Provider Backlash
by Naomi Freundlich
Fifteen years ago, insurers were trying to put a brake on healthcare costs by “managing care”—which often meant saying “no” to patients. Too often, insurers denied coverage for care that patients needed. Then came the backlash against managed care, and insurers relented. They began to say “yes” to more treatments, and passed the cost along to customers in the form of higher premiums, co-pays and deductibles.
More recently, insurers have begun trying to save money by shifting their focus from patients to doctors. Increasingly, insurers have been delaying payments to physicians, and, doctors say, insurers are underpaying for many services. Physicians are now fighting back, bringing lawsuits against insurers. Doctors often complain that we live in a terribly litigious society. Now, they are hiring the lawyers. Are the suits justified?
When for-profit health maintenance organizations (HMOs) came on the scene in the 1990’s, consumers balked at some of the cost-containment measures these companies imposed on services. Reports began circulating about cancer patients being refused coverage for potentially life-saving treatments, about mothers being kicked out of the hospital less than 24-hours after giving birth, and doctors not performing medical tests on patients whose plans used capitation (paying a lump sum for each patient rather than paying fees for each service).
The public outcry—and in a lesser sense, legislation—led the managed care industry to back away from many of their more draconian cost-containment strategies. The managed care companies (MCOs) that remained after the 1990s decided to concentrate on “disease management” and preferred provider networks to try and keep costs down. They offered consumers more choice and flexibility in their plans; removing barriers like gatekeepers and capitation agreements.
This “loosening up” has had the predictable effect of driving health care costs up for both employers and consumers. According to the Kaiser Family Foundation, the cumulative growth in health insurance premiums between 1999 and 2008 was 119%. Employers have passed some of that increase along to workers who now face ever-higher out-of-pocket expenses: the average employee contribution to employer-provided health insurance has increased more than 120% since 2000.
In response to these runaway costs, insurers have been resorting to a second-round of cost-containment measures that may be less obvious to consumers. For a good take on this see; “Managed Care Rebound? Recent Changes in Health Plans’ Cost Containment Strategies” .
Squeezing Providers
Insurers have focused on business practices that include delaying payments to providers, “bundling” several procedures and then reimbursing at a lower rate, and underpayment of services provided outside the network. These newer cost-containment measures have now raised the ire of providers. According to an article written by Maureen Glabman in the February 2009 issue of Managed Care, class-action lawsuits filed by providers against all of the major health plans have nearly tripled from the late nineties to the first five years of this century.
According to Glabman, these suits already have resulted in combined, multi-billion dollar settlements-- and there are many similar cases still working their way through the court system. Angry providers, backed up by the American Medical Association (AMA) and state medical societies, are “empowered as nearly anonymous members of class action lawsuits,” observes Glabman, to try and fight carrier business practices they feel are depriving them of income.
Why are doctors banning together in class action suits? Robert Seligson, president of the Physicians Advocacy Institute, a group representing state medical societies that is charged with enforcing the national class-action lawsuit settlement agreements between physicians and health plans, explains:
“Individual doctors are afraid [to get in a dispute] with a managed care company for fear of retribution—getting kicked out of a plan, coming under intense review, or being subjected to retaliatory tactics. They have more support with organized medicine behind them.”
The provider-instigated lawsuits fall into three areas:
1) Charges of racketeering around business practices that include “bundling, downcoding, recoding,” and other fraudulent practices. The largest lawsuit in this area involved over 950,000 physicians, physician groups and physician organizations who submitted claims to any of the 12 for-profit insurers—including Humana, Aetna, CIGNA, Prudential, UnitedHealth and WellPoint) between 1990-2003.
Similar racketeering charges were filed in a class-action suit by the same group against over 60 Blue Cross companies. Some of the publicized settlements include: Aetna, $470 million, Cigna, $440 million; and WellPoint, $498 million.
2) Charges that managed care companies have been using artificially low figures to calculate “usual and customary rates” (UCR) in order to force consumers to shoulder more of the bill for their out-of-network charges. It turns out that these rates have been determined by just one company, Ingenix—a subsidiary of UnitedHealth Group.
