Articles & Industry News
By Thomas J. Force, Esq., President, The Patriot Group
Most physicians and healthcare administrators believe that healthcare and particularly the "revenue cycle" is controlled entirely by commercial insurers. They believe this because these companies are multi-million dollar conglomerates with seemingly endless streams of revenue. In addition, those same companies are the ones that draft the provider managed-care contracts that set the reimbursement rates for most practices. Unless the health provider is a huge hospital network, there is generally very little room for negotiation as to the terms and rates for such contracts.
While this common belief is understandable, it simply is not true. The fact is, the hospital system or medical practice and its consumer patients have much more "power" when it comes to the claims adjudication process than the insurance companies. If the medical practice can learn to harness this power, its claims will be paid quickly and at fair reimbursement rates.
Payors such as managed care companies, HMOs, PPOs and the like have many state and federal statutory and common law responsibilities with respect to the adjudication of medical claims. Providers simply do not have these obligations. Consider this: Managed care companies have to comply with:
- Payment of claims within a set time frame (i.e., Section 3224-a of NY Insurance Law requiring payment of electronically submitted claims within 30 days of receipt and 45 days of receipt for claim submitted on paper);
- Denial of claims within a set time frame in writing setting forth specific reasons for such denials (i.e., 30 days per Section 3224-a of NY Insurance Law); and
- Payment of interest if claims are not paid within the statutory time frames set forth in the State Prompt Payment Law (i.e., at least 12 percent interest unless such interest would be less than $2.00 per Section 3224-
Unfair claims settlement practices. These acts and statutes prohibit insurer conduct that aims to avoid payment of clean claims when there is evidence of this as a general business practice (i.e. Section 2601 of NY Insurance Law).
Unfair and deceptive trade practices. These acts and statutes prohibit deceptive and unfair advertising and marketing by insurers (i.e., New York Deceptive Trade Practices Laws – General Business Laws Section 349 – 350).
Federal ERISA laws are applicable when insurance companies administer self-funded plans (Federal Statute 29 CFR 2560.503-1 sets forth claim and appeal adjudication requirements for self funded plans).
The Patient Protection and Affordable Care Act or "PPACA" regulates, among other things, time limits for insurers responding to appeals.
Common law responsibilities.
- Common law assumes that inherent in every contract is the implied duty of good faith and fair dealings.
- Certain common law responsibilities relate to the construction of managed care agreements (i.e., vague and ambiguous provisions are interpreted to the benefit of the non-drafter policyholder and healthcare provider and against the insurer – see Matter of United Community Ins. Co. v.
Bad faith law is applicable to any insurer conduct that is so reckless and severe and creates severe civil and criminal sanctions against the insurer.
In view of the many and varying obligations of the insurer in the claims adjudication process, it is incumbent upon the healthcare provider and medical practice to understand the law. Once the provider understands the law, it can effectively hold the insurance companies accountable to the law. Knowledge of the law is the "power" that providers need to ensure that their claims are paid promptly, with interest if required by state law, and at fair reimbursement rates.
1. Obtain proof of submission and receipt of the claim.
2. Check applicable prompt payment laws and managed care agreements. It is important to know with certainty the time frames in which the insurer must pay claims, deny claims and/or request additional information to adjudicate a claim.
3. Attack time frames before the merits of a denial. Before appealing a claim on the merits, determine if the statutory and contractual timeframes were satisfied by the insurer. For example, was the claim denied within 30 days of receipt? Was the payment made within 45 days? If not, was interest included in the payment? Was the denial set forth in writing and in plain language? Was the specific reason for the denial detailed? Was the insured and provider offered an opportunity to appeal and given appeal submission instruction?
4. Include written explanations with appeals based on merit. Make sure you provide a written explanation in the form of a first level appeal or grievance as to the reasons it is believed that the denial is unfair and wrongful. Remind the insurer of its good faith obligations under the Unfair Claims Settlement Practices Act, the state’s prompt payment law and managed care agreements. Attach supporting documentations, including factual affidavits, medical records, photographs and CPT Code explanations as needed. Make sure the appeal is sent to the appeals and grievances department which may be different from the address for claims submissions. Almost ensure that appeals are made within Appeals Submission deadlines set forth in the Managed Care Agreement.
5. File second level appeals. Don't worry if your first level appeal is denied. Instead, determine whether the appeal was sent within time frames set forth by applicable state and federal laws or the managed care agreement. Many claims denied after first level appeal are paid after a second level appeal is filed so make sure a second level appeal is filed. Be mindful that certain states have different laws for medical necessity and cosmetic denials. For example, states like New York afford an immediate right to an appeal review by an external appeals agent after a denial of a first level appeal for medical necessity or experiment reasons (See Title I & II of Article 49 of the New York Insurance Law and Title I & II of Article 49 of the New York Public Health Law).
6. Utilize state insurance department complaint procedure. Violations of State Insurance Law are governed by the Commissioner of Insurance for the involved state.
7. Utilize small claims lawsuits (under $5K). Most states have courts of lesser jurisdiction that permit lawsuits against commercial entities such as insurance companies. Most of these courts permit lawsuits brought by non-lawyers where damages are less than $5,000. The costs for filing these lawsuits is usually nominal, less than $35.00 and the complaints are usually simplified, one-page or less.
8. Be sure patients sign Assignment of Benefits forms. Make sure your AOBs include an authorization from the patient permitting the medical practice or its representatives to file appeals against their health insurers for denied claims.
9. Obtain patient email addresses. Patients respond to text messages and emails over traditional mailed letters and phone calls. Obtaining patient email addresses and cell phone numbers for text messages is an easy and cost-effective way to communicate with patients and especially useful when collecting deductibles, coinsurance and non-covered services.
In summary, it is imperative that the healthcare system or medical practice, provider and revenue recycle administrators familiarize themselves with the various laws and other responsibilities of the various managed care organizations. Then hold these payors accountable to the law. Remember, the "power" is with you.
Remain compliant by using a list of patient forms and disclosures that're essential to your appeals and fraud audit defense.
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