Using contract law to get hospitals paid’
Law firm succeeds with hopeless accounts
What if your hospital could get reimbursement for a procedure even when a required authorization wasn’t obtained in advance or when billing wasn’t done in a timely manner? How about the premise that if a hospital has provided valuable services in good faith, it’s really not fair that it not be paid?
Two Maryland hospitals apparently are on the cutting edge of what some observers say could become a trend among health care organizations seeking innovative ways to get the reimbursement for care to which they are entitled. Both health care facilities are working with a law firm that specializes in taking denied accounts on which hospitals have thoroughly exhausted all appeals and turning them around, applying the principles of contract law.
After doubling its recovery rate on denied days through a comprehensive internal revenue recovery initiative, Johns Hopkins Hospital in Baltimore realized "there was more hanging fruit," says Dan Wassilchalk, MHA, RHIA, director of performance improvement and utilization management. "However, the efforts were very taxing on our staff; because of limited internal resources, we became creative in looking outside."
A chance conversation between one of the hospital’s administrators and a partner in the Towson, MD, law firm of Siegel & Fotheringill, led to the firm working with Johns Hopkins on its denied accounts and ultimately deciding to specialize in the appeal-and-litigation process for third-party reimbursement, he notes.
Less than a year after engaging the firm’s services, Wassilchalk adds, the hospital’s recovery rate on denied days — which had gone from 10% to 20% as a result of the internal initiative — increased another 10%. Annually, he says, "10% equals a million dollars."
Johns Hopkins has an ongoing arrangement with the firm, Wassilchalk says, and has expanded the effort to include emergency department accounts. "We are soon to move into outpatient ancillaries," he adds.
Firm relies on technical details
"Not every hospital recognizes that something can be done with some of the technical denials," says Linda Fotheringill, who, along with Malinda Siegel, is a partner in Siegel & Fotheringill. "There are all kinds of ways to get a hospital paid, using legal principles, if we’re able to show the services given."
Fotheringill and Siegel — both of whom were physician assistants "in another life" — consider what they are doing to be "representing the hospital in a contract dispute." Fotheringill explains that what her firm does has nothing to do with the role of a traditional collection agency or outsourcing company. "We don’t do form-letter kinds of appeals."
Instead, she adds, "we do an exhaustive review of the medical record. We pull out all the detail on what happened on each denied day, and reconstruct that day. The progress notes might say, for example, Vital signs stable, pain improving, drainage decreasing.’ With a day like that, we’re able to construct a paragraph of data and tell the story of each denied day."
Because as lawyers they are able to do advocacy writing, and as former clinicians they can "read between the lines" to see what happened on a given day of care, Fotheringill says, she and her partner can "take a very aggressive approach" to turning around the denials.
"If we can show that [denied services] were medically necessary, and that if a call had been made, authorization would have been given, using legal principles, we can get the hospital paid," she says. "No damage [to the payer] can be shown. Things happen. Why should the hospital suffer when it gave those services in good faith?"
Recovering completely hopeless’ claims
St. Mary’s Hospital in Leonardtown, MD, which has worked with Siegel & Fotheringill for about two years, has given the law firm the denied claims that it considers "completely hopeless," says Allen Burton, the hospital’s director of finance. "These are lacking medical necessity, lacking authorization numbers. We have done our best to appeal to the insurance company and had no success."
The reimbursement recovery rate for those "hopeless" accounts, he adds, has been about 19%, amounting to additional revenue of $100,000 per year. Minus the firm’s contingency fee, Burton says, the hospital has netted about $80,000 annually.
Like most other hospitals, he notes, St. Mary’s also outsources some of its unpaid claims to collection agencies. Those claims, Burton emphasizes, are in a completely different category. "We’re giving those accounts to the collection agencies, knowing that some of what we’re giving them is truly collectible."
The denied claims appealed by the law firm, he says, represent "money that in the past — because we felt the insurance company was right — we wouldn’t have collected any of. I can’t stress enough that this is a different niche."
Scott Johnston, technical director for the Chicago-based Healthcare Financial Management Association (HFMA), explains that the approach is "an up-and-coming practice" that is likely to become more widespread as hospitals with shrinking margins "get more and more into reimbursement and look at getting money any way they can."
Applying the principles of contract law to get hospitals paid is a basic way of looking at the situation, he says. The provider, Johnston adds, is saying, "I gave a service, and I expect to be paid for this service."
"I see it becoming a trend," he predicts. "Once some things are published on this, there will be others that jump on the bandwagon and go forward with it. I think it’s a great thing."
Because the law firm works on a contingency basis, Johnston notes, there is no financial risk for the hospital.
A price to pay for abusive denial practices’
Fotheringill & Siegel recently represented a client in Nevada on a large Medicaid claim that already had been appealed by the hospital. "It was a technical denial, with a very large monetary value," Fotheringill says. After an extensive presentation on the claim’s legitimacy, she adds, the Medicaid office continued to deny the claim.
"We asked for a hearing, and they told us no one had ever asked for a hearing before," notes Fotheringill. "They went back and looked at our appeal — the analysis of the law and why the claim should be paid — and [granted the appeal].
"We were prepared to take it all the way," she points out. "That’s the part most hospitals don’t understand. They don’t think about working with a law firm for these kinds of cases."
With managed care claims, Fotheringill explains, "you’re bound by the terms of the contract. We look at the terms, interpret, apply the facts, and argue."
One scenario, she says, might involve a case in which the managed care company says it will pay for everything except the last four days of a month-long hospital stay. "If you just take those four days, it doesn’t amount to enough money to justify litigation or arbitration."
The firm often is successful in getting cases overturned on a case-by-base basis. "Those we’re not successful with, we can track and group by payer, if given permission by the client," adds Fotheringill. "We can bundle those cases and arbitrate or litigate with a group of cases."
A client that allowed the firm to file suit against Blue Cross Blue Shield, she notes, has noticed that there now are fewer denials by that insurance company. "The client believes it’s because the payer knows this client is not standing for it, and that there is a price to pay for abusive denial practices."
The reports tracking denials by payer, denial codes, etc., also can be used in managed care contract negotiations, Fotheringill points out. "If you have an attorney looking at the denials you are getting," she adds, "[the attorney] also can be scrutinizing the contracts and can bring to the attention of the billing department the language that is going to cause problems."
A key piece of advice for access managers and all others involved in the billing process, Fotheringill says, is for the various departments to be in communication with each other, rather than "every department being an island." That way, she adds, everyone can understand the impact of the language they’re agreeing to."
Another instance in which a legal principle can be used to reverse a claim denial is when a hospital calls for eligibility verification and is told the patient has coverage, goes forward with treatment, and finds out later that the payer made a mistake and the person wasn’t eligible.
"We’re able to get paid in many of those cases," Fotheringill says, "because the hospital relied on those representations. There is case law that shows that in that kind of situation, under contract law, you are able to get payment. In a majority of cases, we’re able to get payment without resorting to arbitration or litigation."
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