This document summarizes a presentation on legislative updates related to usual, customary and reasonable charges given by Ed Norwood. It discusses how health plan profits increased in 2008-2009 despite the economic downturn. It also summarizes regulatory efforts by the DMHC to audit health plans and providers who lower payment rates or have frequent complaints about payment. The presentation urges providers to help identify underpayments and file complaints to trigger DMHC reviews. It maintains that cost-to-charge ratios alone do not satisfy rules for determining reasonable reimbursement.
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ERN/NCRA 2010 Annual Legislative Update
ERN / The National
Council of
Reimbursement
Advocacy
Annual Legislative Update
USUAL, CUSTOMARY AND REASONABLE CHARGES
Ed Norwood
2. Slide 2
ERN/NCRA 2010 Annual Legislative Update
The Sign of the Times
“Our greatest glory is not in never
failing, but in rising up every time
we fail.”
-Ralph Waldo Emerson
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ERN/NCRA 2010 Annual Legislative Update
The Sign of the Times
Healthcare is a law to be
defended.
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ERN/NCRA 2010 Annual Legislative Update
The Sign of the Times
Revenue Net income
Health Plan (in millions) (in millions) Earnings Per Share
2008 2009 2008 2009 2008 2009
Aetna $30,950.7 $34,764.1 $1,384.1 $1,276.5 $2.83 $2.84
(12.3%) (0.4%)
Cigna $19,101.0 $18,414.0 $292.0 $1,302.0 $1.05 $4.73
(-3.6%) (350.5%)
Health Net $15,366.6 $15,713.2 $95.0 -$49.0 $0.88 -$0.47
(2.3%) (-153.4%)
UnitedHealth Group $81,186.0 $87,138.0 $2,977.0 $3,822.0 $2.40 $3.24
(7.3%) (35.0%)
WellPoint $61,251.1 $65,028.1 $2,490.7 $4,745.9 $4.76 $9.88
(6.2%) (107.6%)
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ERN/NCRA 2010 Annual Legislative Update
The Sign of the Times
Underpayments by health care service plans and their
capitated providers exacerbate an already fragile health
care delivery system.
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ERN/NCRA 2010 Annual Legislative Update
The Sign of the Times
On September 14, 2009, the DMHC expanded its
routine audits to specifically address claim payment
issues pertaining to plans and capitated providers, with
an emphasis on claims for emergency services.
The DMHC's regulatory efforts will initially concentrate on
the health plans and capitated providers who meet one or
more of the below criteria:
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ERN/NCRA 2010 Annual Legislative Update
The Sign of the Times
1. Health plans and capitated providers that have lowered
their payment methodologies since October 15,
2008. Any decrease in claim payment levels will need to
be justified.
2. Health plans and capitated providers whose claim
payment methodologies result in the lowest payment
levels to providers.
3. Health plans and capitated providers that are the
subject of substantive and/or repeated complaints
regarding their reasonable and customary
methodologies.
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ERN/NCRA 2010 Annual Legislative Update
The Sign of the Times
4. Health plans and capitated providers that routinely
have low initial payments.
5. Health plans and capitated providers that have no
meaningful dispute resolution processes, or have other
unfair payment practices.
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ERN/NCRA 2010 Annual Legislative Update
The Sign of the Times
Recent courts have determined that payors cannot set
reimbursement rates in an arbitrary and capricious
manner. In the California Supreme Court's Prospect
decision, the Court stated:
"Prospect has provided no authority, statutory or
otherwise, for this court to conclude that it can set
the rate of emergency rooms physicians pursuant to
any across-the-board mechanism, whether the
Medicare rate or any other rate." (Prospect Medical
Group, Inc. v. Northridge Emergency Medical Group et al. (136
Cal. App. 4th 1155, 2006.))
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ERN/NCRA 2010 Annual Legislative Update
The Sign of the Times
The Prospect decision makes it clear that any fee dispute
involving emergency services rendered in non-contracted
facilities must be resolved pursuant to the promulgated six-
part regulatory test cited in 28 CCR 1300.71 (a)(3)(b) which
states:
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ERN/NCRA 2010 Annual Legislative Update
The Sign of the Times
“Reimbursement of a claim” means: For contracted
providers without a written contract and non-contracted providers,
except those providing services described in paragraph (C) below:
the payment of the reasonable and customary value for the
health care services rendered based upon statistically credible
information that is updated at least annually AND
TAKES INTO CONSIDERATION: (i) the provider's training,
qualifications, and length of time in practice; (ii) the nature of the
services provided; (iii) the fees usually charged by the provider; (iv)
prevailing provider rates charged in the general geographic area
in which the services were rendered; (v) other aspects of the
economics of the medical provider's practice that are relevant;
and (vi) any unusual circumstances in the case.
OUR CONCERN IS: WHO IS MONITORING THIS?
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ERN/NCRA 2010 Annual Legislative Update
The Sign of the Times
In a recent compliance audit, ERN/NCRA has discovered that
two of the largest health plans in the State of California utilize
the following methodologies in determining emergency
reimbursement to non-contracted providers:
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ERN/NCRA 2010 Annual Legislative Update
The Sign of the Times
HEALTH NET:
"Health Net uses the greater of the OSHPD or the
Medicare reported cost to charge ratio for each
facility to calculate the maximum allowable
amount. The OSHPD cost to charge ratio is
calculated as follows:Total Operating Expenses-
Other Operating Revenue/Gross Patient
Revenue. Health Net will pay a facility the
maximum allowable amount based upon the greater
of: (a) 165% of a facility's OSHPD cost to charge
ration; or (b) 165% of a facility's Medicare cost to
charge ratio; provided, however in no event, will
Health Net pay more than 100% of a facility's
charges."
