Managed care nightmare comes true in 3 states
Payers' strong-arm tactics can threaten care
If your case management department has problems with excessive claims denials and slow insurance payments, brace yourself, because you probably haven't seen anything yet. In California, Massachusetts, and Maryland - the nation's top three states in managed care penetration - payment problems have become epidemic, with denials and slow pays increasing administrative burdens of case management departments and threatening to impair patient care.
Nowhere has the problem been more pronounced than in Maryland, where the Lutherville-based Maryland Hospital Association (MHA) has filed grievances with the state insurance commission against the state's two largest payers. According to the complaint, Blue Cross and Blue Shield (BCBS) of Owings Mills, MD, and Mid Atlantic Medical Services of Rockville, MD, have systematically and illegally denied payments for medically necessary care. "And what we've seen with Blue Cross and Blue Shield is that about 80% of the denials are strictly based on length of stay," says Cal Pierson, president of the MHA.
At issue is Maryland insurers' rigid reliance on Chicago-based Milliman & Robertson's length-of-stay guidelines, which Pierson says are applied regardless of specific patient conditions. "There's no consideration of case severity or the conditions of individual cases," he says. Pierson notes that Milliman & Robertson's own instructions indicate that isn't how the guidelines should be used. "They say the guidelines are just that - guidelines - and not to be used in arbitrating whether to pay a claim or not. They also say that the guidelines should be used on a case-specific basis with physician judgement."
Although the MHA named only BCBS and Mid Atlantic in its complaint, the association contends that the state's other major insurers are also at fault. Pierson cites the fact that Maryland's top seven payers denied $50 million worth of hospital claims last year. BCBS alone accounted for $29 million in denials, denying 13% of all patient days.
"There are some other payers we haven't focused on yet, but we will," Pierson says.
BCBS refused our request for an interview, but the company claims in a written statement that several hospitals in the state, "by their own admission," have agreed that in about half the cases where claims were questioned, the hospital care and services provided were inappropriate. The statement goes on to say that the company is "seeking to improve procedures for more effective hospital utilization review with individual hospitals. A number of hospitals have responded to the challenge to utilize resources more effectively by implementing creative, cost-saving measures. These best practices offer the basis for more effective utilization review in the future."
That response doesn't sit well with some Maryland case managers, who claim that BCBS has so far made no effort to work with hospitals to lower their cost base, says Karen Sweeney, RN, director of clinical resource management at Sinai Hospital in Baltimore. "There's been a lot of discussion by the payers about how they're going to increase communication," she says. "Have we seen that come about? No."
In 1996 alone, Sinai lost $4 million to denied claims, Sweeney notes, and the situation hasn't improved.
The effect of such rampant claims denials has been a dramatic increase in the demands placed on the time of utilization reviewers and case managers, Sweeney says. For one thing, some payers are now asking telling Sinai they no longer want to get review information from secretaries. "They only want to do nurse-to-nurse reviews. I have four reviewers for the whole hospital. If they're on the phone all day long talking to payers, they're not going to get to see patients," Sweeney says. "That means I'm going to need a lot more reviewers, which is going to drive up my staff and my costs."
Appealing 20 to 30 cases a week
Another problem is the time and effort case managers must put into the process of appealing denied claims. The case manager first must get the chart, and then get the physician to review it and draft a letter of appeal. Then someone must photocopy the entire medical record. "Then everything's put together and it's sent back to the payer for an appeal," Sweeney says. "That takes a lot of time. And we're appealing 20 to 30 cases per week, so you're talking about having somebody almost full-time just to do that process. It's a mess."
Within a month, the Maryland Insurance Commission will decide whether to undertake a review to substantiate the MHA's charges against BCBS and Mid Atlantic. If the commission determines that a pattern of abuse exists, it can impose a cease-and-desist order and administrative penalties, and require restitution for the payment of denied claims.
Although Maryland's situation has been the most public and acrimonious, other states with a high level of managed care penetration have encountered serious problems of their own. Indeed, although it's conducted no systematic analysis of the problem, the Chicago-based American Hospital Association has received similar complaints from hospitals around the country and views claims denials and slow payments as an increasing trend nationwide, says Dionne Dugall, an AHA spokeswoman. "And if hospitals are going to continue to have these problems, it just takes away from the money that is supposed to be used for patient care."
Hospitals in Massachusetts, which is tied with Maryland for second in the nation in managed care penetration, also have been hit hard by the efforts of some managed care organizations to control costs by increasing their scrutiny of hospital utilization.
Slavish adherence is a problem there as well - not to M&R length-of-stay guidelines, but to payer rules regarding observation. In Massachusetts, some payers have imposed stringent rules requiring that certain patient hospital stays of less than 48 hours should be classified as observation cases. "So they don't pay for the inpatient admission," says James Kirkpatrick, senior director of healthcare finance at the Massachusetts Hospital Association in Burlington.
"In many of these cases, it's with hindsight that the plan looks at the length of stay and denies it, saying it should have been an observation case," Kirkpatrick says. "And because the decision was based on hindsight, it's not based on what was being faced by the patient in the hospital at the time the decision was made to admit."
Another serious problem in Massachusetts is the issue of slow payment. "Receivables are going sky-high," Kirkpatrick says, which places a greater administrative burden on hospitals and threatens the solvency of smaller physician practices.
Slow payments are also plaguing hospitals in California, the nation's leader in managed care penetration. There, managed care organizations are using what some consider a loophole in the law to delay payment and force hospitals to resubmit claims.
"The law says that if you submit a clean claim, you should be paid within 45 days," says Tony Ramsey-Wallace, vice president of finance at the Sacramento-based California Association of Hospitals and Health Systems. The catch is that there's no consensus on what a "clean claim" actually is. In some cases, claims have been sent back for resubmission based on one incorrect number or data field.
"Payers are keeping those [claims] for two weeks, then sending them back and saying 'This is not a clean claim' so their 45-day period starts over again," Ramsey-Wallace says. "So you see how this can snowball into a month, two months, three months, before you get paid."
According to the AHA, some managed care organizations systematically delay paying hospitals for medically necessary services in order to collect more interest on the money. "Sometimes they come back to the hospitals and say they don't have enough information to pay the claim, so the hospital then has to send in a duplicate claim, which slows the process even further," Dugall says.
More ominously, such tactics can ultimately impair hospitals' ability to provide the highest level of patient care, Pierson says. He points to a case in Maryland in which a patient's ruptured appendicitis became infected and required seven days of hospitalization. The entire stay was denied. "If it becomes established practice that payers aren't going to pay for this, it could have a very chilling effect on how care would be delivered in this state," he says. "It's not going to be immediate, it's not going to be total, but it could have a chilling effect over time."
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