The American Medical Association filed the first suit in this case against UnitedHealth and its subsidiaries in 2000, but litigation has really heated up this year after New York Attorney General Andrew Cuomo completed an investigation of Ingenix and found that the company regularly understated usual and customary charges by 10-28%. The company relied on “fraudulent” and in some cases, decade-old, data submitted by insurers to make its determinations.
You can access the Attorney General’s report, “Health Care Report: The Consumer Reimbursement System is Code Blue” here.
In March, the Senate Committee on Commerce, Science, and Transportation held hearings on “Deceptive Health Insurance Industry Practices – Are Consumers Getting What They Paid For?” and invited representatives from provider groups, insurers and Cuomo’s office to testify. In her testimony, Linda A. Lacewell, head of the Healthcare Industry Taskforce for New York State’s Office of the Attorney General had this to say:
“For ten years, the ‘usual and customary’ rate for the entire industry has been decided by one company: Ingenix. As we learned, the largest health insurers throughout the country use Ingenix to determine ‘usual and customary’ rates. Who is Ingenix? Early on in our investigation we discovered that Ingenix is a wholly-owned subsidiary of the nation’s second largest health insurer, UnitedHealth Group. As both a user of and contributor to the Ingenix database, UnitedHealth clearly had an interest in depressing reimbursement rates, causing consumers to pay more. Shortly thereafter, we learned that many other national health insurers also contributed their billing data to this database and then used the database as a benchmark for reimbursement rates.”
“Reasonable and customary rates are supposed to fairly reflect market rates, but our investigation revealed that Ingenix is nothing more than a conduit for rigged information that is defrauding consumers of their right to fair reimbursements for their out-of-network health care costs.”
3) Provider lawsuits have also been filed against MCOs that use “tiering;” a process in which insurers rank physicians and offer lower copayments to patients who see top-rated doctors. In their lawsuits, providers are charging that the rankings, based on claims data, are defamatory and harmful.
One example: last May the Massachusetts Medical Society and five physicians sued the state Group Insurance Commission (which oversees health plans for some 300,000 municipal and state employees and their families) as well as Tufts Health Plans and Unicare over tiering, charging that the insurers rank individual physicians using inaccurate, unreliable and invalid tools and data. The Medical Society also claims that “physicians have been attributed to patients they did not see, and assigned procedures they did not conduct.”
In addition, physicians have received reports that are unintelligible, and they have been given little time to appeal any evaluations.”
The Problem With Tiering
The physicians have a clear case. It turns out that tiering doesn’t work very well in reducing costs or increasing quality. A wide range of variables—patient compliance, population served, severity of illness, etc.—can effect the “quality” or “effectiveness” rating an individual provider receives. From anecdotes associated with some of the class-action suits filed against insurers by providers, these ratings often seem to be mostly about cost, not quality. In other words, insurers downgrade a physician if he is spending too much time with patients, or providing more services —whether or not that extra time leads to better care. Most experts believe that tiering at the provider level will never offer real benefits for health care consumers because of the inaccuracies associated with relying strictly on claims data to make assessments. For a take on this, the Center for Health System Change has published an issue paper called : “Consumer Tolerance for Inaccuracy in Physician Performance Ratings: One Size Fits None” .
Today, physician tiering is being used less and less by insurers—mainly because provider and subscriber opposition to the scheme has been overwhelming.
In the end, these suits verify some of the seemingly paranoid notions most of us have had about what goes on behind the scenes in the for-profit health insurance industry.Yes, they were denying claims just to see if they could get away with it; yes, they were paying below the usual-and-customary charges for out-of-network care and assuming we wouldn’t know enough to challenge it; and yes, they were giving higher rankings to providers who provided the cheapest, but not necessarily the highest quality, care.
Together these issues highlight the great need for more transparency in the health care system. While politicians and policy wonks debate the details of reform, it is clear that much of the recent experience for both consumers and providers with managed care has been tarnished by the fact that insurers put business priorities first when making decisions about care.
