houston audits
contractual payment problems
hosptial health care
news and events
Download PDF.......Click Here  
Download PDF.......Click Here  
Court Rullings Legislation
hospital managed care
court Rulings Legislation

WSJ - Fights Over Health Claims Spawn a New Arms Race

Insurers and Doctors
Try for Upper Hand;
Firms Help Both Sides

February 14, 2007; Page A1

Four years ago, Paluxy Valley Physicians of Glen Rose, Texas, was struggling to recoup more than $500,000 in denied or unpaid claims from insurers. Two of its eight doctors left the practice, while three others had to borrow $100,000 to keep it afloat.

To turn things around, the medical practice turned to Boston-based athenahealth Inc., one of the biggest of hundreds of companies in a lucrative niche: helping doctors wring payments from health plans. Athenahealth's software flagged and corrected the complex coding for thousands of claims, preventing them from getting hung up in insurers' Byzantine rules. Today, Paluxy Valley has whittled its claims outstanding to $179,000 and repaid the bank loan. No longer in a revenue crunch, its doctors have stopped moonlighting in the emergency room to make money.

"The insurers outcode us, they outsmart us and they have more manpower," says Shari Reynolds, the administrator at Paluxy Valley, which pays athenahealth a little over 3% of the $2.5 million it collects annually from insurers. "Now at least we have a fighting chance."

Doctors increasingly complain that the insurance industry uses complex, opaque claims systems to confound their efforts to get paid fairly for their work. Insurers say their systems are designed to counter unnecessary charges and help keep down soaring health-care costs. Like many tug-of-wars over the health-care money pot, the tension has spawned a booming industry of intermediaries.

It's called "denial management." Doctors, clinics and hospitals are investing in software systems costing them each hundreds of thousands of dollars to help them navigate insurers' systems and head off denials. They're also hiring legions of firms that dig through past claims in search of shortchanged payments and tussle with insurers over rejected charges. "Turn denials into dollars," promises one consultant's online advertisement.

The imbroglio is costing medical providers and insurers around $20 billion -- about $10 billion for each side -- in unnecessary administrative expenses, according to a 2004 report by the Center for Information Technology Leadership, a nonprofit health-technology research group based in Boston.

Some companies are profiting from arming both sides. Ingenix, a unit of UnitedHealth Group Inc., the country's second-biggest health insurer, sells insurers systems to screen doctor's claims while promising doctors its software for them will "help you take a more assertive stance on fair and accurate payment." Ingenix says it helps smooth the entire payment system by equipping both insurers and providers with the same information. Diane Breneman, an attorney representing doctors in the Kansas City, Mo., area suing several major insurers over claims, disagrees: It's "like tobacco companies getting into the nicotine-patch business," she says.

Behind the Scenes

Some patients get dragged into these behind-the-scenes disputes when physicians try to bill them for what the insurer hasn't paid. Physicians say state-run Medicaid systems are among the worst payers: That's a large reason why fewer than a quarter of physicians in a survey last year by the Center for Health System Change, a nonprofit research group, said they were accepting new Medicaid patients.

State Medicaid programs say that with millions of claims running through their systems, beneficiaries moving on or off their plans and occasional budget crunches, they're bound to frustrate some doctors. Some insurers say they are moving to make it easier for doctors to get paid, not harder. "Every time we redo a claim, it costs us a lot of money, too," says Dr. Allan Chernov, a medical director at Blue Cross Blue Shield of Texas. As of last month, he points out, doctors using the insurer's software can check beforehand whether they're about to run afoul of a coding rule.

The denial-management industry's rise shows how much of medical spending is consumed by propping up and doing battle over an arcane patchwork of claims systems. Roughly 30% of physicians' claims are denied the first time around. Sales of physician-billing and practice-management technology grew 25% to more than $7.5 billion last year, estimates Jewson Enterprises, a health information-technology research firm in Austin, Texas.

