Cover Story

Managed Care Ripoffs

Are you being paid less than you should?

Unless your billing department is vigilant—and fully staffed—some insurance claims could be coming up dry.

By Susan Harrington Preston
Senior Editor

The light dawned for orthopedist Franklin J. Dzida after he opened a satellite office for his four-doctor, Downey, CA, practice. "My patient load there is lighter," he says, "so I've had time to look at my billing a lot more carefully. And what I've found is really aggravating."

What did Dzida find? An insurer paying a discounted fee for emergency surgery, even though Dzida wasn't in the insurer's network. An insurer basing pay for a workers' compensation claim on the state's fee schedule, rather than on the appropriate, and more-generous, federal schedule, for an injury that took place in international waters—and then stonewalling Dzida's efforts to get his proper pay. Insurers using "silent PPOs," in which payers take a discount they're not entitled to.

"It wouldn't be so bad if health plans just made mistakes and you could take care of them with a phone call or two," says Dzida. "But my experience is that these people are playing us for fools."

Dzida's story shows why it's worth checking the accuracy of claims reimbursements: If you don't, your receivables may be leaking away. Texas doctors have learned this since 1991, when the Texas Medical Association started its "Hassle Factor Log," which collects reports of payment problems from TMA members and tries to help solve them. In 1999, complaints to the log topped 1998's tally by nearly 50 percent. Taken together, the 3,322 complaints for 1999 included 4,955 individual payment problems. (A complaint can involve more than one "hassle.")

The single largest of the TMA's 17 categories of payment hassles—delayed payments—accounted for 31 percent of the total. Claims denials were second (20 percent), followed by the need for repeated phone calls for individual claims (19 percent) and excessive time on hold (12 percent). The TMA notes that the top four categories have been consistent since 1991.

Payment delays are getting longer, according to InterStudy Publications, a managed care research organization based in Minneapolis. In its HMO Financial Benchmarking Guide, published this spring, InterStudy reported that claims payment typically took 15 days longer in 1999's third quarter than in 1994's.

Some insurers may not have the cash to pay claims promptly. According to InterStudy, HMOs' liquidity levels overall have dropped since 1994, diminishing the firms' ability to meet "current obligations, such as claims payable to providers."

That appears to be the case with Cleveland-based Medical Mutual of Ohio, the insurer Teri Martell, office manager for Country Square Surgeons in Sylvania, OH, cites as her most difficult payer. Cash holdings at Medical Mutual dropped from over $123 million in 1997 to $22 million in 1998. Meanwhile, unpaid claims stood at $135 million for 1997 and $133 million for 1998.

Medical Mutual takes issue with this interpretation, however. "In a much smaller company, cash flow might affect the speed of payment, but not in a company the size of Medical Mutual," says Rick Chiricosta, the company's vice president for finance. He notes that in 1998, in addition to cash reserves, Medical Mutual had nearly $150 million in investments that could easily have been liquidated to provide cash, and that at the end of 1999, the company's cash reserves stood at $49.5 million.

Whatever the role of tightened cash flow, delayed, downcoded, and otherwise mishandled claims are so common that most of the sources for this story assumed that insurers use payment hassles deliberately for business reasons. There's documentation that some Medicare carriers have indeed engaged in such tactics. A 1999 report by the General Accounting Office details carriers' efforts to save money, often at doctors' expense, by such strategies as discarding claims and falsifying information on payment turnaround time. (You can see this report on the GAO's Web site at www.gao.gov. Look for report HEHS 99-115.)

Whether the hassles are deliberate or not, you need to look for them diligently, advises Joette P. Derricks, a consultant with Healthcare Management Solutions of Camp Hill, PA—and then, if you find problems, take action.