HMOs to Face Payment Pressure

Amid growing rancor nationally over the way HMOs pay their claims, California officials are pushing through new regulations that would hold health insurers far more accountable for paying doctors and hospitals on time.

The regulations, which have not yet been publicized, are among the toughest in the nation. They include stronger monitoring requirements for health maintenance organizations and would force insurers to disclose their fee rates for individual medical services and procedures, which some insurance companies have been reluctant to do.

The provisions also would make it harder for insurers to bounce claims back to providers with requests for more medical information--one of a number of tactics that regulators say has been used to delay payments beyond the 45-day limit set by law.

Tens of thousands of medical claims are delayed or disputed every month in California. Health insurers blame that mostly on incomplete claims filings. But some physicians, fed up with fighting insurers over bills, say they have stopped doing business with some insurance companies, potentially jeopardizing patients’ access to care.

“Too often they don’t pay doctors on time, and that has an effect on patient care,” said Daniel Zingale, director of the Department of Managed Health Care, which drafted the regulations as part of the state’s prompt-pay law that took effect last year. The department oversees HMOs as well as the Blue Cross and Blue Shield preferred provider organizations in California.

The new regulations are likely to be implemented this fall after a period for public comments.

Health insurance executives are expected to raise strong objections to the measures. When told of the regulations, they said some of the rules were unnecessary, arbitrary and will ultimately drive up costs for consumers at a time when premiums are already soaring. The national HMO association said that insurers have very high compliance rates with prompt-pay laws and that in many cases the delays are the result of two major issues: eligibility requirements and multiple filings.

“It’s a solution in search of a problem,” Health Net spokesman David Olson said of the new regulations. Neither Health Net nor other insurers would say whether they would challenge the measures in court, but regulators seemed to be anticipating that possibility.

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Billing Disputes Spilling Into Courts

Although billing disputes between insurers and health providers have been around for years, they have taken on more intensity lately, spilling into the courts and government offices throughout the nation. They are part of the ongoing backlash against managed care and reflect the frustrations of many doctors who have become disenchanted with an increase in administrative hassles and an erosion of autonomy and income.

In recent months, five medical societies around the country have filed lawsuits against insurance companies for delaying or denying payments.

Meanwhile, regulators from Florida to Texas to California have levied fines totaling tens of millions of dollars against health insurers over their handling of claims.

Regulators say that when insurers don’t pay on time or at all, patients are caught in the middle. Sometimes patients are held financially responsible for the bill. Left unpaid, consumers can later discover that their credit record has been smeared by an unresolved medical claim.

When physicians cancel contracts with insurers or medical groups over payment practices, patients might have more trouble seeing their doctors or face higher out-of-pocket costs.

Some doctors contend that insurers drag their feet in paying claims to maximize the float they earn on interest in premium dollars. But Janice Frates, a health-care administration expert at Cal State Long Beach, who has studied issues of claims processing, said: “It’s not so much deliberately delaying payments as much as putting them mindlessly through the cycle again and kicking them back.”

Since last year, California regulators have collected major fines from PacifiCare Health Systems and Health Net, and have taken over some smaller health plans for failing to pay doctors and hospitals. Zingale called prompt pay a top priority for his department, saying he planned to step up enforcement.

Dr. Ted Mazer, an ear, nose and throat specialist in San Diego, says claims problems are not just about late payments. In December, he says, he billed Blue Cross of California $3,200 for a 3-hour-long sinus surgery. His claim included charges for several procedures, including work outside the nose and reducing an enlarged spongy bone inside the nose known as a turbinate.

But Blue Cross didn’t see all those procedures as separate billable items, and the insurer combined some of them, including the turbinate reduction. Two months later, he received a check for $1,265.32.

“It’s not only unfair but untenable,” said Mazer, noting that it is not uncommon for insurers to “bundle” or “downcode” claims, in which a medical procedure will be coded under a related but cheaper rate. Mazer, a solo practitioner, has a full-time employee devoted to tracking claims, but sometimes he gets so frustrated that he pursues the bills himself, with certified mail and phone calls threatening to sue.

Blue Cross spokesman Michael Chee, citing privacy concerns, said he couldn’t comment about Mazer’s case. But Chee said procedural codes may be bundled if Blue Cross views them as essentially one service. As an example, he said, some physicians will bill two codes for a mammogram--the procedure itself and the accompanying office visit. “You can’t do it separately, you get the consultation with the mammogram,” he said.

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Millions of Claims Processed Monthly

Blue Cross processes about 3 million claims a month. The company provided a computer record showing that 97% to 99% of the claims received in the last 12 months were paid in 30 days or less--well within the state’s legal requirement. The insurer did not, however, provide further details about the 1% to 3% of bills that are held up--which translate into tens of thousands of claims every month.

Blue Cross, which is owned by publicly traded WellPoint Health Networks of Thousand Oaks, has not been fined by the Department of Managed Health Care for late payments. But the insurance carrier has been a frequent target of criticism, partly because of its large size and aggressive negotiating stance. Last year Blue Cross settled a lawsuit filed by the Catholic Healthcare West hospital chain over payment rates and delays. Financial terms were not released.

A spokesman for Catholic Healthcare West, which owns 38 hospitals in California, said that Blue Cross has made good progress since the settlement, but that in general the hospital company was still having trouble getting timely payments from insurance companies.

Some insurers, such as Blue Shield of California, have tried to work out a more friendly arrangement with doctors over payment issues. Earlier this year the San Francisco-based insurer signed an agreement with the California Medical Assn. to disclose physician fee schedules--the rate at which each medical procedure or service is reimbursed--and limit changes in them to no more than once a year. (Blue Shield said that so far this year, it has paid 98% of its claims within 45 days.)

The new state regulations require insurers to disclose their policies regarding reimbursement for multiple procedures and the bundling of claims. Insurers would also have to give providers a 30-day notice before making changes to fee schedules. Some doctors have complained that insurers change their fee rates at will without giving prior notice.

The disclosure requirement doesn’t mean physicians will get paid more or see less bundling, but the new regulations create a process for resolving disputes more quickly. Doctors say disclosure of fee schedules will allow them to compare rates among health plans, which could help them make better business decisions about their practice.

The new regulations also would hold HMOs directly responsible for monitoring medical groups with whom they contract, requiring the health plans to file quarterly reports detailing how the physicians’ organizations are complying with the state’s prompt-pay laws.

This added oversight could be significant in California, which is unlike most other places in that HMOs pay doctors’ groups monthly capitation fees--a preset amount per HMO member. Those fees are what medical groups must manage in paying out claims that they receive from their affiliated doctors. But physicians say that it is sometimes just as hard to collect payments from medical groups as it is when they bill the insurer directly.

Regulators said that based on their review, one out of five medical groups in California was not paying 95% of the claims to doctors within 45 days of receiving bills. Zingale said that while medical groups were being held to a standard of 95%, he was seeking 100% compliance from the health insurers--a rate that the national HMO association called unreasonable.

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New Rules Are Labeled One-Sided

The new regulations were prepared in accordance with AB 1455, which was passed in 2000. The legislation was pushed by the California Medical Assn. and gave the Department of Managed Health Care powers to investigate and impose sanctions against health plans for unfair payment patterns to health providers.

Walter Zelman, president of the California Assn. of Health Plans, which represents most of the state’s medical insurers, said his group supported the original legislation. But he said that the newly drafted rules are one-sided in the way they treat responsibility for the prompt payment of claims.

“It’s not always clear whose fault it is. Claims may have been filed wrong,” he said. “There could be mistakes and failings on both sides ... but if a provider or hospital does something wrong, there is no equivalent sanction mechanism in place.”