That's prompting big companies to move into the market. General Electric Co. last year snapped up physician- practice management firm IDX Systems Corp. for $1.2 billion. McKesson Corp. -- which makes the top-selling software system used by insurers -- announced it would buy a denial-management supplier, Per-Se Technologies Inc., for $1.1 billion. Cerner Corp., a big maker of hospital software, also is moving more into the physician market. Meanwhile athenahealth, co-founded by President Bush's cousin, Jonathan Bush, has grown in six years from a client base of a couple dozen physicians to more than 8,500 doctors.
Two decades ago, insurers did less to stop doctors and hospitals from racking up bills and getting paid in full. But as they moved into managed care, health plans tried to control costs by imposing conditions on payments, such as medical documentation. To gain access to insured patients, doctors had to join insurers' networks and comply with their various fee schedules and payment rules.

What particularly riles doctors, who often still use paper records, is how insurers' claims-processing software periodically re-interprets the national standardized coding system used to file and reimburse medical claims. The set of 7,000 five-digit codes, each for a different medical service or procedure, was devised by the American Medical Association in 1966 and adopted by Medicare. Private health plans followed suit.

The coding system incorporates hundreds of thousands of payment rules to prevent doctors from claiming for medically incompatible services or double billing. If, say, a physician bills for removing a gallbladder and opening and closing a patient's abdomen, it rejects the second charge because it's inherent in the first.

Code Auditing

Over the past decade, most insurers have adopted code-auditing software from companies such as McKesson and Ingenix. These advanced systems include several million coding rules to guard against overcharging, and are routinely updated with new rules to which claims must adhere.

In October, for instance, a Paluxy Valley patient came for her annual physical and an allergy shot. While she was there, her blood pressure shot up and her doctor and the staff tended to her for a few hours. The practice submitted a $200 claim for her physical, the allergy shot, and an office visit for treating her blood pressure. The payment back from Blue Cross Blue Shield of Texas: just $18.49 for the allergy shot. Its software had chopped the other charges out because a routine allergy shot doesn't require a doctor visit, the insurer explained.

"We filed that exactly the way we're supposed to," says Ms. Reynolds. Her billing staff included a piece of code that, under the universal coding system, signifies the charges were for three separate medical issues, she adds. "They deny it automatically anyway," she adds. "They take the chance the doctor won't fight it."

At the Texas health insurer, Dr. Chernov says that its claims-processing software, made by McKesson, doesn't necessarily recognize the coding edits that would let a claim pass under the Medicare system. He adds that in many cases, it would be understandable to flag or reject part of such a claim because an allergy shot would so rarely be done together with a physical.

"I recognize a computer software can't read every permutation or combination of services," he says. He adds that the insurer hears doctors out and even removes certain coding rules from the system if they make a good case for it. "But we're trying to balance being responsible [to our customers] and making sure we're paying appropriately," he says. McKesson says it updates its software throughout the year to reflect changes from Medicare -- and in prevailing medical practices and technologies.

Physicians first tried to fight the insurers' software in the courts. A class-action suit in 2001 charged that the country's biggest insurers were conspiring to use the McKesson software to systematically bilk them. Aetna Inc., followed by all but UnitedHealth and Coventry Health Care Inc., eventually settled, and agreed to contribute hundreds of millions of dollars into a fund to pay doctors who win judgments from an independent review board on previously denied claims. A U.S. district judge inMiami dismissed racketeering claims from the suit last June, and some medical groups say insurers have moved away from more egregious practices. But regional pockets of doctors such as those in Kansas City are still suing the insurers without the racketeering claim.

Athenahealth got into the business of helping doctors navigate insurance hassles after its own billing travails. Mr. Bush and his partner, Todd Park, initially raised $1.6 million to build a national franchise of birthing centers. But the fledgling business quickly sank in 1999 under insurance snafus and payment delays: "We couldn't get out from under unpaid claims," Mr. Bush says. Mr. Park's younger brother designed an Internet-based system to navigate their insurers' claims processors and anticipate such problems.

Now Mr. Bush runs athenahealth out of an old munitions factory outside Boston, where its staff sifts through 13,000 pounds of mail per month about claims and feeds all of the data into its central servers. The company takes an average 5% cut of the revenues it helps doctors collect, depending on the type of practice.

Harnessing the collective claims experience of so many doctors at once lets athenahealth's software engineers spot new "denial patterns" and quickly program an alert into the system. Usually the culprit is a new coding rule that an insurer has introduced into its software.

