Posts Tagged managed care

Anthem (and others) to Cut Payment for E&M-25 by 50%

Recently, Anthem in Kentucky (and other states), Harvard Pilgrim, and other plans (so I hear), have established policies to reduce by half payment for Evaluation and Management (E&M) services when accompanied by a -25 modifier and billed in combination with some 150 specific (and commonly used) preventative and procedure codes. The -25 modifier is supposed to indicate that these services are ‘separately identifiable’, according to AMA CPT coding rules. The rationale for this 50% reduction is that the plan does not want to pay twice for ‘the overlap of overhead expenses in the RVUs of the code combinations’. Anthem KY also plans to ‘make improvements in (their) primary care fee schedule allowances for office E&M codes’, but it is not clear to me if these improvements are intended to compensate for some or all of these reductions (don’t count on it).

Initially, I was not sure whether this policy would apply to both office based and facility based providers, so I contacted Anthem in KY to see. Though there was some confusion about this at first, the latest response I got from Anthem KY was that “Emergency Room Physicians will NOT be affected by the 50% reduction in payment”. I do not know at this point whether or not this exception also applies to other facility based providers. When I initially saw the policy statement from Anthem, I replied to them that:

I do not believe that ANY portion of the RVUs assigned to the E&M service should be ignored, deleted, modified, or considered duplicative to the RVUs assigned to the additional procedure when separately identifiable services are coded on the same claim. This is what CPT means by ‘separately identifiable’: it means ‘distinct from’. The overhead expenses associated with an E&M service are likely to be completely separate and independent of the practice or overhead expenses associated with the procedure: incremental rather than overlapping. For example, the major practice expense for an office-based practitioner associated with the performance of an ultrasound is the cost of the machine and the cost of the training to perform the service. Neither of these are necessarily duplicative of, or overlapping with, the practice expenses associated with the provider’s E&M service.

In the case of facility based providers, like emergency physicians, the practice expense component of the E&M services are likewise separate and distinct from the practice expenses associated with procedural services by these providers, AND IN ADDITION, the practice expense component of the emergency physician’s E&M services represent a very small component of the overall RVUs assigned to the E&M service – certainly far less than 50%.

I indicated that this policy was inappropriate whether or not it was applied to office based or facility based providers. It is my understanding that several plans have initiated or are planning to initiate this same sort of payment policy. The AMA has also responded to this development. The fact that Anthem in KY is apparently not going to apply this strategy to emergency physicians, and perhaps other facility based providers, and the argument above against this practice, is an opening that other providers can use to push back when faced with these payment reductions. The unilateral decision by health plans to re-invent or re-interpret CPT claims coding rules on the fly, using rationales that appear more like rationalizations, begs for adoption of standardized, universally applied coding/payment rules for all payers.

This post also published in The Fickle Finger

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The Solution to Medicaid Expansion or There’s Just Not Enough Meat on the Bone

Health Care reform proposals to cover more of the uninsured by expanding the Medicaid program inevitably stumble over several potholes and obstructions: there aren’t enough providers to cover existing Medicaid enrollees, let alone millions more; Medicaid Managed Care doesn’t seem to save enough money; states can’t afford to pay for it; the feds can’t afford to subsidize it; and most importantly, the poor don’t vote or contribute to election campaigns. Not to worry: I say with all modesty that I believe I have a solution.

Let me tell you a true story about a successful Medicaid Managed Care plan that works. If you wanted a model for such a plan, this would be a good one. Partnership Health Plan (PHP) in Northern California is one of 5 fully capitated County Organized Health Systems (COHS) in the state, covering Sonoma, Lake, Mendocino, Marin, Solano, Napa, Yolo and Sonoma Counties. It has over 200,000 enrollees, of which 31% are seniors and persons with disabilities. PHP has 240 Employees and a $700 million annual budget, and a remarkable 95% Medical Loss Ratio (i.e. 95% of funds go to medical services). Administrative costs for the Medi-Cal product (Medicaid in California) are currently less than 3.5%. PHP actually believes in managing care, they take it seriously, and they generate serious cost-savings as a result, with a 380% ROI in complex case management, and a 220% ROI on a care transitions program to reduce or prevent hospital readmissions.

PHP pays their capitated PCPs very well, and it pays networked FFS specialists better than any other Medicaid Managed Care plan in California, at rates of 120-160% of the state’s MediCal fee schedule. The plan pays claims quickly (less than 10 days on clean claims), and without relying on the typical down-coding and bundling schemes to underpay EMTALA obligated providers. PHP is so well received by providers that its network participation with the primary care and specialist provider market in its assigned counties is remarkably broad and deep. Ninety-seven percent of PCPs and specialists contracted with PHP expressed satisfaction with the plan – you just do not see this kind of thing in most Medicaid Managed Care organizations. Recently, despite California’s scheduled 10% reduction in MediCal rates and capitation payments to MMC plans; PHP decided to maintain current provider rates in order to maintain patient access to these services. So how did PHP accomplish this? Partnership Health Plan is a not-for-profit Medicaid Managed Care Plan.

All over the country, health care policy wonks have been advocating for the expansion of Medicaid through a for-profit managed care structure, ignoring the fact that there just isn’t enough meat on the bone in Medicaid programs to support quality care for enrollees, case management for the chronically ill, reasonable payment to providers, sufficient access to specialty services, and generate profits to Wall Street or equity investors and excessive management fees to overpaid CEOs. The drive for profits, and limited financial support from strapped governments, leads these for-profit plans to adopt strategies that result in provider underpayment, lost claims, selective dis-enrollment, inappropriate denials of coverage, limited access, financial insolvency, and delays in necessary care. Why are so few advocating for a non-profit approach to Medicaid Managed Care? The presumption is that the profit motive should drive creativity and cost-effectiveness, but if policy-makers fail to accurately measure access to care and quality, and only look at the cost side of the equation: it’s easy to get fooled about the value and success of government sponsored for-profit health-care enterprises. The ability of PHP to succeed in the context of such a lean, nearly meatless, Medicaid program as exists in California should cause everyone, everywhere, to reconsider the not-for-profit approach to Medicaid expansion.

