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Progressive Focus© Newsletter

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Volume 6, Number 4 Winter, 2005
Helping You Manage the Expectations of Managed Vision Care

In This Issue:

When insurers retroactively deny eligibility: Every practice's managed care nightmare

You see the patient and provide a full exam. Staff works with the patient for half an hour or more, selecting the proper frame and lenses, or training with contact lenses. The eyewear is dispensed a few days later, and staff submits a claim that includes the vision plan's eligibility verification.

And then sometime later the plan tells you that despite the confirmed preauthorization, your patient, their "insured," really wasn't eligible on the date of service. The claim is denied and you're told to seek payment from the patient who, by now, is long-gone. When you protest, the plan disingenuously tells you it's out of their hands, and not their responsibility.

Quotables

Aaaargh!!!

Charlie Brown
"Peanuts"

Why are we even playing this game?

And so you feel like Charlie Brown, about to be suckered into trying to kick the football for the umpteenth time, and knowing full well that Lucy will pull it away at the last moment. For many practitioners, Lucy could be the personification of insurance companies - holding out the promised compensation only to pull it away.

If you're wondering how it is that vision care has fallen under the absolute control of sometimes-onerous third party plans, you are not alone. If it seems absurd that the provision of something so basic as routine exams and eyewear should have become so impossibly complicated, join the crowd. A steadily increasing number of your colleagues are asking the same questions, pondering how things got to this point, and wondering how to deal with insurers who have utterly usurped control of vision care.

Perhaps an essential source of so much frustration with managed vision care may lay in the fact that many eye doctors view vision insurance for routine exams and eyewear as a ridiculous idea in and of itself. Insurance, certainly health insurance, is supposed to protect the insured person against unpredictable and costly care. It's a (relatively small) premium-based hedge against (relatively expensive) risk.

Given that basic principle of insurance, how can insuring vision care make any sense? The cost of the services is low, not high, and an individual's need for the services is absolutely predictable rather than unknown. Unless an employer provides blanket coverage to all employees and dependents, those who need eyewear elect to get the coverage and those who don't -- don't.

In such a senario the insurance is not so much self-protection against extraordinary financial costs as it is first dollar coverage that lowers out-of-pocket expenses. Thus, except perhaps for the very needy under Medicaid, vision insurance really is nothing more than a means to a discount on something that would likely be purchased in any case.

The real absurdity of it all is that even for the richest of vision benefit plans the insurance dollars paid out on behalf of a beneficiary-user really don't amount to much -- certainly not as compared to, say, 80% major medical coverage of charges for a hospitalization and surgery.

So why do employers spend so much for routine vision care "insurance" when the costs of such predictable services are more properly borne by the patient? It's enough to make you scratch your head and say "hmmmm..."

Maybe the fact that so few dollars are involved on a per-case basis makes it doubly frustrating for the doctor when a vision plan refuses to pay for a previously authorized service, or retroactively declares a patient ineligible after previously confirming eligibility, and then takes back the paltry sum paid for patient care.

In the best of circumstances managed vision care is problematic. While some plans do a pretty good job keeping administrative hassles to a minimum, others have a well-deserved reputation for continually frustrating doctors and staffs. To some extent, all of them are fraught with irritating policies and procedures that complicate what should be simple administrative functions.

The "Dear Doctor" letter

Three months, or a year, or several years after you've provided the care a "Dear Doctor" letter arrives from the vision plan. You've all seen them.

The letter demands a refund of monies paid to you for services provided to the patient. It says the patient was not eligible on the date of service and, therefore, not entitled to benefits. The plan disclaims any financial responsibility for those services, and states that if you do not refund the money the amount will be deducted (offset) from future payments.

Your natural reaction to this absurdity is, Are you kidding? You expect me to refund the money after you preauthorized the services and you confirmed eligibility? We did everything by the book, but you want me to absorb the loss brought about by your error(s)?

And, yes, that's exactly what you're being told.

Well, it's unacceptable. No payer should be able to retroactively dodge financial responsibility for properly authorized covered services when the doctor has relied upon that authorization and performed in good faith, and when the error(s) was the payer's. And here we're going to look into some ways to limit or preclude a vision plan's ability to stick the collateral damage of its errors (or those of its employer-clients) onto your shoulders.

Playing hardball

Quotables

It is fatal to enter any war without the will to win it.

Douglas MacArthur
1952 Republican National Convention

Without question, the best way to prevent disingenuous payer tactics is to preclude them in the Provider Agreement. This entails getting language inserted into your contract that specifically states you'll be paid if you've jumped through all the right hoops but the vision plan screws up.