New Snag

Paluxy Valley, for instance, administers a special three-in-one immunization shot to about 40 kids a month. Texas Medicaid used to pay $5 to administer each shot separately when the claim was coded using the numbers 90723. Because Ms. Reynolds says she and her billing staff don't have the time to regularly check the Web sites of all their public and private insurers for updates, she never spotted that to get paid for the new three-in-one shot, she'd now have to add a "u3" to the code. Athenahealth's system picked up on the pattern and its staff tracked down the new snag. Its software engineers built an alert into the system to flag all claims missing the new code before Paluxy Valley could ever file one incorrectly. "It would have taken us weeks to figure out," says Ms. Reynolds.

A spokesman for the Texas Health and Human Services Commission, Ted Hughes, says that every time the state legislature mandates a new or higher payment, the Medicaid program has to make a change in the coding to reflect that. "The coding system doesn't belong to us," he says.

Athenahealth's system also runs reports to let doctors see when an insurer has chopped out charges or shaved a few dollars -- no small issue for a practice handling thousands of claims a month. Doctors' practices have trouble finding these changes themselves. Insurers often don't disclose their full list of fees or coding edits, claiming they are proprietary.

When Boro Park OB/GYN, a Brooklyn, N.Y.-based practice, checked how well one of its private Medicaid plans paid for prenatal visits, it saw that seven out of 229 claims in December were paid at $55, or $9 less than it is supposed to get.

The insurer, New York-based HealthFirst, says such mistakes are the result of human error. HealthFirst switched more than a year ago to a special set of codes for prenatal visits, and its system kicks them out to be manually processed. The insurer says it makes errors on just 2% of claims. "We're the ones catching the mistakes," says BoroPark's executive administrator, Fran Schwartz.

Sometimes patients get caught in the mix. Peggy Encinia of Houston was visiting her daughter near Port Arthur, Texas, last July when chest pains woke her in the middle of the night. An ambulance rushed her to the nearby Medical Center of Southeast Texas, which didn't have a contract with Mrs. Encinia's insurer, UnitedHealth's PacifiCare. The bill from her 12-day stint in the hospital and treatment for heart failure came to more than $104,000. But PacifiCare paid only $4,100 initially, explaining that because the hospital wasn't in its network, its policy was to pay only the standard Medicare rate.

Instead of going after Mrs. Encinia for the balance, the medical center commissioned its claims auditing service, PPO Check Ltd. of Houston, to fight the insurer. PPO Check argued that Mrs. Encinia's policy specifically states how out-of-network claims should be calculated for payment. After several rounds of appeals and disputes, PacifiCare agreed to pay an additional $70,000, close to the going rate other hospitals in the area would get for the same service. "I could argue this until I'm blue in the face, but I don't know the rules like they do," says Mrs. Encinia. "When I told the hospital I'd do my best to sort it out, they said, 'Don't get yourself worked up over this.'"

A UnitedHealth spokesman says it's fairly standard procedure to pay Medicare rates when a hospital is out of its network and that it did come to an arrangement with the hospital to pay the prevailing local rate after listening to its appeals.

Some doctors say they see insurers stepping up efforts to keep a lid on reimbursements. One increasingly popular tactic among health insurers is to hire "health-care claims recovery" teams or software to dig through claims, some as old as two years, to see if they overpaid and seek redress. That's partly because more states have been adopting "prompt pay" laws that require health insurers to reimburse claims within 30 or 60 days, says UnitedHealth spokesman Tyler Mason, which sometimes doesn't leave enough time to review them first. "We need to have a way to still thoroughly review whether a claim's paid correctly or not," Mr. Mason says.

Some insurers demand the money back. More, though, simply deduct it from future claim payments. That forces doctors to appeal the claim all over again. Recently, Hawthorn Medical Associates, a Dartmouth, Mass., multispecialty practice with 50 doctors, received a letter from UnitedHealth. One of the insurer's units, which audits already paid claims, had detected $8,355 in overpayments on imaging tests for 25 different patients. Hawthorn says UnitedHealth made a mistake because it wrongly identified some of its doctors as being out of its network.

Louisiana Hospital Association - Texas Hospital Association - Florida Hosptial Association - American Hospital Association - Nevada Hospital Association
hospital billing and coding procedures
houston cunsulting
audit houston
Louisiana Hospital Association Texas Hospital Association Florida Hospital Association American Hospital Association The Political Action Committee for the Texas Hospital Association Nevada Hospital Association