This post also published in The Fickle Finger

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Medicaid Managed Care Does Not Provide Better Access than FFS Medicaid for Non-emergency Care

The folks who run Medicaid Managed Care Plans often gripe about their enrollees using emergency departments for non-emergency care. And of course, they do, and probably more so than commercially insured enrollees. Most state and federal government regulators and legislators believe that capitation and managed care models for Medicaid can reduce the inappropriate use of ED services by Medicaid patients by incentives that encourage primary care providers in managed care organizations to increase access for their enrollees to extended office hours or next-day appointments for urgently needed, non-emergency care. Recently, the Obama administration decided to kill a proposed plan to use ‘secret shoppers’ to determine whether, in fact, enrollees can get such appointments when they need them, in the face of considerable opposition from these very medical-home advocates. In the ED, we constantly hear from Medicaid Managed Care enrollees who come to the ED because they could not get a timely appointment from their PCP or clinic, but anecdote is not the best evidence, and there is not a lot of recent research about timely access for Medicaid patients (I think because no one in government or health care policy really wants to know). Therefor, we must look to indirect evidence of this phenomenon.

Recently, I had the chance to review claims data from 138,129 Medicaid Managed Care (MCMC) enrollees and 107,125 Medicaid Fee for Service (MFFS) patients seen consecutively in about 65 EDs in 6 states states over the first 4 months of 2010. Using ED physician charges (all under the same fee schedule) as a surrogate for ‘acuity’, all of these claims were stratified into 20th percentiles, from highest charges to lowest, for the MCMC and FFS patients. If you think about things like ‘deferral of ED care’, the patients who might be the least likely to require emergency care would fall into the bottom 20th percentile of ED physician charges, the least ‘acute’ patients using the least amount of ED physician services. These 20th percentile groupings offered an interesting comparison between MCMC and MFFS.

Here is how the comparison looked:

Medicaid Managed Care: 41.55% of all ED visits for these MC enrollees were in the lowest 20th percentile of charges (representing 26.57% of total ED MD charges for all MCMC enrollees)

Medicaid Fee-for Service: 36.72% of all ED visits for these FFS enrollees were in the lowest 20th percentile of charges (representing 21.14% of total ED MD charges for all MFFS enrollees)

Some of this discrepancy may be accounted for by the fact that the average charge for the MCMC patients was slightly (8%) higher than the average charge for the MFFS patients, but at best what this data suggests is that MCMC plans and capitated medical groups do not provide any better access to enrollees for urgently needed, non-emergency office or clinic appointments than their counterparts providing services to Medicaid patients on a FFS plan. If this were not the case, the numbers would be very different. So much for incentives. I guess as long as these MCMC organizations and plans can continue to underpay ED providers for after-hours urgent care to under-served Medicaid enrollees and not worry about ‘adequate access’ oversight, this isn’t likely to change.

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Much Ado About Very Little – the Deferral of ED Care Boondoggle

Boondoggle – a scheme that wastes time and money. Perhaps this is not the best way to describe the many efforts that are being made to try to keep patients with non-urgent problems from using the emergency department, but from where I sit, deferral of ED care is a cost-saving tactic that not only fails to deliver much in the way of cost savings, it also is a strategy that can be both risky and unethical. More importantly, the focus on deferral of care and ‘unnecessary ED visits’ as a cost-containment tactic is a distraction from efforts that would yield far more savings at far less risk to patients, and to our fragile emergency care safety net.

Recently, I worked with one of the major health plans to look at over 637,000 consecutive commercial and Medicaid California ED patient visits over a one-year period (excluding ED patients who were admitted to the hospital). Based on the data below, it is clear that those 20% of patient visits that represented the least costly visits (facility plus professional ‘allowable payments’) accounted for less than 4% of the total cost for all non-admitted ED patient visits.

Rank            Total Allowed             % of Total Allowed
1                 $520,314,096                       54%
2                 $195,156,385                       20%
3                 $129,376,962                       13%
4                  $84,949,393                          9%
5                  $33,929,559                          4%

Remember, this data just represents patients who were not admitted (facility costs for ED care of admitted patients are bundled into inpatient payments). Thus, it is likely that the bottom 20% of admitted, discharged, and transferred ED patient visits likely represented between 2 and 3% of the total cost of care for all ED visits. ACEP has been saying for a while now that (depending on the source of the data) ED care accounts for around 2% of the $2.4 trillion spent on all health care costs. Now the estimates of the percentage of ED patients who ‘don’t need to be there’ or have ‘non-urgent’ or ‘non-emergency’ problems is a bit more wide-ranging, depending on the agenda of the estimator; and numbers as low as 10% and as high as 50% get thrown around all the time. The Rand Corporation put the number at 17%, the CDC at 8%, and HCA Gulf Coast Hospitals put the number at 40% !!! Clearly, no one seems to be able to define this group in a standardized way, but it is clear that as the poster child for unnecessary and expensive care, the ED has become the target of many attempts to reduce costs by keeping patients out of the ED, or sending them away, based on screening criteria that may, or may not, meet EMTALA standards. Much has been written about the down-sides of the deferral of ED care strategy, and ACEP has a policy that opposes deferral of care, especially when it is not accompanied by adequate access to alternative care venues and carefully designed programs to arrange for timely and appropriate care for those whose care in the ED is deferred. Most ED physicians agree that the way to reduce unnecessary visits to the ED is by improving access for non-urgent care in clinics and primary care offices. However, my issue with all the hubbub about cost-containment through deferral (or denial) of ED care goes beyond the ethical and risk issues: it simply is not a cost-effective strategy.

