After 15 months of investigation, Maryland's insurance commissioner fined two insurers a total of $90,000 last week for improperly denying hospital claims for payment.
Most of the penalties were leveled at CareFirst Blue Cross and Blue Shield, the consolidated company that includes the Blues plans in Maryland and the District of Columbia. Mid-Atlantic Medical Services was fined $9,000.
The probe did not turn up nearly as many inappropriate practices as the state's hospitals alleged when they complained to Commissioner Steven Larsen last year about a pattern of arbitrary claims denials.
The investigation did, however, substantiate a pattern of inappropriately denied ancillary services. CareFirst's claims adjudicators had judged certain days of inpatient stays to have been unnecessary. Consequently, they determined the ancillary services delivered on those days were unnecessary. In some cases, the insurance commissioner disagreed.
The mixed results prompted both sides in the dispute to claim vindication.
"The commissioner's actions . . . confirm that many of the concerns outlined in our April 1998 complaint were well-founded," said Calvin Pierson, president of the Association of Maryland Hospitals and Health Systems. The association submitted 106 individual complaints in April 1998.
But CareFirst contended the report validated its actions. "We resent the (association's) allegations that CareFirst's customers had been denied necessary care," said John Picciotto, CareFirst executive vice president. "This dispute involves differences of medical opinion over claims filed by the hospitals, not the provision of medical care."
The state also conducted a systematic evaluation of 399 randomly selected claims that had been denied by CareFirst in 1997. A similar review of Mid-Atlantic is planned.
Of the 106 individual cases, nearly half were thrown out because they involved self-insured or government payers not under state jurisdiction. Of the rest, the probe found CareFirst had incorrectly denied 13 of 24 claims and Mid-Atlantic incorrectly denied 10 of 35 (See chart).
In the larger study, however, Larsen said he found no statistical evidence to support the hospital association's broad allegation that CareFirst arbitrarily applied criteria for denying coverage rather than considering each case's complexity and unique circumstances.
An independent review organization concurred with CareFirst's denial decisions in more than 90% of the claims reviewed. Of the 3,011 days represented by the sample, CareFirst paid for 1,936; physicians reviewing the claims said they would have approved 2,044.
CareFirst also disagreed with findings that nearly 25% of its denials for ancillary charges were improper. The coverage denials for ancillary services stemmed from the insurer's refusal to consider certain days-and the tests performed on those days-necessary. Those denied days were judged improper 16% of the time.
Most of the denied service claims were for tests scheduled on the last day of a hospital stay. The insurers said those tests could have been performed less expensively on an outpatient basis, and the patients could have been discharged a day earlier, said CareFirst spokesman Jeff Valentine.
Larsen levied $68,000 in penalties for the patterns of improperly denied days and ancillary charges. He also fined CareFirst $13,000 for the 13 individual violations.