How the recent Aetna lawsuit over out-of-network payments could affect reimbursement

Aetna’s recent offer to settle with plaintiffs in a class-action lawsuit originating in 2007 has added fuel to the debate about out-of-network payments. The $120 million settlement stems from the database Aetna used to define rates.

And although at least one insurance association has gone on the offensive by issuing a report calling out-of-network charges “a hidden threat to affordability,” providers say they face a seemingly unrelenting trend of lower-than-expected reimbursements and commuiques to become in-network providers.

In January, industry group America’s Health Insurance Plans (AHIP) issued a report on out-of-network charges (an earlier such report was published in August 2009) based on a survey of national and regional health plans operating in the 30 most populous states. The report notes that “health plans and their members routinely receive bills from physicians that are 10 to 20, or sometimes nearly 100 times higher than Medicare would allow.”

Meanwhile, physicians and medical associations point to what they contend are the insurance industry’s own abuses when a provider does not have a contractual relationship with an insurer.

The plaintiffs in the Aetna litigation, which included the American Medical Association (AMA), 10 state medical societies, and individual physicians, alleged that Aetna had skewed data that went into market databases, with the intention of helping to lower the “usual, customary, and reasonable” rates used as a basis for paying out-of-network charges. The database at issue was at the time managed by Ingenix, then a subsidiary of insurer UnitedHealthcare.

In 2009, the Ingenix organization was dissolved as part of a separate settlement with United, and a new not-for-profit, transparent organization called FAIR Health took over management of the database and its methodology.

In agreeing to its settlement, Aetna admitted no wrongdoing. It’s also important to bear in mind that the lawsuit is not over. Even if the settlement is approved, the AMA and the state medical association plaintiffs are continuing the litigation.

“The proposed settlement with Aetna provides substantial financial relief to individual physicians and to Aetna’s subscribers who were seriously harmed by the insurer’s long-term use of skewed data to underpay bills for out-of-network medical services,” AMA president Jeremy A. Lazarus, MD, tells Medical Economics.

“The AMA and other medical societies are continuing to seek injunctive relief against Aetna to bring greater transparency and accuracy to the insurer-controlled system for paying out-of-network medical bills,” he adds.

Other health insurers that used the Ingenix data faced similar lawsuits.

Limited fallout?

Reasons exist to not overstate the out-of-network situation.

• Most practices don’t have a large number of out-of-network cases, says David J. Zetter, PHR, CHCC, CHCO, CPC, CPC-H, PCS, FCS, CHBC, of Zetter Healthcare Management Consultants, Mechanicsburg, Pennsylvania.

• According to Houston-based healthcare accountant Reed Tinsley, CPA, the number of physicians working out of network is declining.

• Glen Stream, MD, MBI, FAAFP, former president and current board chairman of the American Academy of Family Physicians, notes that out-of-network payments typically don’t affect primary care physicians (PCPs) as much as they do other medical specialists. Still, he’s hoping that the Aetna settlement might prompt insurers to re-evaluate payments to providers.

All of that said, however, Tinsley notes that managed care plans continue to exert pressure regarding out-of-network services, subjecting referring physicians to a “constant bombardment” telling them not to refer out of network.

From another angle, the advent of accountable care organizations (ACOs) and medical homes is likely to bring significant changes and to blur the lines of what’s even considered “out of network,” predicts Michael J. Wiley, CHBC, AVA, of Healthcare Management and Consulting Services Inc., Bay Shore, New York, and a Medical Economics editorial consultant.

Management of direct pays

Effectively managing the patients’ financial responsibilities that arise from out-of-network services, sources agree, should start with transparency.

“A clear understanding with the patient about [his or her] financial responsibilities is critical,” Wiley says. “When do you want to find out they can’t afford” a service, he asks, before or after it’s performed?

“Many practices try to hide from that,” he adds. Having a billing manager sit down with the patient is a practical start, according to Wiley, who says that a very large specialty practice in his area takes this approach.

“It’s all about patient education,” Tinsley says. Although patients typically do not know or do not check whether a referred physician is out of network, it’s better, he says, at least from a patient-relations standpoint, to inform the patient if you are not in his or her insurance network.

Out-of-network services typically place a greater financial burden on the patient, and the physician will spend extra time and effort collecting the balance that the insurer does not pay.

AHIP, too, is looking for more transparency regarding out-of-network charges, says Susan Pisano, the group’s vice president of communications.

In all the emphasis on what insurers pay, she says, “what the physician is charging is overlooked” in out-of-network situations, resulting in their receiving “essentially a blank check” for services performed out of network.

In other words, providers can charge a fee they believe is warranted,  and the insurer will only pay its portion based not on the actual fee, but on what it considers a reasonable fee. Often, the insurer-calculated out-of-pocket responsibility as well as the balance of the original fee both become the patient’s responsibility.