Let’s assume that it is possible to accurately identify and screen the patients that do not need ED care without missing the patients who really do have an impending medical emergency in the early stages of presentation, and that we could reasonably eliminate the 20% of ED visits that use the least amount of ED resources. I don’t actually believe this is possible, but let’s make this assumption. If it were, we could reduce the US health care budget by something like 3% x 2%, or 0.06%. But wait- surely some money would have to be spent caring for most of these patients in the clinic or PCP’s office. So perhaps the actual savings from deferral of ED care might amount to 0.05% of the health care budget (50 cents for every $1,000). Probably, the number is even lower. Yes, I know, it is real money, but in relative terms, they call this ‘budget dust’.

The study on ED visits in CA that I mentioned above also looked at costs by procedure and costs by diagnosis for those 637,000 patients. I was surprised to learn that renal and ureteral stones accounted for $25 million of the $963 million spent on all these patients. So, roughly, the same amount of money was spent taking care of 7,900 patients with kidney stones as was spent on taking care of the 127,000 patients who might have qualified for deferral of ED care. In fact, the data from the Anthem study suggested that we could save as much money by reducing the number of CT scans done in the ED by 1 out of 12 scans as we could by barring the door of the ED to every single one of the 127,000 patients in this study who accounted for the lowest 20% of ED costs.  My point is that all sorts of legislators and health plan executives and government regulators are screaming about, and scheming about, reducing unnecessary ED visits, and distracting us all from focusing on where the real money gets spent, and the real savings could be achieved. You want to talk about saving health care dollars: let’s look at back surgery, depression, end of life care, obesity. But no, the focus of TENCare and HCA and the Dr. Thompson’s in Washington State and elsewhere is on the ‘imprudent’ parent who takes their screaming, vomiting, febrile 2 year old child into the ED at 3 AM, only to be diagnosed with a lowly ear infection. And to top it off, the solution to this problem that many Medicaid program directors and legislators have lit upon, the best way to keep these patients out of the ED, is simply to decide, after the fact, not to pay the ED physician for having provided this care. Yep, that makes a lot of sense.

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Participation by Emergency Physicians in Compensation Driven Cost Containment Strategies

It strikes me that in developing payment reform related, compensation driven cost-containment strategies aimed at constraining the cost of emergency care, policy makers, emergency physicians, and health insurers should adhere to certain principles. ACEP should be at the forefront when it comes to establishing these principles, which I hope will be focused on protecting our patients first, and our specialty second.

The concept and practice of ‘managed care’ has raised some very reasonable concerns about the way some physicians’ commitments to the welfare of their patients has been compromised by the financial incentives inherent in compensation arrangements like capitation and risk-pools. If emergency physicians are going to be engaged, willingly or reluctantly, in cost-containment oriented incentive compensation programs; we need to make sure that the competing interests of patients, providers and insurers (including the government) are balanced properly, and morally.

I thought I would take a shot at formulating a few of these principles, and encourage readers of this blog to suggest changes and propose additions.

1. Cost containment strategies for emergency care should focus first and foremost on cost-effective care, with the emphasis on effective.
2. Shared-savings, pay-for-performance, capitation, risk-pools, and similar payment reform programs designed to incentivize emergency physicians to reduce the cost of providing emergency care must not result in a reduction in necessary care, an unreasonable delay in the provision of care, a significant increase in medical risk to patients, or a significant decrease in patient satisfaction with care; or shift the burden of care to those who are unwilling and/or unable to provide this care.
3. Cost-effective care strategies should be evidence-based where possible, though common sense strategies should also be considered even if evidence in favor of such strategies is not abundant.
4. The proportion of total reimbursement that emergency physicians derive from the successful adoption of cost-containment strategies, relative to the proportion derived from payment for services rendered, should be limited in order to ensure that these cost-containment incentives do not overwhelm service-driven and outcome-driven medical decision-making.
5. Strategies that rely on the deferral of care in the ED should be considered as relatively high-risk, low-reward strategies when compared to others that are focused on cost-effective care and high-cost services.
6. Cost-containment strategies for emergency care should be transparent to patients, providers, insurers, and policy-makers.

Any other ideas out there?

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Some Additional Thoughts on ACOs

ACOs are coming to a health care market near you. About the only real difference I can see between the ACO model and the ‘managed care model’ is that health plans (or Medicare or Medicaid) will be using incentive payments to promote cost-effective care, rather than (or in addition to) capitation payments as a risk sharing (or risk transferring) strategy. These incentive payments will include aggregate payments negotiated between the ACO and the payers, and incentive payments to individual providers within the ACO that are eligible to receive these incentive bonuses. This may seem like a new approach, but it is really not much different than the ‘risk pools’ that plans once used to incentivize medical groups and IPAs to hold down costs. I guess that everyone assumes that this risk-sharing concept has a better chance to work now that all these sophisticated tools like EMRs and chronic disease management advocates are around to help coordinate care.  Some folks might argue that ACO incentives are about promoting effective care, but trust me, the emphasis is likely to be on COST first, and effective, second.

ACOs are not just meant to exist under the Medicare program, so it is likely that many of the payment methodologies and organizational entities (like IPAs, medical groups, PHOs, and integrated health systems like Kaiser) are going to get into the ACO game on the commercial side as well as the government payer side. Consequently, there might be an opportunity here to rewrite, at the federal and especially the state level, the rules under which commercial and government sponsored managed care has been operating for the last few decades. If you have the chance to influence the way ACOs will operate, and the rules they must follow, in your State, or at the federal level, you might consider promoting some of the following suggestions, which are born of many hard lessons learned from the most abusive and inappropriate practices of managed care plans and provider groups around the country (and especially in California, where managed care took root many years ago).

