American College of Physicians: Internal Medicine — Doctors for Adults ®

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New solutions to an old problem: health plans that pay too slowly

From the September 2000 ACP-ASIM Observer, copyright © 2000 by the American College of Physicians-American Society of Internal Medicine.

By Edward Martin

Like most physicians, Dr. Goldfisher's options were limited. He could complain to the state, which might fine the company under its prompt-pay laws. But he doubted that a health plan with annual profits of more than $700 million would be moved by the threat of a fine of a few thousand dollars at most. The cardiologist could sue, but his claim was relatively small, and his legal costs could easily equal or exceed any judgment he received.

So Dr. Goldfisher and his practice, Englewood Hospital EKG Associates, got creative. He drafted statements to hundreds of the health plan's patients explaining that it had not paid him for his services and suggesting they call an executive at the health plan to complain. "We told patients that they probably couldn't reach him at his office," Dr. Goldfisher recalled with a pause, "so we included his home telephone number."

The tactic worked—the health plan paid up before the statements were mailed to patients—but it is an extreme example of techniques doctors are using to fight delayed payments that cripple their cash flow. While few physicians are publishing the personal phone numbers of HMO executives, many are devising strategies they hope will pressure health plans to pay up on overdue claims.

Some are finding inventive approaches like hand-delivering claims, although most medical practices are turning to state legislators and insurance commissions for help. Still others, disappointed by that route, are looking for strength in numbers and filing class action lawsuits representing large groups of physicians.

The problem

How bad is the delayed payments problem? A 1999 survey of 768 physicians conducted by MedChi, the Maryland State Medical Society, found that three out of four doctors reported median delays of more than 40 days. Some respondents said delays exceed 300 days, despite Maryland's law requiring that claims be paid within a month.

ImageNational data paint a similar picture. According to surveys from the Medical Group Management Association (MGMA), only about 40% of physician claims are paid in less than 30 days. By contrast, nearly a quarter of all claims are unpaid after 120 days, and physicians in multispecialty practices say that at any given time, they are owed a median of $105,000.

On the surface, it appears slow payments have not dramatically worsened since the mid-1990s. The number of claims older than 120 days has not risen dramatically between 1994 and 1999, according to MGMA figures, and the median in accounts receivable grew by only about $7,000 in that same period.

MGMA officials caution, however, that those figures are skewed by several factors. First, some of the data comes from large multispecialty groups that have more sophisticated collection systems than the typical single-specialty, internal medicine practice. (In Maryland, for example, less than one physician in five said they were paid, on average, within a month of submitting a claim.) MGMA officials also said that smaller practices, including many internal medicine groups, probably have worse collection rates.

Second, those figures reflect improvements in how quickly government programs such as Medicare pay physicians. Don McLeod, spokesman for HCFA, said the agency's average claim was settled in 16.0 days in 1999, compared to 17.4 days five years earlier. MGMA officials say if overall payment times have remained stagnant at a time when the government has improved its turnaround time for physician pay, it's reasonable to assume that private payers are paying claims more slowly.

Anecdotal evidence certainly shows that practices are hurting as a result of delayed payments. The financial collapse of the multispecialty Nalle Clinic in Charlotte, N.C., one of the state's largest practices, was attributed partly to severe cash-flow problems. The clinic's 140 doctors saw 175,000 patients. By the shutdown in April, some doctors were receiving less than $100 a month, partly because many managed care payments were four months or more in arrears, said Jerry Holleman, MD, president of the group.

Help from states

To avoid similar fates, physicians have asked for—and received help from—their state legislators. Thirty-eight states now have laws requiring health plans to promptly pay physicians and health care providers.

The problem is that many of the new laws don't work as intended. Many states' prompt payment laws contain loopholes, such as vague criteria for what constitutes "clean claims." An even bigger problem is that most laws lack sufficient bite to be effective.

In New York, for example, the state can fine an insurer $5,000 per prompt-pay violation, but most plans receive a slap on the wrist that does little to deter continued violations. Two years since the New York law was enacted, complaints have resulted in a total of $266,000 in fines. Some companies have been fined as little as $1,200.

The fines clearly have not persuaded many payers to change their ways. When fines were announced in February, two-thirds of the 18 companies cited were repeat violators.

"Insurers jump up and down and scream," said Robert Goldberg, DO, a physical medicine and rehabilitation specialist who is president of the New York County Medical Society. "But fines are nothing. Besides, the funds go to the state, not the physician."