“The point is that consumers are unprotected,” Pisano says.

Negotiating, collecting charges

Once a patient knows what the billing situation is, the physician or practice must be diligent in collecting the patient’s portion of the bill and, if possible, negotiating with the payer over the payment.

It’s more than collecting the patient portion of the bill, Tinsley adds; he sees payers sending reimbursement checks to the patient.

A practice certainly needs to answer the question of which payers and procedures provide the most revenue, Zetter says, but beyond that, it needs to know which payers cause the biggest headaches in terms of denials, audits, and so forth.

“Insurance is a massive game with rules that change constantly,” he says.

Zetter advises PCPs to take a close look at their actual reimbursements. In other words, he says, reimbursement rates might be high in theory, but the net pay after the administrative hassles could be much lower. He also recommends using the higher rates when negotiating with other payers and deploying outcomes and quality measures as leverage, if possible.

In the face of these complexities, Zetter sees more and more use of third-party companies to negotiate with out-of-network payers on providers’ behalf. “Your billing staff is not going to know a lot of this stuff,” he notes.

And although these negotiations typically are handled on a case-by-case, claim-by-claim basis, he says, a broader agreement could be created if, for example, a specialty practice were the only one in a given area.

Wiley sees such third-party billing companies as becoming more proficient in this area-“There are some good outsource options,” he says-although he adds that many practices are becoming better at this function as well.

Balanced payer/revenue mix

The more strategic, and ongoing, question facing practices is how to balance the payer and revenue mix, that is, how to obtain enough patients while also getting a viable amount of revenue per patient.

PCPs acquire new patients from being listed with their local insurance networks, which builds a patient base, Zetter says, while, in contrast, “out of network is a risk.”

Zetter tells the story of a client who opened a new family practice in Pennsylvania and initially decided to contract with every local network/payer, including Medicaid.

“If you don’t have anybody coming in the door, you’re not making any money,” as Zetter points out. He adds, however, that in time, PCPs might want to re-evaluate that matter as to which payer(s) generate the highest volume of patients.

Zetter has another, more established family practice client that has a patient population that is mostly covered by Medicaid. Now the practice is looking to negotiate contracts with commercial networks, which certainly would pay better.

Even so, Zetter is working with an internal medicine practice in San Francisco, California, a market where one payer, Anthem Blue Cross, dominates, making it difficult to find other networks.

“You’ve got to go where the patients go,” Wiley says. He also cautions that although PCPs can contract with more than one insurer, they can only contract with one Medicare ACO, according to current regulations.

In trying to balance a practice’s revenue mix, Tinsley says, “You’re literally at the mercy of the marketplace.”

He recommends, from a contracting standpoint, keeping an eye on the local trends.

Tinsley worked with a group that had its area’s only rheumatology practice, which was operating without commercial in-network contracts until one doctor left the practice and contracted with the dominant regional insurer.

“I can still hear the sucking sound” of patients leaving the original practice, he says. “That’s the kind of thing you have to watch out for.”

A practice has to continue to monitor “how much money is coming from the payer and how much money is coming from the patient,” Tinsley says. Otherwise, it’s easy to suddenly realize that you’ve built a self-pay practice.

In addition, he says, a practice might quantify its pay rate as a percentage of the Medicare rate. Some payers that do not rely on “usual, customary, and reasonable” market databases instead rely on flat Medicare fee percentages. Some pay out-of-network services at 140% of Medicare, for example.

The struggling U.S. economy and a practice’s regional economy also affect reimbursement issues, Wiley says. In the tri-state New York City area, for example, some affluent patients readily can afford out-of-network fees.

From the patient’s standpoint, he says, going out of network is more desirable for “once and out” situations, such as a hip or knee replacement, where the patient’s choice might  be driven by a physician’s reputation. For ongoing care, such as primary care or allergy treatment, patients often seek in-network practices for the maximum insurance coverage benefit.

From the provider’s side, he adds, remaining out of network with some or all of the local insurers seems to be more plausible for older, more established physicians.

Experts agree that service is crucial to patients who choose out-of-network providers. A practice has to offer “exemplary service” to attract o patients, Wiley says, and Zetter goes a bit further: “If you provide a great service, they’ll knock down walls to get to you.”

Whether “out of network” describes a practice’s relationship to some or all of its patients, it remains a tricky area without easy answers.

For one thing, avoiding network contracts is not an ideal model in areas that reimburse for coordinating care, Stream says. “As a [PCP], I’m my patient’s advocate in navigating that system.”

The ACO model might offer a way forward, he says.

At least in the Medicare ACO model, however, patients are assigned to organizations retrospectively, so providers might be missing opportunities for earning extra coordination fees at the point of care.

“There will be a continued battle over what is a ‘fair fee’ for out-of-network service,” Tinsley predicts. “I don’t really see that changing all that much.”