• A managed care model that limits the percent or number of physicians who have equity ownership of the organization is likely to promote both practice and payment policies that preferentially derive benefits for the equity holders rather than for the providers and their patients. Also, it is easier to get physicians ‘on board the bus’ if they all have an equal stake in the success of the organization. ACOs should have broad, and preferably equal, equity participation among all participating physician providers.

• Physician leadership in ACOs should continue to provide clinical services so that they experience the impact of the clinical practice policies they develop and promote.

• When developing payment policies for different physician specialties and roles in the ACO or Foundation model, consideration should be given to whether the physicians are obligated to take on the care of the under- and uninsured as a part of their practice, and these obligations should be considered part of the practice overhead of these physicians, relative to the physicians in the ACO who can and do decline to take on these responsibilities in their practice.

• Foundations and ACOs that are initiated by, or intimately tied to, hospitals have often and particularly used coercive tactics in negotiating contracts with hospital-based providers. Coercive contracting must be countered by strict rules regarding the development of fair market discount and other payment arrangements with hospital based providers, especially those whose ability to decline participation in caring for ACO patients is limited by EMTALA or by virtue of at-risk departmental staffing contracts with hospitals.

• Carve-outs and selective enrollment and dis-enrollment policies must be strictly limited in order to ensure that ACOs and Foundations do not game government sponsored capitation programs.

• Primary care centered ACOs should not be responsible for the payment of the claims of non-contracted non-elective services, as this will encourage these ACOs to inappropriately pay claims rather than manage patient care as a means of reducing costs and increasing profits.

• ACOs that take on claims payment responsibilities for all professional services should be required to contract for non-elective as well as elective specialty care services, so that the ACO does not have to rely on the EMTALA obligation of ED on-call specialists for non-elective and after-hours care.

• ACOs should not be delegated the responsibility by a health plan for paying the commercial claims of non-participating providers: this should be the responsibility of the health plan, with cap deductions or risk pool arrangements to ensure that the ACO does not over-utilize non-par provider services.

• If an ACO becomes financially insolvent, the health plan should be responsible for unpaid commercial ACO-delegated claims, under the concept of negligent delegation.

• ACOs should be accountable to their community, and not just to their assigned patients.

• ACO administrative overhead should be counted against the 85% mandatory health plan medical loss ratio requirements under health reform.

• If an ACO does not have a nurse-advice line or similar mechanism for assisting patients in deciding whether or when to use emergency department services, it should not be allowed to retroactively deny coverage for emergency department services based on the prudent layperson standard.

• Hospitals that participate in, contract with, or develop ACOs should be required to collect data on hospital inpatient and outpatient care services and outcomes that can be accessed and reported by ACO providers in order to meet performance and reporting benchmarks.

Courtesy of a recommendation from a friend, Dr. Joel Stettner, let me also suggest you view the following video, which is very funny, and sadly all too accurate:

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The Balance Billing / Fair Payment / Hospital-based Physician Conundrum

Efforts to prohibit balance billing by non-contracted hospital based physicians, especially for emergency care patients, continue to confront ACEP state chapters left and right (or should I say North, South, East and West). It is pretty clear that many legislators and insurance regulators see this as a consumer protection issue, predicated on the fact that in an emergency, most patients do not have the ability to shop for providers that are contracted with their health plan; and that when they go to their ‘networked hospital’, it is with the expectation (often built upon misleading health plan assertions) that all of the docs at this hospital will be contracted with their plan. Health plans, regulators, and legislators are also motivated by the desire to contain costs; and for the plans in particular, prohibiting balance billing by hospital-based docs is the camel’s nose under the tent for control of all physician-related outlays.

The simplest solutions equate to fee setting. Fortunately, no one seems quite willing to go there….yet. I think this is because most folks recognize that setting fees at the wrong level could lead to disastrous unintended consequences, especially given physician shortages in this country. The AMA considers the balance billing issue to be a problem with ‘inadequate networks’, but pressure on plans to include more hospital based docs in plan networks often just results in more coercive contracting.  This is where the plan pressures the hospital to leverage the staffing contracts of the hospital-based docs, to force these docs to accept deeply discounted contract rates with the plans. This has unintended consequences, too. Hospital employment of physicians would certainly ensure that these docs were contracted with all of the hospital’s networked plans; but hospitals are notoriously poor at collecting for physician services, and the downsides of the corporate practice of medicine are real. You would think the marketplace would have resolved this issue; but because of EMTALA and coercive contracting and the burden of the uninsured and the lack of good regulatory oversight; the market for emergency care services is really not a fair and free market.

The conundrum is: how do we make sure that emergency care providers and hospital-based physicians subject to EMTALA’s mandate are sufficiently compensated for commercially insured services so that they can meet their mission to provide care to all those uninsured and under-insured patients, and at the same time keep insured patients out of the middle of disputes between plans and providers over the reasonable value of emergency care and hospital-based physician services? One could argue that the patients should not be excluded from the debate, but the plans and legislators easily trump that argument with tales of egregious charges by a few ‘greedy doctors’. Hospitals and plans could be required to include physicians in three-way network contract negotiations, but that is  impractical. Hospitals could be forced to provide subsidies to make up for the losses incurred by hospital-based docs who are forced to sign contracts with plans at deeply discounted rates; but many hospitals are already going bankrupt supporting flagging ER on-call rosters, and really it is the plans who are making most of the profits nowadays. Plans should not be able to say:  ‘the uninsured are not our problem’.  Some legislators (most recently in Illinois, in exchange for honoring assignment of benefits) have proposed fee arbitration as a solution, but the arbitration of millions of underpaid non-par claims is just ridiculous, not to mention hugely expensive. Any so-called solution that does not result in the vast majority of claims being paid appropriately up-front is doomed to failure.  Others have proposed all sorts of inventive solutions to balance billing that would precipitate one or more serious unintended consequences by failing to address charge outliers or relying on fee setting or ignoring claims dispute resolution or relying on impossible claims management procedures. What is a well-meaning regulator or legislator to do?

