THE PAYER SOLUTION
SIIA CONFERENCE 2005
Presentation by:
Lawrence Thompson
EVP, Healthaxis
OUT-OF NETWORK CLAIMS
Myths, Realities and the Future
CONTENTS
Development of PPO’s Silent PPO’s OON Claims Contract Violations PPO Contracts What to expect
DEVELOPMENT
1950’s - Blues got “reduced rate arrangements” 1960’s - Medicare devised payment based on hospital costs 1980’s – HMO’s, PPO’s, POS
Rules for getting a discount Contracts between providers and the managed care plan
CONTRACTS
PPO’s gained popularity Discounts driven off of steerage Expensive contracting Local or regional Contracts specify:
Who is entitled access to discounts Discount terms and conditions
NATIONAL PPO’S
Culmination of rented networks Some direct contracts Growth in available PPO’s Healthcare costs rise PPO’s adopted rapidly Now most prevalent type of plan in nation
DISCOUNTS
Five-year healthcare inflation High rate increases Control / lower costs PPO’s offer significant discounts But out of network claims have inflated
OON CLAIMS
OON dollar value risen significantly Inflation in OON claims greater than overall claims Increased impact on plan performance Focus on managing costs Many methods being used
TYPICAL PPO SERVICES
Single point of contact to access discounts Cost effective Many with 4,000 facilities and 400,000 physicians nationwide Re-pricing services with electronic submission Some with web portals
PROVIDER’S VIEW
Single point of contracting Lower costs Steerage Patient flow Prompt payment Perhaps geographic exclusivity Broad range of employers Submission assistance
REMARKETING ENTITIES
Entities with access to PPO discounts Offer claim admin. and management Expansive discount databases Few or no provider contracts Limited legal right to use contracts
COMMON PPO CLAUSES
Verification of coverage and eligibility: ID with PPO logo Basis for preferred rates: Hospital/physician discount rate in exchange for designation as PPO provider Application of contract rates: Only apply to covered persons enrolled
COMMON PPO CLAUSES
Compensation and timeliness: 30 day terms or no discount Payer specific opt-out: Provider to approve proposed PPO-payer contract Silent PPO: Not authorized Payer authorization: PPO enter agreement with provider
ERISA IMPLICATIONS
Most plans subject to ERISA fiduciary requirements TPA’s “act prudently in order to minimize losses of the plan” If discounts removed, TPA’s and plan liable under ERISA Participant may have to pay more in co-pays or coinsurance
STATE LAWS
California: A.B. 175 bill 20030811 Illinois: 50 ILCS 5/370k Louisiana: Statute 40:2203.1 Massachusetts: 211 CMR 52:00 Minnesota: MNS 62Q.74 New Hampshire: RSA420-C.7 New Mexico: NMSA 59A-22A-4(C)
STATE LAWS
North Carolina: NCGS 58-50-56(h) Oklahoma: O.S.Title 36 Sec. 1219.3 South Dakota: SDCL 58-17C-20 Wisconsin: Admin Code – Ins. 9.01 Other States:
Considering legislation AMA supporting
TYPICAL VIOLATIONS
Disputes and discount reversals Managed care audits Terminated access to providers Negative employer and participant perceptions Guilt by association
RECENT CASE 1
HCA sued Employer’s health insurance company under ERISA Court found EHI’s interpretation of plan arbitrary and capricious EHI not entitled to discounted rate under contract Appeal court found “Silent PPO” not permissible under ERISA
RECENT CASE 2
Hospital sued 70+ payers for taking improper discounts Filed in Superior Court of NJ – docket # BER-L-2075-01 13 counts alleged There were over 70 defendants –TPA’s, carriers, plans Case was settled, defendants had to repay discounts + costs
YOUR PPO CONTRACTS
Required logo on your ID card? Listed and provider approved payer with remarketing org.? Violation of geographic exclusivity clause in agreement? Violation of use of supplemental network in primary PPO contract?
YOUR PPO CONTRACTS
In-network versus OON claims handling? Discounted claims? Electronic re-pricing after services rendered? Prior provider approval? Secondary network = contract violation of primary?
PROVIDERS VIEW
OON claims are a big part of their primary profit Not renewing PPO contracts Looking for limitation on remarketing discounts Unlimited inflationary outlet OON claims expensive but profitable to the provider Larger financial amount
FIND VIOLATIONS?
Providers are looking New systems for matching patient EOB’s with ID’s New audit firms Audits offered at % of savings Lawyers seeing big fees Medical billing companies monitoring Tech improving rapidly
OON PROCESSING
Common ways to process OON claims:
Stacking Silent PPO Partial negotiation Finance the liability Negotiate each claim individually
Many PPO employ several of these processes
SILENT PPO’S
Usually unauthorized discount arrangements Often participant, employer, provider do not know it is being used No ID verification used Costing providers
STACKING
Discount rate taken No ID verification used Steerage not a factor Best discount usually applied Theory of volume prevails Hard to track
PARTIAL NEGOTIATION
Situations occur when PPO gets approval to use discounts on variety of claims Can be legally defeated and puts payer at risk No specific contract Permission from secondary contractor, not the providers
FINANCING CLAIMS
Entities offer to “buy / finance” OON claim at discounted rate after adjudication Provider not involved in approving deal Discounts stacked or silent Payer and participant legally exposed
ARBITRATION
Claim by claim basis Provider agree in writing to discount Protects payer, all fiduciaries, and participants Fair to payer and providers, and legally binding Most efficient way to handle OON claims
RESULTS
All methods result in some discounts, but differences are:
Stacking: Ltd. Savings/liability Silent PPO: Ltd. Savings/liability Partial negotiation: small savings Financing methods: decent savings/liability Negotiation/arbitration: About 30% savings –no liability
Cost of re-processing or violations not included
LEGAL ISSUES
Fiduciary liabilities associated with OON claims/PPO handling Liabilities attached to participants not discounted Legal precedence against extracontractual discounts Litigation amongst plan vendors when PPO violation is caught and enforced
THE FUTURE
OON claims will be a focus of plans, payers and providers Payers want just payment on claims per contracts agreed to Plans want best discounts they can get and no liability Payers want to provide good discounts and limit exposure
THE FUTURE
More legal cases More payers punished for unethical methods for discounts More re-marketers caught using PPO discounts incorrectly More employers/plans insist on legitimate methods for discounts Cost of failing out-way discount from unethical deals
SUMMARY
Discounted medical care critical to managing healthcare costs Providers give discounts in exchange for specific provisions Payers use discounts if legally entitled and providers are aware Out-of-network claims not contracted and paid at UCR
SUMMARY
If discounts contracted, OON claims would increase States more aggressive Technology and 3rd party auditors assure compliance Costly liabilities Compliance critical and ethical Scrutiny with CDH, increased regulation and more litigation
FINAL THOUGHTS
Let’s not wait for embarrassing lawsuits and legislation Let us show that we are ethical and deserving of public trust Let us help end payer/provider adversity Let’s do the right thing!
OUT-OF NETWORK CLAIMS
Myths, Realities and the Future