Slowly, however, more states are beginning to address problems in their prompt-pay laws. In Georgia, for example, insurance department officials estimate that that the state's managed care industry routinely sits on more than $200 million in claims that are more than 90 days old, violating the state's 15-working-day payment standard.

So in the past year, Georgia has slapped insurers with penalties sufficient to raise eyebrows at even the wealthiest companies. John Oxendine, the state insurance commissioner, said he upped the ante after health plans ignored four separate warnings he issued, starting in 1996. The state fined UnitedHealthcare Inc. $123,500 in February and Principal Health Care Inc. $262,700 in March.

Other states have issued hefty fines, too. In April, New Jersey fined Oxford Health Plans $275,000 for wrongly denying valid claims, delaying payments past the 60-day legal limit, and depriving patients and doctors of their rights to appeal medical decisions.

And Maryland fined UnitedHealthcare $400,000 for failing to pay claims quickly enough. United was the hardest hit of four major insurers and 11 HMOs targeted by the Maryland Insurance Administration, which levied a total of $1.6 million in fines this spring.

While these states are revamping their efforts to get health plans to pay physicians faster, there are limits to how much they can help. Already, some state insurance departments are overwhelmed. "There's a huge pileup at the Maryland insurance commission," said Michael Preston, executive director of MedChi. "The staff complains that doctors are using them as a collection agency."

Physician action

As a result, physicians are finding other ways to pressure health plans to pay them more promptly. Some go to elaborate measures to ensure that managed care plans receive claims so they can't later claim they are missing paperwork.

Every Friday, one Maryland surgical practice has an administrator hand-deliver claims to managed care companies and obtain receipts. And the Florida Physicians Association (FPA) in Jacksonville, a companion organization to the Florida Medical Association, sends out formal "pay-or-else" notices on a local law firm's letterhead to persuade health plans to pay physicians.

But that strategy doesn't always work, so the FPA also offers members legal assistance. For $100, FPA members can join a legal defense fund that will process lawsuits on their behalf. Physicians receive full payment of overdue claims plus two-thirds of the interest due; FPA lawyers get the other third of interest and legal fees that the court orders defendants to pay.

FPA is trying to streamline the legal process for physicians because it has traditionally been so counterproductive to sue health plans. "It's too costly for one doctor to have to pay $50,000 in lawyer's fees to collect $10,000," said Don Moy, JD, general counsel for the Medical Society for the State of New York.

Donald Widener, JD, FPA's general counsel, said that doctors who sue on their own face other dangers. "They can be terminated by their health plan without cause," he said.

A number of medical organizations including the College have been trying to press Congress to pass federal legislation that would require insurers to promptly pay physicians and other health care providers. In March, the College was one of 20 organizations that signed a letter urging Congress to include prompt-pay language in managed care legislation.

With that legislation stalled in Congress, some physicians are turning to class action lawsuits. FPA, for example has filed class action lawsuits against HIP Health Plan and five other companies. In one suit, it alleges that UnitedHealthcare of Florida intentionally discards thousands of claims and downcodes others. State medical organizations in California and Georgia have also filed suit against health plans, in part because of delayed payments.

Even national organizations like the AMA are pressing class action lawsuits. In March, the New York State Medical Society and the AMA launched a class action lawsuit accusing UnitedHealthcare of pocketing millions by miscalculating payments. The AMA is involved in more than two dozen lawsuits against insurers. AMA officials say that the organization has become increasingly litigious because of the number of physician complaints about delayed payments.

Some states would like to make it easier for physicians to file class action lawsuits. In New York, physicians have filed 40,000 complaints with insurance regulators claiming slow payments. In part because of that avalanche, and the prohibitive cost of filing private lawsuits, the New York State Medical Society is asking the state to ease strictures on filing class action lawsuits.

Some wonder, however, whether lawsuits are really the answer. Heading to the courtroom may not provide the swift relief physicians seek when state insurance administrations seem slow to act, and legal authorities predict the current class-action lawsuits will take years to wind through trials and appeals. In addition, most laws force physicians to bear the lengthy and expensive burden of proof.

But Yank D. Coble, MACP, a Jacksonville, Fla., endocrinologist and AMA trustee, believes that the stakes are so high that physicians cannot afford to back down. "What legislators or the public might not perceive," he said, "is that these problems are impacting not just patients today, but the infrastructure of medicine tomorrow."

Edward Martin is a freelance writer in Charlotte, N.C.

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