NY investigates HMOs late payments to providers
NY HMO Late Payment
May 31, 1997
4 minutes read
On Wall Street, Oxford Health Plans, Inc. has been wowing investors with phenomenal revenue growth. But, many hospitals and physicians around New York say the successful and fast-growing managed care firm is months late in paying bills. The late payments are causing cash flow problems for providers and their vendors, and stress and inconvenience for patients.One oncology practice says cash-flow problems have forced it to ask some cancer patients to pick up their own chemotherapeutic agents at outside pharmacies and transport them in ice chests to the office so that their prescription drug plans can cover the cost.
The delays, which Oxford attributes to computer problems, have led Gov. George Pataki to call for a "major investigation" of HMOs by the New York State Insurance Department. Insurance department spokesmen say regulators will be doing on-site reviews at several unnamed HMOs to scrutinize claim files and claims-paying practices. HMOs will be expected to pay bills in 30 days or face a fine of $500. The attorney general’s office is already conducting an investigation of Oxford and of other HMOs, which it declined to identify. Insured patients are getting "dunning notices," from hospitals which "doesn’t seem to be the way the system should be working," says Marc Carey, spokesman for the attorney general’s office. A group of Orange County physicians has asked the attorney general to investigate WellCare for late payments.
"It doesn’t make sense to us that they (health plans) require payment of premiums by a certain date or consumers are no longer covered by the plan," says Elizabeth Dears Kent, special counsel for the Medical Society for the State of New York. Yet, physicians have "no leverage in discussions over payment for services."
Both the insurance department and the attorney general’s office say they will be looking at "cash management" practices by HMOs. Provider and consumer groups charge that HMOs are profiting from the delays by earning interest income. The insurance department says it wants to look at "where the money is being held."
At a recent press conference, Attorney General Dennis Vacco said, "From an economic point of view, they get the benefit of the float—whether it’s 30, 40, 90, 120 days, they’re getting an interest-free loan."
The Attorney General’s office negotiated an agreement with Oxford in mid-March which required it to pay its outstanding claims within 30 days and pay new claims within 30 days. However, the attorney general and other state offices have continued to receive complaints about late payments from providers. The Insurance Department says is plans to make reviews of payers claims-processing practices a routine part of its financial reviews in the future.
New York legislators have been working on bills that would require payers to reimburse providers within 45 days or face interest charges. A bill sponsored by Sen. Holland would impose a 1.5% interest charge for bills not paid on time.
Among the issues the legislation should address, says Ms. Dears Kent, is the definition of a "clean claim." There should be a deadline for payments of claims after appeals, grievances and utilization review questions have been resolved. Electronically submitted claims should also be paid faster, she says.
New York hospitals appealed to the Department of Health earlier this year for help in collecting payments from private payers. However, Dana Sherwin, senior policy advisor for the Greater New York Hospital Association, attributes the delays in payment to implementation of a new law in New York that deregulates hospital reimbursement and requires payers to contribute to a pool for medical education and uncompensated care, or pay surcharges on their hospital bills.The Association charged that some insurers were withholding 1996 payments as leverage to negotiate rate contracts for 1997.
A recent survey of hospitals by the association found that there are still a significant number of hospital claims that are at least 60 days old, but Ms. Sherwin says she is seeing some progress. She notes that cash advances have helped the hospitals with their cash flow problems. Oxford has made $110 million in cash advances to hospitals with unpaid claims.
While implementing the new deregulation law has caused problems for payers, Ms. Sherwin believes they do have other options besides simply delaying paying their bills. They could continue to pay claims under the old system and make adjustments retroactively. Hospitals often run an old system concurrently with a new system because they cannot afford to stop billing for services, she says.
Ms. Sherwin notes that any legislation should provide for enforcement and oversight as well as dispute resolution. Also, payments should not be delayed pending managed care reviews in all cases, she says. Payment should be made ahead of reviews in routine cases and only held for reviews of complex cases.
Oxford officials did not respond to a request for an interview. However, in a May 5 press release, Stephen F. Wiggins, chief executive officer of Oxford, said, "We regret the delays some customers recently experienced as a result of our upgrade to a new computer system. Those delays are unacceptable to us, and Oxford employees are literally working around the clock to address the problems that created them. We are rapidly approaching our goal of processing at least 95% of clean’ physician claims in thirty days or less..." Besides computer problems, Mr. Wiggins cited implementation of the deregulation law as a factor in the delay of payments to hospitals.
Backlogged claims accounted for less than 10% of claims Oxford paid between February and April, the statement said. "Nevertheless, it is a significant number of claims and Oxford deeply regrets the delays this backlog has imposed on its members, doctors and hospitals.
New Jersey’s Department of Insurance reports getting an increasing number of complaints about Oxford, but officials told a local newspaper the department is satisfied that Oxford is working on the problem.
Eleanor Kerns, an analyst for Alex Brown, dismissed the notion that the company could gain any financial benefit by not paying its providers. She says "payables look bad on paper" and operating income for managed care plans is much more important than investment income. She says the delays in payments have been due to "equipment failure."
Contact the NY Insurance Dept. at 212-602-0428, the NY Medical Society at 518-465-8085, or Ms. Sherwin at 212- 246-7100.
NY investigates HMOs late payments to providers
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