Overbilling vs. Downcoding — The Battle between Physicians and Insurers
http://www.100md.com
《新英格兰医药杂志》
In September 2004, a federal appeals court upheld a class-action lawsuit on behalf of physicians who charged that their patients' insurance companies had conspired to curb reimbursement for the physicians' services. The judge described the case as "almost all doctors versus almost all major health maintenance organizations"1 (see table). The case has revealed issues that have long lurked beneath the surface of the managed-care revolution. Physicians are accused of driving up costs and exploiting the third-party–payer system by overcharging for their work. Managed-care organizations are accused of systematically obstructing and delaying payment for legitimate services in order to improve their bottom lines. In the end, the court's involvement in controversies about billing practices may help to expedite changes in the health care payment system.
View this table:
Allegations in the Class-Action Lawsuit by Physicians against Insurers.
Around the middle of the 20th century, reimbursement of physicians for outpatient care came to be dominated by private insurers and the Medicare and Medicaid programs. As a result, patient visits had to be translated for third-party payers who remained outside the examination room. In 1966, the American Medical Association (AMA) published its first edition of Current Procedural Terminology in an effort to standardize descriptions of how patients are evaluated and how their care is managed. Current Procedural Terminology included some guidelines for its use. For example, when a minor procedure is performed as part of a more substantial one, it should be "bundled" into the larger procedure rather than coded as a separate procedure.
The Current Procedural Terminology system did not include fee schedules. Government and private payers initially reimbursed physicians at the physicians' usual and customary rates. Payments grew exponentially, however, and as a result, in the 1980s the government set a fee schedule limiting physician reimbursement. Private insurers quickly followed suit, usually linking their fee schedules with physicians' enrollment in the networks of individual physicians known as preferred-provider organizations.
Third-party payers could not observe physician–patient visits, however, and evidence surfaced of coding errors and the possible abuse of the system by physicians. In the late 1980s, the Office of the Inspector General (OIG) of the Department of Health and Human Services found that up to 13 percent of claims for any given procedure were being miscoded. With respect to the "separate procedure" guideline, the OIG reported that physicians frequently billed separately for biopsies that were part of complicated surgical procedures, thereby improperly fragmenting claims in a way that had led to $12 million in overpayments within one year.2
Private insurers worked to cut costs and counteract physicians' erroneous or improper coding. They adapted Current Procedural Terminology guidelines to promote reimbursement policies such as bundling. The insurers' response to contentions that physicians overbilled for patient visits was to "downcode" automatically some expensive, complex claims to lesser ones. Insurers also rejected more claims outright. They used claims-analysis software to process claims and to make adjustments, but because the computer programs were not supplied with information about the content of clinical encounters, many proper claims were also affected.
Insurers maintained that they could generalize from concepts found in Current Procedural Terminology to implement their reimbursement policies — policies that physicians could accept or attempt to change in negotiating contracts with the insurers. However, physicians and state medical associations grew increasingly frustrated by insurers' billing practices and groused that the insurers were exploiting the computer programs and using unfair billing procedures to boost their profits.
Some physicians and state medical associations turned to the courts for relief. They alleged, in part, that insurers reduced compensation by purposely delaying payments, improperly denying claims, and using computer programs to process claims purely in order to reduce reimbursements. They invoked the federal Racketeer Influenced and Corrupt Organizations (RICO) Act,3 which prohibits racketeering — including extortion, bribery, and mail fraud — in conducting the affairs of any enterprise that affects interstate commerce. They charged that the "enterprise" was made up of insurers who coordinated their conduct, most significantly by using similar computer programs and third-party claims reviewers for bill processing. The RICO Act stipulates that damages be automatically tripled — a potentially devastating outcome for defendants facing a large class of plaintiffs.
With so many physician groups making related allegations, the cases were ripe for class-action status. The insurers argued that variations in billing practices among the insurers and the varying contracts each held with providers made it inappropriate to combine the physicians into a single class. But on September 26, 2002, Florida district court judge Frederico Moreno certified the class action.4 Judge Moreno found that variations among physicians were not material enough, since the insurers, not the physicians, controlled the analysis of claims. The plaintiffs now represented 800,000 physicians who had treated patients enrolled by the defendant-insurers during the previous decade.
In the wake of the decision, Aetna and Cigna settled, agreeing to injunctive stipulations and to hundreds of millions of dollars in payments. Among the stipulations, Aetna pledged, for example, to decrease administrative hassles such as preauthorizations and denials based on technicalities, pay claims more promptly, end automatic downcoding, and make the claim-adjudication procedure more open and user-friendly. To improve its relations with physicians, Aetna established an advisory committee of physicians to help implement the proposed changes, based its definition of medical necessity on an AMA standard, and removed contractual provisions such as gag clauses that limited communication between physicians and patients. In early 2004, Judge Moreno approved a proposal from Cigna that included many similar changes in its business practices, along with a somewhat larger cash payment.