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ERN/NCRA 2010 Annual Legislative Update
The Sign of the Times
BLUE CROSS:
"To determine benefits on a customary and
reasonable basis for non-contracting institutional
providers, a percentile of billed charges from the
Anthem Blue Cross (ABC) database is used to
calculate the benefits, subject to the following:The
allowed benefit WILL NOT BE: 1) less than covered
charges multiplied by the cost to charge ratio the
institution reports to OSHPD multiplied by a
specific percentage; or 2) More than covered
charges multiplied by the cost to charge ratio the
institution reports to OSHPD multiplied by
another specific percentage; or
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ERN/NCRA 2010 Annual Legislative Update
The Sign of the Times
BLUE CROSS CONT…:
3) More than the full 100% of the institution's
charges. The ABC database takes into consideration
various factors, such as the billed charges of
providers for services based on Diagnostic Related
Group (DRG) codes for inpatient claims and Current
Procedural Terminology (CPT) codes and
Healthcare Common Procedure Coding System
(HCPCS) codes for outpatient claims."
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ERN/NCRA 2010 Annual Legislative Update
The Sign of the Times
We do not believe that the OSHPD cost to charge ratio
(calculated from Annual Disclosure reports) can be used
solely to satisfy the six-part regulatory test under 28 CCR
1300.71 (a)(3)(b) to determine reasonable and customary
rates.
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ERN/NCRA 2010 Annual Legislative Update
The Sign of the Times
A FEW THINGS TO REMEMBER:
1. The DMHC has very limited resources for reviewing each
health plan and capitated provider’s UCR methodology (pg. 2)
THE DMHC WILL NOT REVIEW UCR
UNDERPAYMENTS UNLESS YOU BRING THEM
TO THEIR ATTENTION.
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ERN/NCRA 2010 Annual Legislative Update
The Sign of the Times
2. The DMHC will focus its regulatory efforts on health plans and
capitated providers as identified by the 5 factors (pg. 3.)
YOU MUST ROVIDE THIS PAYMENT DATA TO
THE DMHC.
NO ONE CAN IDENTIFY PAYORS WHO MAKE
EMERGENCY UNDERPAYMENTS AND MEET
ONE OF THE 5 FACTORS LISTED EXCEPT
PROVIDERS.
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ERN/NCRA 2010 Annual Legislative Update
The Sign of the Times
WE NEED YOUR HELP.
1.) We ask for your identification of any payor UCR payment
methodologies that fail to consider the Gould factors in
1300.71 (a) (3) (b) and result in routinely low payments.
2.) We urge you to file complaints through us or internally
with the DMHC if you have an in-house Compliance Officer.
IDRP VS. ONLINE COMPLAINT PROCESS
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ERN/NCRA 2010 Annual Legislative Update
The Sign of the Times
The DMHC’s pilot Independent Dispute Resolution
Process (IDRP) employs a voluntary "baseball style"
arbitration model that encourages the plan and the provider to
negotiate realistically before an arbitrator (CHDR), or risk
having the other side's proposal accepted. For the IDRP, the
provider's original billed amount and the payer's original paid
amount will be used to determine which amount better reflects
the reasonable and customary value of the services performed.
BUT YOU HAVE TO PAY FOR IT AND THE PLAN
CAN REFUSE PARTICIPATION.
THE DMHC COMPLAINT PROCESS – H&S 1371.39
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ERN/NCRA 2010 Annual Legislative Update
The Sign of the Times
Untimely payment has a negative effect on
patient level of care.
Violation of the Knox Keene Act is a
considered a crime against public health
and safety.
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ERN/NCRA 2010 Annual Legislative Update
Thewe must be as passionate about
Together,
Sign of the Times
violations of health and safety as the Red Cross is
about disaster.
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ERN/NCRA 2010 Annual Legislative Update
Why We Exist
CHAPTER MISSION
“To position and strengthen healthcare
professionals for legislative change and industry
advancement through advocacy, education,
training and service.”
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ERN/NCRA 2010 Annual Legislative Update
Why We Exist
CHAPTER VALUES
Advocate passionately for medically appropriate
healthcare in the State of California pursuant to
Business and Professions Code §510.
Challenge HMOs, PPOs and Government payors to
facilitate change and improvement.
Influence the outcomes including public-policy,
reimbursement and quality of care decisions that
directly affect American citizens.
Instill an incurable passion for results in others to
effectuate change in the healthcare delivery system.
Create strategic networking and volunteer
opportunities that fortify member marketability and
transfer to paid jobs.
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ERN/NCRA 2010 Annual Legislative Update
Join Us
WE WOULD BE HUMBLED
TO HAVE YOU JOIN OUR
MOVEMENT
EMAIL US AT
EDNORWOOD@ERNENTERPRISES.ORG
OR CALL (714) 995-6900 EXT. 6926 FOR
MORE INFO.