Although insurers don't see it this way, payment denials are a growing problem for physicians. Now some outside organizations are helping doctors claim their unpaid fees.
"There clearly is a problem with payment denials and inappropriate delay of payments," says Richard Corlin, M.D., a gastroenterologist in Santa Monica, Calif., and speaker of the American Medical Association's House of Delegates.
"It's a very serious situation, particularly when discounts are as significant as they are."
Doctors often don't realize the extent of the underpayments, says Angie Fox, whose Tampa, Fla.-based company, FoxMed, crafts appeals of payment denials.
Those who do might seek help from a billing or collection agency -- but to no avail. That's where a consultant or an outside company such as FoxMed can provide support.
" 'We don't get denials' or 'We don't have that problem' -- I hear that all the time," Fox says. But when she examines a practice's accounts, she says she often finds that in bundling a number of payments together, the insurance company has failed to pay for several items. The doctor's office staff has no time to doublecheck the payment. Whatever the insurer sends, "they just accept it," she says.
The extent of the payment-denial problem is a source of disagreement between doctors and heath plans, and little information exists to support either side.
But it's no secret that HMOs are struggling financially, triggering doctor and patient complaints of poor reimbursement and refusals to pay for certain treatments. For example, data from the Florida Department of Insurance show that the 39 HMOs licensed in the state in 1997 had total net losses of $64 million. In 1998, the 38 HMOs still operating had losses of $48 million.
Still, insurers say payment denials are not a big problem. United HealthCare of Florida, headquartered in Orlando, processed $7.1 million in claims last year.
Denials constituted only a small percentage of those claims, says Patt Reed, marketing manager of the company's Gulf Coast region.
The American Association of Health Plans points to a 1995 study that shows payment denials to doctors ranged from 2% for cardiac catheterizations to 6% for mental health referrals. The majority of the 1,000 physician participants reported no coverage denials for any form of care surveyed, according to the AAHP's March 1998 summary of the study.
The AAHP acknowledged, however, that these findings run "contrary to anecdotal reports of high levels of coverage denials."
They certainly do. The Florida Department of Insurance in 1998 logged 3,900 complaints of claim denials or claim-handling delays in the state, says spokesman Don Pride. That's up substantially from the 1,919 complaints in 1997 from doctors, hospitals and patients.
The number of physicians who complained jumped to 584 in 1998 from 468 in 1997.
The Department of Insurance says it doesn't calculate the total number of claims handled annually. However, the high number of complaints recently prompted it to team up with the Florida Agency for Health Care Administration to form a task force to examine HMO claim payment practices.
Its first action was to begin an audit of all 35 HMOs currently operating in the state, looking for evidence that they've improperly denied claims or avoided paying doctors and hospitals. The task force also plans to meet with the Florida Association of HMOs sometime soon. Its director, Richard Dorff, declined to comment until after that meeting.
Delayed or denied payments are problems for doctors nationwide. For example, the New York County Medical Society last year filed arbitration proceedings against Norwalk, Conn.-based Oxford Health Plans, seeking more than $140 million in unpaid back fees (see March 1998, page 2).
On the national level, the AMA wants HCFA to look into payment denials by Medicare, particularly those that question the medical necessity of physician services.
So whose numbers are correct -- the insurance industry's survey results or the Florida Department of Insurance's anecdotal reports?
Lynne Northcutt-Greager, a consultant with the Englewood, Colo.-based Medical Group Management Association, says many payment denials never get appealed or reported. Northcutt-Greager specializes in billing and professional services for medical groups; some of her work is in payment recovery. Her clients range from large multispecialty groups and hospitals to solo practitioners.
"All too often, denials are either written off or balances are billed to patients," she says. "Reviewing and filing appeals can be a difficult and time-consuming activity, resulting in appeals getting stockpiled. Many of the practices I work with have not kept count of their denials, not to mention knowing which denials should be appealed."
That's where someone like Northcutt-Greager or Fox comes in.