The remaining defendants — WellPoint Health Networks, UnitedHealth Group, Prudential Insurance, PacifiCare Health Systems, Health Net, and Humana (the plaintiffs have petitioned to include other companies, such as Anthem) — continued to litigate. This past September, the federal appeals court decided to uphold the federal RICO class action, and in January 2005, the Supreme Court chose not to review the case. As a result, the insurers are scheduled to explain the similarities in their billing practices before Judge Moreno in September 2005. Given the history of miscoding and potential fraud, they could argue that claims-processing practices are a rational business model, not an attempt at racketeering. They could also argue that physicians are sophisticated enough to resolve billing irregularities at the negotiation table. Though these arguments are compelling and may succeed, in the face of the risk of triple damages, many of the remaining insurers will probably settle in the months ahead.
For the physician-plaintiffs, the changes to billing practices brought about by the litigation are more important than the monetary settlement. When averaged, Aetna's $100 million repayment fund, for example, comes out to approximately $142 per physician in the class. With regard to billing practices, the key transformations involved accelerating claim payments, making claims-processing procedures more open, using fair definitions of medical necessity, and allowing appeals of disputed claims.
In addition, physicians pursued similar reforms by lobbying state governments to regulate insurers' procedures through legislation and by negotiating improvements to the billing terms in their contracts with insurers. Some state regulations were implemented slowly, however, and contract negotiation is useful primarily for large physician associations that have commensurate bargaining power. Although class-action lawsuits require substantial time and involve risk, a favorable verdict or settlement can add enforcement authority to legislation and bring relief to small entities that lack negotiating power. The courts function to support the changes that are already in place and to ensure that the reforms extend to all physicians.
The ultimate effect of the class certification and the settlements will become apparent in the coming years. Insurers whose current billing practices are banned will turn to other means of effecting cost savings, such as raising deductibles or lowering fee schedules, and will develop other tactics for ensuring physicians' accuracy in billing, even if these approaches require additional paperwork and administrative support. But the physician-plaintiffs have decided that the devil they know is not better than the devil they don't know.
Source Information
Dr. Kesselheim is a senior resident in medicine and Dr. Brennan a professor of medicine at Brigham and Women's Hospital and Harvard Medical School — both in Boston.
References
Klay v. Humana, Inc., 2004 U.S. App. LEXIS 18494 (11th Cir. 2004).
Office of Inspector General. Fragmented physician claims. Washington, D.C.: Department of Health and Human Services, September 1992. (OEI-12-88-00901.)
Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. 1962(a) and (c) (1970).
In re Managed Care Litigation, 209 F.R.D. 678 (S.D. Fla. Sept. 26, 2002)(Aaron S. Kesselheim, M.D.)
View this table:
Allegations in the Class-Action Lawsuit by Physicians against Insurers.
Around the middle of the 20th century, reimbursement of physicians for outpatient care came to be dominated by private insurers and the Medicare and Medicaid programs. As a result, patient visits had to be translated for third-party payers who remained outside the examination room. In 1966, the American Medical Association (AMA) published its first edition of Current Procedural Terminology in an effort to standardize descriptions of how patients are evaluated and how their care is managed. Current Procedural Terminology included some guidelines for its use. For example, when a minor procedure is performed as part of a more substantial one, it should be "bundled" into the larger procedure rather than coded as a separate procedure.
The Current Procedural Terminology system did not include fee schedules. Government and private payers initially reimbursed physicians at the physicians' usual and customary rates. Payments grew exponentially, however, and as a result, in the 1980s the government set a fee schedule limiting physician reimbursement. Private insurers quickly followed suit, usually linking their fee schedules with physicians' enrollment in the networks of individual physicians known as preferred-provider organizations.
Third-party payers could not observe physician–patient visits, however, and evidence surfaced of coding errors and the possible abuse of the system by physicians. In the late 1980s, the Office of the Inspector General (OIG) of the Department of Health and Human Services found that up to 13 percent of claims for any given procedure were being miscoded. With respect to the "separate procedure" guideline, the OIG reported that physicians frequently billed separately for biopsies that were part of complicated surgical procedures, thereby improperly fragmenting claims in a way that had led to $12 million in overpayments within one year.2
Private insurers worked to cut costs and counteract physicians' erroneous or improper coding. They adapted Current Procedural Terminology guidelines to promote reimbursement policies such as bundling. The insurers' response to contentions that physicians overbilled for patient visits was to "downcode" automatically some expensive, complex claims to lesser ones. Insurers also rejected more claims outright. They used claims-analysis software to process claims and to make adjustments, but because the computer programs were not supplied with information about the content of clinical encounters, many proper claims were also affected.
