on those is really no big deal. We don't like it, but we don't track these services; there's only so much time in a day."

You've probably got the capacity to put fees into your computer system already. "Most of the standard billing software can handle multiple fee schedules, and some can do upwards of 12 different schedules," says Derricks. If not, you can set up a spreadsheet with insurers listed down the left side and codes listed across the top. Billers can check at a glance whether the reimbursement matches the plans' fee schedules. And when it's contracting time, you can easily compare different insurers' fees.

Your billers can also check payments in what Greater Pinole administrator Tracy Ann Jones calls "the old-school way"—by using a binder for each insurer's fee schedules. "Once you're familiar with how the payments should look, then you can go back and see if you're being paid correctly," says Jones.

A litany of questionable tactics

What, specifically, should you and your staff look for? The following payment tactics were described to us by consultants, doctors, and practice billing managers. If they're not familiar to you, look a little harder at your insurance claims. Many of these dirty tricks are as common as Muzak in a mall.

Downcoding. "If you don't submit the claim with the right documentation, you will automatically be paid at level 3 for evaluation-and-management services," even for claims that should be level 4 or 5, says Dorothy S. Friedel, an administrator for a three-doctor ob/gyn practice in New Jersey. "This is a thinly veiled reduction in fees."

Downcoding has been much in the news lately, having spurred numerous lawsuits. Even so, the tactic has become standard practice for a range of insurers. "We have seen downcoding in Medicare, in private indemnity insurance, and with managed care carriers," says Derricks. "It's difficult to know why they do it, especially if they don't request documentation. How can they know the claim should be downcoded? Apparently they're doing it arbitrarily."

Spotting a downcoded reimbursement isn't easy. "Sometimes the insurer changes the code when they put the claim into the system," says consultant Chris Zaenger of Professional Business Management in Barrington, IL. "Sometimes they use the same code, but change the fee. Sometimes they leave the code off the EOB altogether."

Downcoding often goes hand in hand with bundling of claims. Increasingly, insurers are using software to bundle claims that are customarily billed separately, to reduce the overall reimbursement.(See "They call it claims processing. I call it fraud against doctors," Dec. 20, 1999).

Prior contracts. If you've ever signed more than one contract with an insurer, that insurer may not cancel the earlier contracts. It may simply pay you under the older, stingier agreement, unless you notice a discrepancy and bring it to the payer's attention. Greater Pinole internist Martin L. Serota says he's seen an insurer persist in using an old contract even after being asked in writing to cancel it.

Standard fees for unique contracts. After one primary care group prevailed in a hard-fought battle to get higher fees from a key insurer, the practice found itself bucking another problem: "The insurer was paying the standard fee schedule because of 'administrative problems,' " says consultant Barry Pillow. "We had to monitor that very closely, because they didn't do it all the time—just for some of the claims and codes."

Keeping the cap.If you're involved with a capitated plan, make sure you're getting money from the first month a patient designates you as her primary care doctor, advises Zaenger. Otherwise, you may not get the capitation payment until after the patient shows up on your doorstep—even if she signed up with the health plan months before.

"It's a common problem," says family practitioner Susan B. Rife, whose practice is in Orland Park, a Chicago suburb. "To make it worse, some patients come to me before they've even gotten their insurance cards. We can't verify eligibility, and it's still several months before they appear on our capitation lists. Meanwhile, they've gotten complete physical checkups, lab work, and even subspecialty referrals, and we're not compensated." That turns the whole notion of capitation upside down.

"What would be fair would be to pay the doctor a retroactive fee from the time of patient enrollment," she says. "Sometimes we'll get one to three months of back capitation. Sometimes it takes insurers more than three months just to catch up, even after you bring it to their attention and give them documentation.

"We have to watch our patient lists very carefully, because patients switch plans," Rife continues. "If one doctor won't give them what they want, they switch to one who will."

Silent PPOs. You may receive a discounted fee from an insurer because that insurer has adopted the fee schedule of a lower-paying plan. Whatever underpayments the doctors don't notice, the insurance company keeps.

