State and federal investigators are soliciting tips from hospitals and physicians in their quest to find and punish HMOs that have denied necessary care or purposely delayed payments.
With two Medicare HMOs recently inking settlements with federal prosecutors for a total of $300,000, seeking out potential managed-care fraud promises to be the government's next big healthcare initiative.
The issue of late payments has become hot as providers and money-losing insurers battle for shrinking reimbursement dollars.
In Philadelphia, the U.S. attorney's office is talking to Pennsylvania's hospital association about HMO payment problems, said James Sheehan, assistant U.S. attorney.
Sheehan's office is looking at three areas that could lead to managed-care fraud:
* HMO policies, usually set by medical directors, that lead to the systematic denial of care in order to meet the business goals of the plan.
* A "bust-out scheme," by which a plan knows that a patient will get care but has no intention of paying for it.
* Arrangements for pharmacy benefit management services.
Carolyn Scanlan, president and chief executive officer of the Hospital and Healthsystem Association of Pennsylvania, said the group has shared with Sheehan's office its annual report on HMO payment.
The report, which relies on information that plans filed with the Pennsylvania Department of Insurance, indicates that the number of days it takes plans to pay an average claim has been rising.
"For 1997, the average was 77.5 days," Scanlan said. "The range was from 21 days to 235 days -- and that's a real array of numbers."
Such information led the state to pass a law in June that requires all clean claims to be paid within 45 days.
Sheehan also has called officials at the American Hospital Association and the American Medical Association regarding "what they have special problems with." Officials in the HHS inspector general's office and in the Justice Department have "encouraged us to sit down and talk to provider organizations," Sheehan said.
However, as more providers themselves dabble in managed care, it's more likely that prosecutors will focus on tipsters' activities.
Mary Grealy, general counsel at the AHA, said Sheehan "assumes we are standing shoulder to shoulder with him, but as the Medicare+Choice regulation makes clear, we are them (managed care).
"They (federal prosecutors) are supposed to be working with providers to do more outreach, and they are, but I don't think we view this relationship as `All right, who can we go after next?'*" Grealy said. "Prompt payment is a problem, but I don't know that we think the way to attack it is through the False Claims Act. I hope we can find a better way short of using the U.S. attorneys."
It doesn't look like that will be the case, Sheehan said, citing efforts by state and federal officials to put plans under the microscope.
"As the risk is downloaded to providers, we will see those same (potentially fraudulent) activities among providers," Sheehan said. "Hospitals are concerned about that now that they're in the risk business, but the honest person has nothing to fear from his government."
In California, the state auditor's office has launched an investigation of payment patterns in the state's healthcare industry, at the request of physicians who claim payments from HMOs and other health insurers are consistently and intentionally late.
The investigation will assess the impact of delayed treatment authorizations and delayed payments to physicians, according to a preliminary analysis by officials in the auditor's office. The audit is part of a broader effort by California doctors and the California Medical Association to demand that state regulators step in to punish slow-paying insurers.
Like Pennsylvania's new law, California's health and safety code requires health plans to reimburse doctors no later than 45 days after receipt of a valid claim. But doctors say delays of 90 to 120 days or more are increasingly common.
The state medical association has no doubt that the audit will show a pattern of late payments and delay on the part of HMOs.
"We think the results should encourage the (California) departments of Corporations, Insurance and Health Services to enforce existing law regarding timely payment of claims," said Robert Reid, M.D., president of the California Medical Association, which pushed for the audit.
Officials at the California Association of Health Plans, which represents the state's HMOs, say that there is no evidence of an intentional delay in payments. HMOs acknowledge, however, that in a complex environment, "it's easy for mistakes to be made," said Maureen O'Haren, the CAHP's executive vice president for legislative affairs.
Meanwhile, a subsidiary of Blue Cross of Northeastern Pennsylvania, First Priority Health, has paid the federal government $250,000 to settle allegations that its Medicare HMO did not in a timely manner add HCFA-mandated benefits to its package of services.
Blue Cross said it became aware of the problem earlier this year, and it voluntarily suspended marketing and enrollment until the issue was resolved.
In another case, a subsidiary of Mutual of Omaha Insurance Co. agreed to pay $50,000 to settle allegations that it was improperly screening potential enrollees in its Medicare HMO for health risks. Medicare rules require plans to accept all applicants, regardless of medical condition.
Amy Protexter, a spokeswoman for Mutual of Omaha, said that although the government found no evidence that such screening was occurring, the company chose to settle the matter quickly so it could continue serving patients.
Neither First Priority nor Mutual of Omaha admitted to any wrongdoing or liability.
-- with Eric Weissenstein