Now in years past the chances of contractually obligating a payer to agree were slim and none. I remember some years ago when I worked for a California HMO we were trying to sign a Los Angeles OD to a Provider Agreement. But he insisted on a provision that would guarantee payment even if the HMO's eligibility information proved wrong after services were rendered. That demand went nowhere, and so the doctor wisely refused to sign.

Fast-forward to a contract recently offered by a national vision plan. It includes these previously unimaginable words:

Neither <vision plan> nor Group(s) shall have any obligations to pay for any services provided to a Member without a valid authorization. However, if <vision plan> provides erroneous eligibility information to <Provider>, and if benefits under the benefit plan are provided to a Member, <vision plan> shall reimburse <Provider> for any benefits provided to such Member.

So, assuming a proper authorization was obtained, this vision plan is standing up and accepting financial responsibility if it provides incorrect eligibility information. They're doing the right thing, and that is so very refreshing.

After getting your attorney's approval/comments on the example language above, you should seek to have similar terms inserted into all of your Provider Agreements. Whether you can get the plans you contract with to "do the right thing" remains to be seen, of course. But you must ask if you're to have any hope of receiving. Frankly, in my opinion any vision plan that won't accept financial responsibility for errors of its own making (or those of its employer-clients) is a vision plan I'd worry about.

A slightly less aggressive approach to retroactive denials

Some payers may balk at accepting blanket responsibility for administrative errors, and may wish to preserve some measure of "wiggle room." If so, here's other sample language you can offer as a compromise. While it is not the iron-clad suggestion above, it is, none-the-less, fair to both sides.

This compromise allows the payer to deny payment after previously authorizing services, but only if the practice is informed promptly. If the notice period is kept short enough (absolutely crucial) the practice still has a reasonable opportunity to submit a claim to another insurance company, or to seek payment from the patient.

Have the wording reviewed by your attorney. Then ask the payer to insert it into your Provider Agreement.

RETROACTIVE ELIGIBILITY NOTIFICATION

Payer is obligated to pay Provider hereunder. However, if the Payer learns that a Member is no longer eligible, Payer is not obligated to pay Provider for any services provided to such Member so long as Payer notifies Provider of the Member's ineligibility within thirty (30) days of the date of service {optional: within 30 days of the claim submission date}. In such event Provider may bill the Member.

When payment problems extend beyond eligibility errors

Perhaps your payment problems extend beyond retroactively denied eligibility. Perhaps an insurer alleges overpayments, and then with no substantiation unilaterally takes back the monies from subsequent payments. Or, perhaps, it "massages" your claims to pay less than you believe you're owed.

Here is some sample language that might be the answer. Again, it is fair to both sides. Show this to your attorney, and after approval present it to the insurer for insertion into your Provider Agreement.

OVERPAYMENTS AND UNDERPAYMENTS

a) Request for Adjustment of Payment. Either party shall be entitled to request a payment adjustment if, within <insert number> days from the date of payment, it notifies the other party in writing of the overpayment or underpayment and provides documentation substantiating such claim.

b) Payment Disputes. The parties shall work cooperatively and in good faith to resolve payment issues on an informal basis within <insert number> days of the first notification of a request for an adjustment of payment, pursuant to paragraph (a) above. If this is unsuccessful, then any disputes concerning claims of overpayment or underpayment shall be resolved in accordance with the Payer's Grievance and Appeal Process referenced in Payer's Provider Manual.

c) Payments Final. Except for those payments that have been submitted to the Grievance and Appeals Process in accordance with the foregoing, all payments shall be final.

d) Paying Adjustments. If the parties determine that the Payer has underpaid Provider, Payer shall pay the underpaid amount to Provider within <insert number> calendar days of said determination. If the parties determine that the Payer has overpaid Provider, Provider shall reimburse Payer for overpayment within <insert same number> calendar days of said determination.

e) No Offsets or Deduction Without Permission. In no event shall Payer offset overpayments against, or deduct overpayments from, any other payments it owes Provider unless Provider expressly permits Payer to do so.

As you can see, this language allows both parties to request a payment adjustment, but it also requires documentation of any alleged over- or underpayment. It requires both parties to work cooperatively to resolve payment disputes. Most significantly, paragraph (e) clearly precludes the payer from offsetting against or deducting from future payments without the doctor's permission. Regardless of anything else you negotiate, the principle established by this crucial paragraph (e) should be included in all of your Provider Agreements.

Using the law for leverage

Quotables

Don't fight forces; use them.

Richard Buckminster Fuller
"Shelter"

You may be thinking that there's no way the insurers you deal with would accept any of the contractual language possibilities I've suggested. And, in fact, some insurers simply are not interested in a fair deal; they're only interested in their deal.

A contract should be a negotiation, not an ultimatum, but disingenuous insurers use "take it or leave it" threats as a means to scare practitioners into surrendering. When facing such a situation you should consider carefully just how much you really need that contract and the headaches that are sure to follow. Never sign based on fear.