One alternative is to try to get at the issue by addressing fair contracting rates for hospital-based physicians. Some advocates of what would essentially be ‘forced health plan contracting’ for hospital-based physicians argue that these physicians should accept contracting discounts from their usual and customary charges because their hospital’s networked relationships provide them with patient referrals, and that the only real question is: what is a reasonable contract rate? There are lots of different considerations that are usually exchanged for a fee discount in managed care contracting, referrals being but one of them. Determining a ‘reasonable contract rate’ is no easy matter, especially since contracting rates are supposed to be confidential between plan and provider, so getting at valid ‘usual and customary contracting rates’ would be difficult, if not an outright anti-trust violation. There are so many other terms and conditions negotiated in contracts with plans that establishing fair-market-driven contract rate standards for hospital-based physicians is probably a hopeless cause.

ACEP has addressed the balance billing / fair payment issue by developing a set of fair payment principles and model legislation. The ‘solution’ eliminates the need for balance billing and is predicated on using usual and customary charges to get close to the reasonable market value of non-contracted services and to address charge outliers, and on the establishment of a fair, fast, and cost-effective claims dispute mechanism to address the other causes of claims underpayment for non-contracted (and contracted) services. These and related documents can be found on the ACEP website: This is a complicated issue requiring carefully constructed components and backstop measures to ensure a balanced approach to balance billing and fair payment.

Considering the fragile state of the emergency care system in the U.S., and the proclivity of legislators and regulators to ‘fix’ complex problems without really understanding them first; there are no perfect or easy solutions to the balance billing / fair payment issue that can be enacted without the risk of punching great big holes in the safety net, and making it impossible for emergency care providers to fulfill their mission.  ACEP’s solution is neither perfect nor easy, and not everyone will be happy with it, but it is workable, and reasonable.

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Ten Key Elements to Successful Contracting with Managed Care Plans

In the last ten years or so I’ve had the opportunity to participate in the negotiation of close to half a billion dollars worth of managed care contracts on behalf of my ED partnership. I’ve learned a thing or three from this experience, and wanted to share some observations and suggestions about managed care contracting with my emergency physician colleagues. in part this is because I believe a rising tide raises all boats. Unfortunately, when it comes to managed care contracting, many emergency physician groups have great difficulty just staying afloat. There are lots of reasons for this: coercive contracting (when your hospital ‘encourages’ you to contract with their health plan network partners), lack of attention to the issue, an inability to understand the managed care market in their communities, lack of contracting experience and lack of resources, inadequate billing and collections data, and so on. The result is that many emergency physician groups leave a lot of money on the table – revenues that may be critical to their ability to recruit and retain qualified physicians in their EDs and fulfill their mission. If you think that as a hospital employed ED physician, this does not impact you….well, all I can say is that if your hospital is giving your services away at bargain rates, chances are this impacts your reimbursement in some way or another.

Assuming for a moment that your ER group’s ability to pay you fair compensation for your services is to some extent dependent on the group being able to get the best possible terms in the managed care contracts the group negotiates with commercial, Medicare and Medicaid managed care, and self-insured indemnity plans: here are some considerations that might be important to you.

1. It is absolutely true that, in a negotiation, if you can’t say ‘no, thank you’ and walk away, you are all but screwed. Coercive contracting is a very real issue, and hospitals are frequently enlisted to get their hospital based physician groups to line up and sign deeply discounted, below market rate contracts with plans. The key to neutralizing coercive contracting is to invest the time and effort into convincing your hospital CEO or CFO that it is in the hospital’s interest, over the long term, to give hospital based physicians the room to negotiate fair market rates for their services.

2. Your group’s billing company and claims management team is critical to managed care contracting. You get what you pay for, and going for the cheapest service is penny wise and pound stupid. In contracting, data is king, and a good billing company should be able to tell you more about the financial impacts of contracting terms, current and future, than even the plan itself may be able to bring to bear. In particular, the ability to line item post payments against each code included on a claim is very useful, and a sophisticated claims management system is a must.

3. Most physician groups think that the only thing that needs to be negotiated in a managed care contract is the rates. WRONG. Every line in the plan’s contract is designed to benefit the plan, not you, and every provision is negotiable, and deserves to be review carefully, and challenged when it is either inappropriate to your practice or too adverse to your interests.

4. Once you agree to a rate with a plan, the plan is likely to try to use every other means at its disposal to pay you as little as it can get away with. They do this by aggressively down-coding your claims, bundling your codes, denying coverage, and dragging out the time it takes them to pay. Thus, these ‘terms’ are just as important to address in negotiations as the rate. If, for example, the plan intends to deny payment for ECG interpretation and report, you should know that up front, and negotiate a better rate for E&M and surgical services to make up for this loss.

5. No matter who negotiates these ontracts for your group, they need to have sufficient support, especially data support, to maximize their results for you. Of course, larger groups have an advantage in terms of contracting resources, but both large and small groups can benefit from the assistance of contracting consultants who can provide both negotiating experience and knowledge of contracting markets and plan behavior and strategy.

6. Direct physician involvement in managed care contracting, whether the plan is local or national in scope, is almost always useful. First, who best to advocate for physician reimbursement than a physician; second, physicians have gravitas; and third, physicians understand the nuances of clinical service that often come up in discussions around EMTALA, prudent layperson, necessity of care, medical record documentation, and other claims payment issues.

7. If your group’s billing company or practice management service is not routinely disputing underpaid claims, and you are not taking advantage of whatever regulatory agency claims dispute processes may be available, then you will not have laid the groundwork for successful managed care contracting. Plus, you will be leaving even more money on the table. Having disputed thousands and thousands of underpaid managed care claims, both contracted and non-contracted, I can assure you that the direct and indirect ROI is considerable.