Where the fee schedules come from isn't always clear. "One insurer said it had an arrangement to use the same discount as another company used," says orthopedist Dzida. "So I called the other company, and found out they had never heard of such an agreement."

Refiled claims.Customarily, when a practice has to refile a claim, the payment calendar gets reset to Day One, delaying the day when insurers must begin paying interest on late reimbursement. That interest-free delay can add significantly to an insurer's returns from short-term investments of cash. At May 2000 rates, a 90-day US Treasury bill would earn an annualized 6.25 percent—not bad for an investment that's considered risk-free.

Would an insurer really use such a ploy and risk alienating providers? One whistleblower says Yes. In January, G. Wade Harper, a former vice president of United HealthCare of Florida, filed a lawsuit alleging that United had tried to "play the float" by adopting such payment-delaying tactics as requiring special handling or additional signatures on certain claims, denying valid claims, and mishandling "nonclean" claims.

Rewritten code descriptions. When a claim you think is clean gets bounced back to the practice, it may be because the insurer has written its own rules. "Some insurers use CPT coding conventions selectively," reports Derricks. "CPTs are supposed to be the standard, but when the insurers don't like one, they'll write their own local code.

"It leaves the provider guessing whether to follow CPT conventions or something different. The insurers tend to make things very complicated and often don't disclose their rules on how they want the claim handled and documented."

Ditched modifiers. "Sometimes insurers don't accept certain standard modifiers, such as -25 or -59," says Derricks. "But they will accept, say, modifier -26. You don't know from insurer to insurer how they want claims filed and what is and isn't acceptable."

Strategic ignorance.Occasionally, not even the insurers' staffers know how to fill out a claim according to the company's standards. "If you call the insurer's help line five times to ask how to code a claim, you can get five different answers," says Cindy Manoff, a consultant with The Health Care Group of Plymouth Meeting, PA, who serves as administrator of 16-physician Pottstown (PA) Family Care. "Sometimes the help line employees say, 'I don't know—just bill it and see what happens.' But we're calling so we can avoid having the claim denied."

Buried notification. "Notice of a fee schedule change could be buried on page 8 of a 10-page bulletin," says Derricks. "Physicians get unbelievable volumes of mail, so something like that is easy to miss." However, your computer system can pick up on these by noting discrepancies between the fee schedule and the actual reimbursement. In addition, you can ask for specific forms of notification next time you renew the contract.

Prior "overpayments." Health plans are increasingly reviewing their own records for putative overpayments from years past. "One insurer determined it had overpaid me about $5,000 over the previous three years," says Michael E. Grillis, a surgeon in Fremont, OH. "Why do I have to be responsible for an insurance company's bookkeeping mistakes? My fear is that I could die tomorrow, and my estate would be paying back overpayments for the next 20 or 30 years." Legislation limiting the length of time insurers can recoup overpayments (the "lookback") is in the works in Ohio. "I think it should be no more time than I get for turning in my charges," says Grillis.

Until laws catch up with the problem, some consultants advise practices simply to ignore requests for payments more than a year old. For persistent insurers, Zaenger recommends a letter pointing out that the practice will have to bill the patient for the balance of the bill. "Insurers frequently back down," he says. "I've had a couple send a second letter, but no one has followed up beyond that."

Takebacks.Unfortunately, insurers have gone beyond merely requesting reimbursement for retroactive denials: They're taking it out of your current claims. "The insurer I dealt with withheld future payments to me until they recouped the $5,000," says Grillis.

Office manager Teri Martell, too, has seen overpayments deducted from current reimbursement checks. "On one check, there was at least $1,000 deducted just for one alleged overpayment," she says. "The insurer said it had processed the claim wrong the first time.

"I think the insurance companies need to make a separate request for returns of overpayments, the way Medicare does," she adds. "Otherwise, you have no recourse. I don't think an insurer should be able to hold your current claims hostage."

Pinching pennies. "I've heard about an insurer that's routinely leaving one cent off the payment for every single claim," says attorney Janice M. Weiss of Louisville, KY. "How many doctors are going to write and say, 'You owe me one cent each for 200 claims'?"

