• Patients are referred to the practice by virtue of their inclusion on PPO and HMO Networks;
• Medical Claim Checks are issued more quickly;
• Medical Claims Checks are issued to the practice directly and not to patients; and
• A reduction of denied claims.
The major disadvantage of becoming an “in-network” provider is that the healthcare practitioner is forced to accept very low reimbursement rates for their medical services and there is virtually no give and take on the contract terms. Providers essentially sign the contract as is without any revisions. Consequently, the contract provisions are typically one-sided, favoring the health insurer.
As a result, more and more healthcare practitioners are deciding to go “out-of-network.” This means the healthcare practitioner chooses to forego participation in health insurer PPO and HMO networks and they do not execute any contracts with the managed care organizations. The obvious benefit to being an out-of-network provider is that their reimbursement rates are typically higher than in-network fee schedules. The disadvantages of being out-of-network is that the frequency of denied claims increases, and patients are not referred to the practice by HMO and PPO networks. In addition, many health insurers refuse to accept assignment of benefit forms between patients and the practice. An AOB is a form whereby the patient agrees to assign the claim benefit or payment to the practice such that claim checks are sent to the practice and not to the insured member.
When an insurer rejects AOB in their policies, this results in claim checks being sent directly to the practice’s patients. This forces the practice to essentially chase their patients for claim checks that rightfully belong to the practice. Many patients cash the claim checks, especially in this economy, and outright refuse to return the funds to the practice. The practice is then faced with instituting debt collection actions, which could result in a public relations disaster. As a result, many practices decide to simply write off of the debt, which has a detrimental impact on practice revenue.
Many physician advocates have questioned whether the failure to recognize the validity of a patient AOB is really nothing more than an attempt by the health insurer to punish the practice for daring to go out-of-network. You don’t want to go in-network and accept our unreasonably low fee schedule? No problem, we’ll just send your claim checks to the patients and good luck collecting. Well, health insurers counter that this is a simple contract issue. They cannot accept a patient AOB because they simply do not have privity of contract with the provider. The only privity of contract that exists is with their members, so that is the reason the AOB is rejected and checks sent to members and not the practice directly.
In any event, by way of background, the then New York State Attorney General, Andrew Cuomo, early in 2008 conducted an investigation into what he viewed as under-reimbursement of out-of-network claims by most insurers in the state. At the conclusion of his investigation, he described out-of-network reimbursement by certain health insurers as a scheme to defraud consumers by manipulating reimbursement rates for out-of-pocket medical expenses. Specifically, in a press release, former AG Cuomo stated that the “scheme by health insurers [is] to defraud consumers by manipulating reimbursement rates…” by using a “defective and manipulated database [Ingenix].” Further, the investigation found that most major health insurance companies used this database with full knowledge that it is artificially and intentionally well below reasonable and customary reimbursement rates.
At the conclusion of the investigation in Jan. 2009, the Attorney General’s office published a document referred to as “Code Blue,” which concluded that insurance payors in New York State and nationwide were under-reimbursing consumers and providers in out-of-network situations due to a flawed database, Ingenix, which was used to calculate such payments. The investigation found an inherent conflict of interest involving the Ingenix database in that it was owned by an insurer, United Healthcare, and created by the insurance industry which was motivated to under-reimburse claims. Mr. Cuomo concluded that a reliance on the Ingenix database contributed to a lack of transparency which made it impossible for patients and their families to obtain key information on costs that they would have to bear personally in seeking out of-network services. In subsequent months, the Attorney General’s office spearheaded multi-million dollar settlements with most of the major insurance companies which was to be applied to a replacement database to calculate out-of-network payments more consistent with actual prevailing rates and reasonable and customary standards.
At the same time as the investigation, Sen. Jay Rockefeller (D-WVa.), the Chairman of the Senate Commerce, Science and Transportation Committee, solicited information from 18 insurance companies, representing about 33 percent of the health insurance market in the United States, about whether their companies use the Ingenix database. With the exception of one company, all the respondent insurance companies stated that they, or at least one of their affiliates or subsidiaries, used Ingenix data to calculate reimbursements for out-of-network health care or dental services. The report found sufficient flaws in the out-of-network reimbursement system for those health insurers that used the Ingenix database to calculate “reasonable and customary” reimbursement rates for providers and consumers across the nation. The report essentially made the same conclusions as did the New York Attorney General in Code Blue report.
And, In Jan. 2009, the American Medical Association announced a settlement of its massive class action federal lawsuit against United Healthcare for $350 Million. The lawsuit alleged that UHC under-reimbursed thousands of consumers nationwide.