And keep in mind that when you're dealing with insurers who would deny financial responsibility, practitioners in many states do have the law to back them up in certain cases when they have done everything right. Here are three classic cases where the courts have ruled in favor of health care providers and against insurers. Note that while state law certainly varies, and courts in one state are not obligated to follow rulings from other states, these cases can be the starting point for your attorney in taking action against disingenuous insurers in your state.

Indiana -- St. Mary's v. United Farm Bureau, 624 NE 2d 939.

California -- City of Hope National Medical Center v. Superior Court, 8 Cal. App. 4th 633.

Texas -- Lincoln Nat. Life Ins. Co. v. Brown Schools, 757 S.W. 2d 411.

These three cases have similar elements, but let's look at St. Mary's (Indiana) as representative of the principles for successfully fighting insurers.

How this classic case played-out

A patient went to a hospital (St. Mary's) for surgery. The services were authorized and eligibility confirmed by the insurer, Farm Bureau. The hospital billed for services and was paid, only to have the insurer sometime later retroactively deny eligibility. It sent a "Dear Doctor" refund demand letter to the hospital.

The hospital refused to refund the money and the parties went to court. Farm Bureau alleged that a mistake was made in confirming eligibility, and that the hospital should look to the patient for payment. The trial court found in favor of the insurer.

However, St. Mary's appealed, and the Court of Appeals reversed the original decision, ruling that St. Mary's was entitled to keep the payment.

Key issues -- The arguments from both sides

The insurance company argued three points:

  • The money was paid by mistake,
  • But for that mistake there would have been no payment,
  • It was under no legal obligation to pay the money to St. Mary's.

Farm Bureau also argued that the hospital had been unjustly enriched since it had collected payment from Farm Bureau for services the insurer had no obligation to cover. Farm Bureau argued that St. Mary's should collect from the patient.

St. Mary's appealed the trial court decision by countering that it was an innocent third-party creditor. Specifically,

  • The mistake was solely the insurance company's,
  • The hospital made no misrepresentations (no inducement) that led to the insurer's mistake,
  • St. Mary's acted in good faith and without prior knowledge of the insurer's mistake.

So St. Mary's was saying: We played by the insurance company's rules and did nothing improper that would have induced payment we weren't entitled to receive. It shouldn't be our job to chase after the patient when the insurance company's own eligibility information was flawed.

St. Mary's also argued that it had not been unjustly enriched. Rather, it had provided good value in exchange for payment, and had only been compensated for work it had performed. Therefore it should be entitled to keep the money.

Finally, the hospital argued that if the patient was not eligible on the day she received services then it was she, not St. Mary's, who had been unjustly enriched.

The Court of Appeals speaks

The Court of Appeals agreed with St. Mary's. It stated that the insurance company had satisfied an obligation that actually was the patient's, and it limited Farm Bureau's remedy to recovery from the patient, not from the hospital.

And significantly, the Court also recognized that the whole issue of payers coming back at providers (whether doctors or hospitals) and making retroactive demands at any time for repayment put an unreasonable contingency liability burden on providers. The Court stated:

We agree with St. Mary's that requiring an innocent provider to refund an insurer's payment made by mistake would place an undue burden of contingent liability upon the provider, lasting until all such claims were barred by the statutes of limitation.

The assignment of policy benefits to medical providers is a widespread and accepted practice in the health insurance industry, and the prospect of universal refund liability under these circumstances would create uncertainty in accounting for such payments.

Further, the adoption of this exception places no additional burden upon the insurance companies. It merely requires that an insurer verify coverage before paying a claim, which is what an insurer must do in every case. If a mistake is made, as occurred here, then an insurer can maintain an action for restitution against the insured who was unjustly enriched by payment for medical services.

Finally, some relief against strong-armed tactics

When their databases are in error, or when staffs make a mistake, payers often try to lay the collateral financial damage of their making onto the doctors who, in good faith, have provided covered services. In far too many cases it is the doctors who take the losses, and who are saddled with all of the risk created by the inaccurate or inattentive work of payers. Here, and in the two other cases I cited above, and in numerous other decisions from other states, the courts have said "Not this time."

Courts in various states are telling payers that under certain circumstances they should go chase the patient for financial recovery when they make the mistake. Don't make it the provider's problem.

Hallelujah!

Fighting back against a retroactive claims denial

OK, so how do you fight back when you receive a "Dear Doctor" demand for repayment despite having done everything right before submitting the claim? Well, the first step is to ask your attorney if your state has had provider-friendly court decisions similar to the 3 cases cited above. If so, then you may have significant leverage to use against payers.