8. If your group has more than a few managed care contracts, you need to maintain a managed care contracting database. This database should allow you to easily access all your contracting terms and key provisions, and also calendar dates for expiration and renegotiation of these contracts. Many contracts have automatic renewal provisions that extend the contract unless you give notice of intent to renegotiate.

9. There are all sorts of resources on the net covering managed care contracting and negotiation strategies, and state medical societies are often a good source of information about contracting and some even assist with contract language review, or have resource materials covering contract provisions. Even if you don’t negotiate health plan contracts, negotiation is something that happens every date in our lives, and it doesn’t hurt to learn some of the ropes.

10. A contract with a managed care plan need not necessarily be the reflection of a winning and a losing strategy – there are plenty of opportunities to fashion contract provisions that benefit both the plan and the provider, that reduce the plan’s cost for claims processing or claims dispute while it reduces hassles or payment delays or claims submission costs for the provider. Win-win is possible in the health insurance industry (though unfortunately, not all that common).

The Central Line has set up a managed care contracting category. I encourage other bloggers to chime in on this important topic. Hope to hear from you.

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Accountable Care Organizations, Capitation, and Emergency Care Providers – Lessons Learned from California’s Delegated Payer Model

Talk to legislators about factors responsible for the high cost of health care in the U.S., and they will likely bring up the fee-for-service model of physician compensation. I am not sure if this is an issue of a few well-publicized ‘bad apples’, or if no one really believes any more that the vast majority of physicians are motivated first and foremost to provide appropriate care. In any case, the search for an alternative to fee-for-service physician (and hospital) compensation eventually led to the concept of capitation – a mechanism to put providers at risk for the cost of the services they provide, thus countering the incentive to provide questionably necessary services. The concept of capitation achieved its fullest expression in the Knox-Keene law that expanded the HMO concept to incorporate not only the capitation of ‘risk bearing organizations’ or RBOs (medical groups and IPAs),  but also the delegation of payment responsibility to these RBOs. This model effectively allows HMOs licensed under Knox-Keene in California to carve their ‘management overhead’ and profits right off the top of the premium dollar, and delegate not only some or all of the financial indemnity risk of care, but also the responsibility to pay providers who are not contracted or otherwise incorporated as participants in the RBO’s provider network. This model not only incentivizes these RBOs to deny needed services to the enrollees assigned to their network, it also incentivizes the RBOs to underpay non-contracted emergency care providers who are obligated by EMTALA to treat these enrollees whether or not the RBO pays these claims appropriately, or at all.

Accountable Care Organizations (ACOs) have been included in proposals for health care reform in both the House and Senate versions of health care bills now working their way through Congress, as a potential solution to rising health care costs. ACOs are predicated on the idea that ‘the current provider payment system pays for volume rather than value’; and that by addressing both delivery system and provider payment reform simultaneously, ACOs can achieve the value driven objective imbued in the managed care model (see Can Accountable Care Organizations Improve the Value of Health Care by Solving the Cost and Quality Quandaries?) Two basic versions of ACO physician compensation models are being considered in the House version: a shared savings program (SSP) which is fee-for-service based but incorporates an expenditure savings risk pool / quality standards threshold concept, and a population based payment (PBP) model using a ‘partial capitation’ approach involving risk and profit sharing rather than full-risk contracting, similar to the Medicare Prescription Drug Program’s risk corridors to limit potential ACO losses. The proponents of the partial capitation model often point to the ‘success’ of California’s Knox-Keene program as evidence that population based payment is a better alternative than a fee-for-service based model. On hearing of this argument, I felt compelled to point out that the Knox-Keene HMO concept, and particularly the delegated payer model, has been a nightmare for emergency care providers (ECPs) in California.

ECPs are obligated by EMTALA to provide care to HMO and subcontracted RBO enrollees no matter how inappropriately these providers are paid for the services provided to these HMO enrollees. With the prohibition of balance billing imposed by the California Supreme Court; Governor Schwarzenegger’s veto of SB 981, a bill designed to establish a fair payment rate and dispute process for non-contracted emergency physician services; and the Department of Managed Health Care’s reticence to enforce AB 1455 fair payment regulations: ECPs have nearly lost all leverage to obtain fair payment for non-contracted services, and to obtain reasonable rates in contract negotiations with both plans and RBOs. We have become the ‘indentured servants’ of the HMOs in California. The delegation of payment responsibility to the HMO’s capitated medical groups and IPAs was the rancid icing on this cake.  Here is how capitation and the delegated model have screwed ECPs in California:

1. HMOs are directly regulated by the DMHC, but unregulated medical groups and IPAs that subcontract to the for-profit HMOs often pay less than half what the plans pay, because they are insulated from the DMHC’s direct regulatory oversight.

2. Many on-call specialists have cited, as a reason for leaving on-call rosters, having to fight medical groups for fair payment of their claims. These medical groups are happy to have the on-call specialists take care of the group’s patients in the ER at 3 am, but these very same medical groups often decline to refer patients to the on-call specialist during regular office hours

3. The EMTALA mandate puts emergency care and hospital based providers at a real disadvantage in contract rate negotiations – if you can’t say no, you have no leverage. Further, some RBOs have the equivalent of a monopsony in their local markets, and use this leverage to get hospitals to coerce their hospital-based physicians into accepting below market contract rates with the RBO. Coercive contracting is supposed to be illegal in California (CA Health and Safety Code Section 1322, Stark II, Anti-trust, etc) but violations are difficult to prove, retaliation is a real threat, and the laws are hard to enforce.

4. Many capitated medical groups and IPAs routinely down-code 50% of ER physician claims, and some even down-code 100% of the claims for the care of our sickest patients. The DMHC has been reticent to respond to numerous complaints from providers, and the Department’s claims adjudication process is flawed and expensive.