As part of Mr. Cuomo’s settlements with the various insurers, a non-profit organization called FAIR Health was established to work with leading academic researchers to create an enhanced database, utilizing a fair and open methodology for collecting and analyzing healthcare provider charges nationwide. The data was to be made available to the public to assist consumers to research charges for medical and dental services in advance of making the decision to go out-of-network. The new consumer website is now available at www.fairhealthconsumer.org.
The tools and data developed by FAIR should produce realistic and more competitive out-of-network reimbursement rates, however, most insurers are not yet using these databases to calculate out-of-network medical claims reimbursement. Under Mr. Cuomo’s settlement, the health insurers could continue to use Ingenix and other similarly flawed databases for a time until FAIR was completely up and running. However FAIR is now active. Other health insurers are changing their policies to remove “reasonable and customary” language and replace it with fee reimbursement schedules for calculation of out-of-network claims based upon a percentage of Medicare rates, which, in most expert’s opinions, are unreasonably low.
What does this all mean? It means that healthcare providers and practices can obtain increased reimbursement for their paid out-of-network claims by appealing all out-of-network paid claims. At time of receipt of the insurer’s explanation of benefits, a written appeal should be prepared to the appeal address listed in the EOB citing the precedents created by:
• the New York Attorney General investigation and settlements (cite the Code Blue Report);
• Senator Rockefeller’s investigation and report findings;
• the UHC AMA Settlement; and
• the various class actions that have emerged since the UHC AMA Settlement.
These precedents can and should be used to establish that your out-of-network claims are being under-reimbursed and that an increased payment is warranted. It is truly a unique concept to appeal paid claims as healthcare providers are generally used to appealing only denials. However, practitioners should appeal all out-of-network paid medical claims without exception. You will be surprised by the results. Many payors such as Empire Blue Cross, United Healthcare, United Healthcare Empire Plan, Aetna, Cigna and many more will pay additional reimbursement on plans that reimburse based upon “reasonable and customary” fees. My clients frequently receive 80 percent to 100 percent of charges after appeal.
When dealing with out-of-network claims, the following are a few helpful tips that can assist you in receiving fair, reasonable and quicker payments:
1. Provide patients with instructional information explaining that:
• You are an out-of-network provider;
• What it means to be an out-of-network provider ;
• Advising that checks will be sent to the patient because insurers do not accept AOB; AND
• What to do with checks received (where to send them; how to endorse them etc.).
• Provide contact information of billing staff or billing company representative) who can answer questions about out-of-network claims and payments
• Advising patients not to be alarmed by large patient responsibilities on EOBs (this is to be expected and assure them that all paid claims will be appealed multiple times and that you expect appeals to be successful and patient responsibilities to be reduced) .
2. Get Email Addresses and Cell Phone Numbers of patients. Patients often respond to emails and text messages but not traditional phone calls.
3. Get patient AOB and authorizations to discuss patient medical information, to file appeals and lawsuits against health insurers on their behalf if necessary.
4. Develop an email policy whereby patients agree to accept communications by email or text. (You will have to communicate with patients much more when dealing with out-of-network claims).
5. Give patients self-addressed envelopes to use for returning claim checks to the practice.
6. Provide patients copies of all appeals filed and encourage them to contact the health insurer for status of appeals. Patients should be advised that successful appeals will reduce patient responsibility, thus motivating patients to push payors to resolve appeals quickly.
7. Keep track of payments by payors and percentage of payments to charges as this can be used in appeal letters to establish a precedent for additional payment (i.e., Blue Cross “YLK” plan paid 80 percent of charges for patient Smith, Jones and Mann, thus should pay 80 percent of charges for the appealed claims).
8. Utilize Department of Insurance and State Attorneys General complaint procedures (i.e., New York’s Attorney General Health Bureau has a department dedicated to complaints involving out-of-network claims).
9. Utilize small claims courts and courts of lesser jurisdiction (i.e, if your appeal for increased reimbursement is denied, file a small claims lawsuit, which can be accomplished cheaply and without counsel).
You can and will receive additional reimbursement on your out-of-network claims. Remember, appeal all paid claims, be organized, track payments by payors and be diligent. These claims are like “found” money and can increase a practice’s revenue and bottom line.
Correction: A previous version of this article incorrectly stated FAIR was not yet up and running. In fact, it is.
More Coverage on Out-of-Network Reimbursement:
How to Obtain Increased Reimbursement on Your Out-of-Network Claims
4 Points on Assessing the Profitability of Orthopedics and Spine Cases