Here is a sample letter to show to your attorney. He/she can use it as the basis of a letter customized to your circumstances and your state's laws.

Note that this sample letter references the Indiana (St. Mary's) case. Remember that other jurisdictions are not bound by Indiana court decisions, so you can't simply "cookie-cutter" this letter. But its "message" has proven effective.

BY CERTIFIED MAIL

<Date>

<Healthplan staffer's name>
<Title>
<Healthplan name>
<Address>

Dear <insert staffer's name>,

We must politely decline your request for refund for services provided to <insert patient's name and I.D. number> on <insert date>.

We decline to pay this based upon the Indiana Appellate Case law cited in St. Mary's v United Farm Bureau (624 NE 2d 939). <ABC Vision> is an innocent third-party creditor and, thus, <XYZ Plan> is not entitled to restitution because: (1) the payment was made to <ABC Vision> solely due to <XYX Plan>'s mistake, (2) <ABC Vision> made no misrepresentations to induce the payment, and (3) <ABC Vision> acted in good faith without prior knowledge of <XYZ Plan>'s mistake.

Furthermore, <ABC Vision> contacted <XYZ Plan> for pre-authorization and authorization was received prior to services being performed. We feel compelled to note that the patient never made any mention of other coverage at the time of service, and that his insurance cards and all information from <XYZ Plan> noted that they were primary and the sole insurance. Therefore, based upon the length of time and the facts of this case, we will not be refunding the amount requested.

Your prompt attention and assistance in this matter will be greatly appreciated. If you have any questions or need further information, please do not hesitate to contact me at your earliest convenience.

Sincerely,

<Insert name and title>

One more "bullet" to fire back at payers: Laches

Laches is a term ("equitable doctrine") that your attorney might mention during discussions on retroactive eligibility denials and demands for repayment. When applied, it's to promote fairness in cases where justice wouldn't result by application of strict legal theory.

Laches is a term that can come up in cases where a claim for restitution is made long after what seems, in fairness, a reasonable amount of time. What's reasonable, and how long after a claim is paid can a payer come back with a demand? That depends, but a podiatrist told me about a particularly brazen insurance company that had attempted to take back from him on a claim filed more than 12 years earlier.

Black's Law Dictionary defines laches as: The equitable doctrine by which a court denies relief to a claimant who has unreasonably delayed or been negligent in asserting the claim, when that delay or negligence has prejudiced the party against whom relief is sought.

Laches involves the following elements:

  • waiting an unreasonable length of time to assert a claim,
  • neglecting to assert a right or claim,
  • causing detriment to another party.

A payer should not have forever to make a claim for restitution. Laches says it would be unfair to allow certain old restitution claims to go forward given a significant passage of time since a defendant likely would have great difficulty gathering evidence and witnesses to build a defense.

Your attorney can advise if laches might apply in your circumstances.

Beating them at their own game

When a payer starts playing costly financial games with your claims, particularly when doctor and staff have done everything right, you must be willing to play "hardball" and battle that disingenuous payer as if your practice's life depends on it. Determine for yourself just how much time and effort you're willing to put into protecting your practice's bottom line. But if you're not willing to play "hardball" when the circumstances demand, then problematic payers can and will take advantage of the situation without a second thought.

Beware of onerous contractual provisions that would allow the payer extraordinary rights and latitude while allowing you little or none. Play the negotiations game creatively but wisely. And use the tactics and sample language examples above only with the guidance of an experienced attorney.

In some cases a strongly worded letter and a statement that you will use any and all available means to protect your interests may be all that's necessary to convince the payer that you won't be played for a sucker and, thereby, get the matter resolved in your favor. However, when all is said and done, if a payer insists on using disingenuous tactics such as retroactively denying eligibility, and refuses to accept responsibility for its mistakes, then you have to make a hard decision.

Maybe the frustration and abuse aren't worth the financial return, and maybe you really don't need that Provider Agreement.

Education is what you get when you read the fine print.

Experience is what you get when you don't.

Copyright © 2003-2007, Gil Weber, MBA. No part of this newsletter may be reproduced or distributed in any form whatsoever without the author’s prior written authorization.

These materials are intended to provide useful information about the subject matter covered. The author believes that the information is as authoritative and accurate as is reasonably possible and that the sources of information used in preparation of the materials are reliable, but no assurance or warranty of completeness or accuracy is intended or given, and all warranties of any type are disclaimed.

The materials are not intended as legal advice, nor is the author engaged in rendering legal services. The materials are not intended as a replacement for individual legal or professional advice. Information contained herein is presented only for illustrative purposes, and it should not be used to establish any fees or fee schedules, nor is it intended and it should not be construed as encouraging any user of the materials to take any actions that would violate any state or federal antitrust laws, tax laws, or Medicare or Medicaid laws.

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