5. Capitated medical groups and IPAs that are on the verge of bankruptcy from poor risk management put emergency care provider claims at the end of the list of claims to be paid because they know these providers must continue to see their patients even if payments are withheld. When the medical group or IPA finally goes bankrupt, the contracting HMOs refuse to take responsibility for these unpaid claims. Emergency care providers have lost millions as a result of delegation to financially insolvent subcontracting medical groups.

6. Several ER groups have been forced to go to court to obtain fair payment from capitated groups, and this has undermined otherwise positive and long-standing collegial relationships. Amazingly, some staff at the DMHC have actually encouraged this approach.

7. Many capitated medical groups do not have the resources to employ certified coders for claims review: and inappropriately down-code, bundle, and deny payment of legitimate emergency care claims; have great difficulty complying with AB 1455 prompt payment regulations; and rarely submit their payment practices to outside reviewers to verify compliance.

8. The RBOs have resisted giving up paying for ECP claims, citing that if the HMOs have to pay these claims, the capitated medical groups will have no incentive to keep their patients from using the ED, and the RBOs will also lose the capitation revenues they retain by keeping their patients out of the ED. However, ED usage risk pools can provide incentives for capitated physicians to provide access for after hours urgent care and to manage their chronically ill patients so they don’t need to use the ED for exacerbations. Risk pools incentivize medical groups to do the right thing – profit by managing their patients; payment delegation incentivizes the RBOs to do the wrong thing – profit by underpaying legitimate claims.

9. Capitated medical groups say that if the plans have to take back the responsibility for paying emergency care provider claims, they will take back too much of the capitation payments to cover those claims. If the success of these medical groups is predicated on being able to derive unearned profits off the backs of ECPs by taking advantage of their EMTALA obligation, sidestepping fair payment regulations, and systematically down-coding, underpaying, and denying their claims: this would be an unsustainable business model in a fair market.

10. Several HMOs (like Kaiser) and RBOs have been paying ECP claims in CA appropriately, but this puts them at a competitive disadvantage compared to the for-profit HMOs and RBOs, and they are under significant pressure to follow in the path of easy unearned revenues and profits established by less principled payers.

If capitated ACOs end up being promoted through national health care reform legislation; you, too, may well experience these same vexing issues in your ED.

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Medicaid Recoupment Programs Bypass Providers

The following is a very long blog directed at those responsible for reimbursement issues for your ED group or site.  Though a bit complicated, is pretty interesting, both from a revenue standpoint for Emergency Physicians, not only in California, but throughout the nation, and from the standpoint of maintenance of our reputation with patients.  The basic gist of this issue is that state Medicaid programs have been employing private agencies to recoup payments made to providers through the Medicaid fee-for-service programs in instances where the enrollee MAY have also been covered by a commercial carrier on the date of service.  This process, which in California bypassed the providers entirely, allowed the commercial carriers to escape with millions in unearned profits, and denied providers the opportunity to receive the revenues they were rightfully due.  If this is happening in your state (it probably is), you may find that you have an opportunity to reassert your right to participate in this process, and reclaim these revenues.  I believe that as other health departments in other States become aware of the inadvertent consequences on providers from this program, they may, as the DHCS has in California, willingly consider revisions to the recoupment program.

My ED group first became aware of this Medicaid (Medi-Cal) recoupment program in California somewhat by accident, aided by careful attention to claims management.  More than a year ago, CEP America (CEPA) received a number of notices from Blue Cross requesting additional information to make an eligibility and benefits determination on claims that (we subsequently discovered) were sent to Blue Cross by Health Management Systems (HMS) on behalf of the Department of Health Care Services (DHCS), using CEPA’s group name and our providers’ identification numbers, to try to recoup payments made to CEPA by the MediCal program.  HMS had been contracted by the DHCS to manage this recoupment process (as it has in other States).

What appears to have happened here is that HMS was using Medi-Cal claims data, provided by the DHCS, to try to identify patients who may possibly have simultaneous coverage under the Medi-Cal program and under an indemnity plan like Blue Cross on the date of the provider’s service.  HMS compared the Medi-Cal claims to plan enrollment data provided by several plans, including Blue Cross, obtained under a data sharing agreement with these plans.  HMS then sent claims to these plans in the hope that the patients might have also been covered by the plans, using the CEPA’s provider name and identification number on the CMS 1500 claim form, but using a different PO Box payment address so that any payment is sent to the HMS and the DHCS, and not to CEP America. These claims were supposed to have been processed in a unique manner by these plans, but due to an inadvertent mix-up, BC processed some of these claims as if they came from CEPA.  Since many of these enrollees turned out not to have dual coverage on the date of service; BC inadvertently sent notices to CEPA requesting additional information on the claim hoping to resolve the eligibility question.  HMS indicated that CEPA should never have received these notices, but nonetheless, these notices alerted CEPA to the fact that BC was being billed under CEPA’s provider name and number by HMS.

Furthermore, in a couple of cases, HMS identified patients who appeared to have BC coverage, sent the claim to BC, and it turned out the patient had the same name as the actual BC enrollee, but a different birth date.  One such claim listed both the CEPA provider’s charge of $306 and the payment by Medi-Cal to CEPA of $68.35.  BC then sent their enrollee an EOB indicating that the patient had not yet met their deductible level for the year, and thus the patient owed $186.91 (based on the BC allowable payment).  Had this enrollee met their deductible for the year, BC could easily have sent this $186.91 to the DHCS/HMS PO Box directly.  However, when the patient received the EOB, they contacted BC to say that they had not been treated in the ER on 8/11/2007, and furthermore had not been pregnant at the time (as alluded to in the EOB).  BC then sent CEPA a patient grievance notice asking CEPA to respond to the patient’s grievance.  This is but one of several examples which demonstrated that:

1) The cross-referencing of Medi-Cal claims and commercial plan eligibility logs relied on incomplete data, and misidentified some patients
2) Some of the claims sent to the plans were misleading and inaccurate, and could easily result in incorrect payments by the plan or the patient to DHCS, and damage to the provider (and we were never able to determine how many such claims were previously miss-paid by the plan or the patient)
3) The recoupment process (at least for this program) inappropriately bypassed the provider, thus denying the provider the opportunity to obtain reimbursement at the higher commercial indemnity rate
4) The process made it difficult if not impossible for the provider to subsequently recover proper payment from the health plan if the provider were later to discover that the enrollee had commercial coverage, as the provider’s claim to the plan would be rejected as a duplicate to the claim from HMS.