Fox is a former emergency room nurse who was on the verge of retirement two years ago when she began handling claim denials part time for her employer, University Community Hospital in Tampa. She formed FoxMed in May 1998 and had her first client by August. Fox now works with 15 group practices, 42 solo practitioners, hospitals and other healthcare clients. Her approach involves giving insurers minimal information and a maximum number of phone calls -- daily, if necessary.
She and Northcutt-Greager list "no authorization" and "not medically necessary" as the top two reasons insurers deny payment.
Fox says authorization for treatment is no guarantee of payment; it's just a good basis for an appeal.
One of her clients, a surgeon, received authorization to remove a malignant growth from the breast of a male patient. The insurer later denied payment. "We didn't see the word tumor," an insurance representative told Fox.
Downcoding is a common tactic; it's often used to deny payments for office visits to solo practitioners. Another is to say the claim isn't in the insurer's files.
"We hear that a lot," Fox says. Having a claim listed in the company's computer isn't enough. She sends everything by registered mail so she can say with certainty that the insurer received it.
Even then, and despite prompt-payment laws like the one in Florida mandating payment within 30 days, insurers find loopholes. First, they interpret 30 business days as 45 days overall. Then, they insist that the 30-business-day clock doesn't start ticking until the mail room stamps the claim "received."
For example, one of Fox's claims was mailed March 12 but wasn't stamped until April 8.
The result, she says, is that 60 days has become the standard for "timely" payment. She found that 47% of one client's accounts receivables were 120 days or more overdue. "That's not unusual," she says. A patient of another of Fox's clients became pregnant a second time before the insurance company had paid the doctor's bill for delivering the first child.
Insurers also deny payment if they can't read a doctor's handwritten notes. Some insist on typewritten notes. In the study cited by the AAHP, payment denial was most frequent for mental healthcare, substance abuse treatment and referral to a specialist of choice. Researchers also found female physicians were denied payment more often than their male colleagues in some categories.
Doctors who try to appeal payment denials enter a frustrating obstacle course of delays, demands for more information and decisions based on arbitrary bureaucratic policies.
"Sometimes payer denial reasons can be misleading," Northcutt-Greager says.
"Only someone who is familiar with coding and payer requirements will know how to correct coding errors or appeal the denial."
Once an appeal is filed, insurers often require the doctor to provide unnecessary copies of documents, such as an explanation-of-benefits form and the patient's claim form. "Clearly, they already have those," Fox says. They also commonly require a copy of the entire patient record, which can constitute hundreds of pages. "That just gives them more ammunition to deny," she says. Fox sends only the portions of the patient record that prove the medical necessity of the doctor's treatment; she highlights those portions and lists them in her cover letter.
Fox has recovered payments ranging from $35 to $109,000. She collects a percentage of whatever money she recovers for the client. She refuses to go after patients and declines to appeal claims she thinks were justifiably denied.
But those claims, she says, constitute a small percentage of the ones she sees.
Fox uses a dozen nurses in various specialties to review claims and help craft the medically necessary basis of the appeals. She then writes the appeals herself. She and her three staffers follow each appeal with a phone call at least every 10 days until the claim is paid.
She says some doctors ask her why their offices can't handle these tasks. She answers by asking if they can afford to have two or three employees do nothing but make telephone calls.
She has some pointers for physicians who want to appeal a denial:
- In the letter to the insurer, say as little as possible. Write only about clinical findings and the patient's needs.
- If the patient or the treatment didn't fit the insurer's criteria, stress what was different about that patient.
- Do not describe medical training and experience, protest the inconvenience of appealing or vent anger.
- Follow up with repeated telephone calls to the highest authority available.
The AMA's Corlin advises doctors to stay in close touch with their billing offices. Physicians should know the state of their accounts receivable, he says, and make sure their office uses electronic billing, which saves time. When a bill reaches the 30-day limit, a doctor should have an office worker call the insurer and document who he or she spoke to. Follow that with a letter.
"Gather well-documented data, not just anecdotes," he says. If the insurer still doesn't respond properly, Corlin advocates sending the data to both the state insurance commissioner and medical association.
Linda Gibson is a Tampa, Fla.-based freelance writer.