Insurers maintained that they could generalize from concepts found in Current Procedural Terminology to implement their reimbursement policies — policies that physicians could accept or attempt to change in negotiating contracts with the insurers. However, physicians and state medical associations grew increasingly frustrated by insurers' billing practices and groused that the insurers were exploiting the computer programs and using unfair billing procedures to boost their profits.
Some physicians and state medical associations turned to the courts for relief. They alleged, in part, that insurers reduced compensation by purposely delaying payments, improperly denying claims, and using computer programs to process claims purely in order to reduce reimbursements. They invoked the federal Racketeer Influenced and Corrupt Organizations (RICO) Act,3 which prohibits racketeering — including extortion, bribery, and mail fraud — in conducting the affairs of any enterprise that affects interstate commerce. They charged that the "enterprise" was made up of insurers who coordinated their conduct, most significantly by using similar computer programs and third-party claims reviewers for bill processing. The RICO Act stipulates that damages be automatically tripled — a potentially devastating outcome for defendants facing a large class of plaintiffs.
With so many physician groups making related allegations, the cases were ripe for class-action status. The insurers argued that variations in billing practices among the insurers and the varying contracts each held with providers made it inappropriate to combine the physicians into a single class. But on September 26, 2002, Florida district court judge Frederico Moreno certified the class action.4 Judge Moreno found that variations among physicians were not material enough, since the insurers, not the physicians, controlled the analysis of claims. The plaintiffs now represented 800,000 physicians who had treated patients enrolled by the defendant-insurers during the previous decade.
In the wake of the decision, Aetna and Cigna settled, agreeing to injunctive stipulations and to hundreds of millions of dollars in payments. Among the stipulations, Aetna pledged, for example, to decrease administrative hassles such as preauthorizations and denials based on technicalities, pay claims more promptly, end automatic downcoding, and make the claim-adjudication procedure more open and user-friendly. To improve its relations with physicians, Aetna established an advisory committee of physicians to help implement the proposed changes, based its definition of medical necessity on an AMA standard, and removed contractual provisions such as gag clauses that limited communication between physicians and patients. In early 2004, Judge Moreno approved a proposal from Cigna that included many similar changes in its business practices, along with a somewhat larger cash payment.
The remaining defendants — WellPoint Health Networks, UnitedHealth Group, Prudential Insurance, PacifiCare Health Systems, Health Net, and Humana (the plaintiffs have petitioned to include other companies, such as Anthem) — continued to litigate. This past September, the federal appeals court decided to uphold the federal RICO class action, and in January 2005, the Supreme Court chose not to review the case. As a result, the insurers are scheduled to explain the similarities in their billing practices before Judge Moreno in September 2005. Given the history of miscoding and potential fraud, they could argue that claims-processing practices are a rational business model, not an attempt at racketeering. They could also argue that physicians are sophisticated enough to resolve billing irregularities at the negotiation table. Though these arguments are compelling and may succeed, in the face of the risk of triple damages, many of the remaining insurers will probably settle in the months ahead.
For the physician-plaintiffs, the changes to billing practices brought about by the litigation are more important than the monetary settlement. When averaged, Aetna's $100 million repayment fund, for example, comes out to approximately $142 per physician in the class. With regard to billing practices, the key transformations involved accelerating claim payments, making claims-processing procedures more open, using fair definitions of medical necessity, and allowing appeals of disputed claims.
In addition, physicians pursued similar reforms by lobbying state governments to regulate insurers' procedures through legislation and by negotiating improvements to the billing terms in their contracts with insurers. Some state regulations were implemented slowly, however, and contract negotiation is useful primarily for large physician associations that have commensurate bargaining power. Although class-action lawsuits require substantial time and involve risk, a favorable verdict or settlement can add enforcement authority to legislation and bring relief to small entities that lack negotiating power. The courts function to support the changes that are already in place and to ensure that the reforms extend to all physicians.
The ultimate effect of the class certification and the settlements will become apparent in the coming years. Insurers whose current billing practices are banned will turn to other means of effecting cost savings, such as raising deductibles or lowering fee schedules, and will develop other tactics for ensuring physicians' accuracy in billing, even if these approaches require additional paperwork and administrative support. But the physician-plaintiffs have decided that the devil they know is not better than the devil they don't know.
Source Information
Dr. Kesselheim is a senior resident in medicine and Dr. Brennan a professor of medicine at Brigham and Women's Hospital and Harvard Medical School — both in Boston.
References
Klay v. Humana, Inc., 2004 U.S. App. LEXIS 18494 (11th Cir. 2004).
Office of Inspector General. Fragmented physician claims. Washington, D.C.: Department of Health and Human Services, September 1992. (OEI-12-88-00901.)
Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. 1962(a) and (c) (1970).
In re Managed Care Litigation, 209 F.R.D. 678 (S.D. Fla. Sept. 26, 2002)(Aaron S. Kesselheim, M.D.)