HMS indicated that it had the right to try to recover these payments directly from the health plan using the provider’s name and ID number, based on existing subrogation rights statutes.  Furthermore, even when the claims screening process actually identified a patient who did have indemnity coverage at the time of CEPA’s service, the claim sent by HMS to the insurance plan might result in payment at the contracted commercial rate referenced under CEPA’s provider number, rather than a payment that rebates DHCS the exact amount of the payment made by DHCS to CEP.

Once we had identified these issues, we asked the DHCS to consider allowing CEPA to participate directly in the claims submission / recovery process, using the list identified by the HMS cross-reference process.  The DHCS was quite willing to consider establishing a pilot program to test this concept, in light of the problems we had identified, and recruited HMS’s participation in the pilot.  Although it took HMS a full year to set up the pilot program, they eventually submitted 3369 CEPA claims paid by Medi-Cal where the enrollees were thought to have simultaneous commercial plan coverage.  HMS requested a total of $248,098 in Medi-Cal payment refunds to the DHCS on these claims.

Of these 3369 claims, 1897 claims have thus far been successfully closed.  These 1897 claims represented $138,626 in potential refunds to DHCS.  We determined that of this amount, only $34,327 was actually due to DHCS in refunds (which will be retracted by the department directly).

No refund was due for 1432 claims representing $104,299 in potential recoupments: 762 claims representing $58,000 related to lack of coverage eligibility under the carrier on the date of service; 361 claims representing $21,000 had originally been billed to and paid appropriately by MediCal as the secondary payer (these claims should probably not have been submitted to HMS in the first place); and 309 claims representing $25,000 were not eligible for recoupment for other various other reasons, which were documented and sent to HMS).

CEPA collected $91,357 from primary carriers from the remaining 465 claims that were actually found to have primary commercial coverage on the date of service.  Thus, CEPA retained $104,299 in appropriate Medi-Cal payments (some of which might otherwise have been inappropriately recouped) and received an additional $57,030 after collecting from the plans and making rebates to the Medi-Cal program.

At this time, we still have 1472 unresolved claims due to the following issues:

1) Carrier denied payment due to untimely filing even though supporting documentation was submitted with the original billing to justify late filing.
2) Carrier indicated (on follow-up calls for claims status) that the claims could not be found, thus requiring resubmission on paper, which allows the carrier to take an additional 45 workings day to respond to the claim.
3) Carrier has failed to respond to the claim within 45 days, requiring additional follow-up calls – status pending.

We anticipate that when all 1472 pending claims have been successfully (and accurately) adjudicated, CEPA may collect an additional $80,000 in revenues, and provide an additional $30,000 in rebates to the Medi-Cal FFS program, for a total net additional revenue of over $120,000 from the 3369 claims identified by HMS.  The cost of managing these claims will probably be around $20,000.  Based on even this incomplete result, the DHCS now appears to be ready to remodel the recoupment program with HMS to enable all providers in California to participate in the process.  Given that CEPA represents about 15% of the California ED physician market, this could mean an additional $1-2 M a year for ED physicians in our state. This is not a huge amount, but it appears to be worth the effort, and perhaps more importantly, eliminates the mistakes that can undermine provider relations with our patients, while allowing the Medicaid program to recoup payments appropriately.

It is likely that the same recoupment process, which has been in place in California for several years, is also in effect in many other states, and may deserve to be remodeled to incorporate, rather than exclude, providers.   I think you will see that HMS is in many states doing what they have been doing for the CA Medicaid program, and by the way, HMS also does this or similar recoupment processes for several other government and private clients.  In fact, in CA they provide recoupment services for Medicaid HMOs, though in this program providers get to participate.  However,  the provider has only 45 working days to adjudicate the claim with the alternate payer before the Medicaid Managed Care payment is retracted.  In CA, HMS  ‘demands’ recoupments without bothering to do the work of checking with the alternate payer’s on-line coverage eligibility database for coverage on the specified date of service, resulting in demands for recoupment for many patients that did not have simultaneous coverage on the date of service.

I would suggest that ACEP members send out inquiries to their Medicaid departments asking if HMS, or any other organization, has been contracted to manage recoupment for Medicaid patients in the state that were thought to possibly have simultaneous commercial or Medicare coverage, and whether this contractor was responsible for submitting claims to these alternate carriers, using the provider’s name and id numbers on these claims.  If the answer is yes, I would suggest stating concerns about the inadvertent impacts such a program might be having, based on the fact that the contractor is likely misidentifying (with their cross-check process) far more instances of simultaneous coverage than actually occur (see the issues listed above), and insisting that providers should have the opportunity to send these claims themselves, and provide rebates to Medicaid when appropriate.

Assuming that the Department in question is willing to revise the program to include provider participation, I would suggest insisting that 1) the provider have at least 120 working days to adjudicate the claim with the new primary before any recoupment or retraction is made, 2) HMS be required to do online eligibility determinations with the potential new primary carrier for the date of service in question before sending the information and recoupment request to the provider, 3) that HMS be required to use the patient’s name and at least one and preferably two additional patient identifiers (date of birth, Medicaid enrollee number) to ensure proper patient identification, and 4), that any retractions done by the Medicaid program should properly identify on the retraction notice (warrant) the specific claim to which the retraction applies.  Ideally, no retractions should be due unless the commercial carrier has paid first.   EMTALA obligated providers can not afford to be bypassed in the recoupment process.

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