“Usual and Customary Rates”
There is little question that reformers will be taking a closer look at “usual and customary rates” as part of the cost-containment efforts that will be an integral part of health care reform. Studies using Medicare data find that prices that individual physicians charge for visits or procedures vary by general region (they are often higher in the Northeast), city or even between zip codes. These variations can sometimes be explained by higher overhead costs associated with neighborhoods—like Manhattan’s Upper East Side, for example—that include rent, salaries, and malpractice insurance. On the other hand, variation in what is considered “usual and customary” can reflect a provider’s attempts to recoup from private insurers and, increasingly, consumers, the income losses from lower Medicare reimbursement. This is especially true with certain specialists who participate in few health plans yet whose services are highly sought out by consumers. How many of us know beforehand what a doctor will charge to treat us? If that information were available—along with measures of quality—might we not be inclined to “shop around?”
Consumers Need Transparent Pricing
It’s clear that any cost controls will need to be based on meaningful data, not some half-baked, out-dated numbers that insurers use to discourage their subscribers from using doctors outside of their network. Consumers should be able to get good data on prices
As Lacewell testified in last month’s Senate hearing:
In January 2009, the New York Attorney General announced that it had reached a deal with UnitedHealth in which the company would pay $50 million to help set up a new database for determining reimbursement for out-of-network providers. The database is to be owned and operated by a non-profit organization in order to eliminate insurance company conflicts of interest. Cigna, Aetna and Wellpoint have recently also reached agreements with the Attorney General. In addition to ending their use of the Ingenix database, WellPoint and Cigna agreed to pay $10 million each toward creation of the new database. Aetna also recently agreed to end its relationship with Ingenix and contribute $20 million to the new database.
This new, independent, database ultimately could offer benefits for the industry too—even if they haven’t realized it yet.
Stephen J. Hemsley, President and Chief Executive Officer of UnitedHealth Group testified in the Senate hearings on March 31:
“This Committee knows better than most that physician reimbursement based on nothing but the doctor’s bill is simply not economically tenable for consumers nor our health care system. The [Ingenix] databases were created with the goals of appropriately managing costs and ensuring that consumers are protected from exorbitant medical bills.”
In the end, the two major efforts by managed care companies to curb rising costs have both led to public outcry—measured here by the increasing number of large-scale lawsuits waged against them. In the 1990s, the focus was on gatekeepers, limited provider networks, capitation and aggressive utilization review—strategies that provoked a strong consumer backlash. The current methods of cost containment—delaying or reducing reimbursement, penalizing out-of-network providers and setting up tiers of preferred providers—struck close to the hearts of doctors and the professional groups like the AMA that represent them.
Everyone agrees that health care costs must go down. Most of us agree that charges for doctor visits, procedures and hospitalization as well as utilization have to be controlled in some way. But these methods have to be transparent—backed by evidence-based research and increasingly, studies in cost-effectiveness too. As the dozen or so Ingenix-based class-action lawsuits and other recent settlements with providers have shown, the public has little taste for the murky cost-containment efforts imposed by a for-profit insurance industry.
I did read this article and I do agree with some of the issues in it, but there are more issues with fraudlent billing by hospitals than ever before. If you take what Medicare has found in the inappropriate billing arena, what do you think it is in the "Commercial" billing to "Third Party Payers". For example, The OIG found that Hospitals were billing 40% of modifier 25 inappropriately and modifier 59 at 38%. This is just for Medicare, the numbers would be staggering on the private side.
Another "big issue" on fraud by Hospitals. Is the area of "Surgical Supplies and Equipment" charges that are included into the payment of the "operating room charge" or "the operating per minute charge". CMS tells the hospitals that they also want to see the costs of these charges (surgical supplies & equipment) included on the bill, billed under REV codes 270, 271, 272, but this is just for CMS to review this for "future rate settings". The payment again is already included into the payment of the OR. Now, Hospitals have billed the Third Party Payers for years and have recieved "duplicate" payment on the surgical supplies and equipment. "Fraud" written all over it, when you don't pay the provider on the above REV codes they file suit. ARe the hospitals saying that CMS is wrong that the surgical supplies and equipment are "NOT" included in the OR? I don't think so. This is just one example of many.
Posted by: Bill Maurice | May 08, 2009 at 12:38 PM