Getting tough with laggard payers

You're probably well aware of the standard steps for dealing with a denied or delayed claim: Refile and follow up by telephone and letter, then file an appeal with the insurer if necessary. Here are some other options:

Enlist patients."I sicced our patients on the insurance companies for overdue claims," says Grazina Vizinas, nurse and office manager for internist Edmund W. Vizinas of Chicago. "I sent statements to the patients. When they called to ask what was going on, I told them to show the letter to their boss and say, 'My bills aren't being paid. Will you phone the insurer about payment?' All of a sudden, payments started coming in."

Do your own yelling.Orthopedist Frank Dzida feels he has little choice but to get on the phone himself. "My office manager and billing person are pretty aggressive," he says. "But the heat that I can put on is a quantum leap more."

And yes, that can mean yelling at insurance people over the phone. "Only when I'm absolutely miserable to them do they come through," says Dzida. "But that's the only thing that works. I don't like getting nasty, but I have to."

Call a collection agency."We've had huge, national collection agencies ask us to hire them so they can basically threaten the insurers into paying," says Pottstown Family Care's Cindy Manoff. "These are collection agencies offering to help us with insurance companies, not patients. It's a whole new industry."

Skip the chase; cut to the appeal. Some experts recommend that instead of refiling claims, practices go straight to the insurer's appeal mechanism, especially if the claim has additional documentation. Derricks observes that attachments tend to disappear during claims processing. "Generally, we don't get as many problems with attachments in appeals as we do with initial claims submissions," notes Derricks. Further, most insurers direct appeals and new claims to different departments, according to experts, and some states also require that appeals be processed more quickly than claims.

Contact your state medical society. Don't underestimate this organization. A number of state medical societies have stepped up their payment advocacy efforts, either by collecting information on payment delays, influencing state legislation, or mediating between doctors and insurers.

Besides keeping its Hassle Factor Log, which records doctors' reports of payment difficulties, the Texas Medical Association helps in other ways, such as contacting insurers on doctors' behalf. "A letter from the TMA usually gets attention," notes Teresa Devine of the TMA.

More-complex problems are addressed in face-to-face monthly meetings between the TMA and insurers. Take the Texas dermatologists who complained when one payer began bundling two CPT codes that had been paid separately. "All our dermatologists were sending us the same problem from the same payer," says Devine. "So, working with the doctors, we got documentation from peer-reviewed journals that supported their position. We took that to the payer, which changed back its policy.

It's a lot of work getting them to change those policies," she says, "but at this point there's no other way to do it."

Contact your state insurance commissioner. "I've done it three or four times," says Country Square Surgeons' Teri Martell. "They send a response saying they'll investigate. In the last case, the problem got resolved within three weeks after I got the response from the insurance commissioner. Which was wonderful."

For more details on contacting state insurance departments, see "What to do about a slow-pay carrier—when all else fails," in our Sept. 20, 1999, issue.

Go to small claims court or arbitration. Which route you take depends on your state and your contract, according to health care attorney Steven I. Kern of Bridgewater, NJ. "Some states have arbitration provisions within the law, and many contracts provide for arbitration. If neither applies, chances are that small claims court is your only remedy."

On the other hand, warns Kern, "If you sue, the insurer will likely drop you from its network." You'll need to make a commonsense judgment on whether to proceed, depending on what the contract is worth to you.

Line up behind a lawsuit. Sure, it's a long-term solution, but even the prospect of a lawsuit by several plaintiffs can bring pressure that negotiation can't match. In early 2000, the Florida Medical Association settled one such dispute against Humana involving downcoding and delayed claims without formally filing a lawsuit.

You can also join a class-action suit. One such suit was put in motion in January 2000 in Louisville, KY, where two physicians filed a lawsuit against Humana. Attorney Janice Weiss, who represents the Kentucky plaintiffs along with her partner Mark Gray, says they hope to have the case certified as a class action during 2000.

"Negotiating with insurers doesn't appear to be working for doctors," says Weiss. "If they want results, doctors really need to go to their lawyers."


. Are you being paid less than you should?. Medical Economics 2000;11:201.

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