By STEVE MARLIN, who writes about technology issues
The settlement of the lawsuit involving Ingenix, the United Healthcare unit that provides data used to set "usual and customary" charges for medical services, is at least on the surface a big step toward reducing uncertainty on the part of healthcare providers and patients about how charges are set, and who will be paying them.
United and other large health insurers rely on the Ingenix database to determine usual and customary rates.The database calculates rates for individual claims by assessing how much the same, or similar, medical services would typically cost, generally taking into account the type of service and geographical location.Under this system, insurers control reimbursement rates that are supposed to fairly reflect the market.
The investigation by New York State Attorney General Andrew Cuomo revealed that the Ingenix database intentionally skewed usual and customary rates downward through faulty data collection, poor pooling procedures, and the lack of audits.
The investigation also revealed that having a health insurer determine the usual and customary rate, a large portion of which the insurer then reimburses, creates an incentive for the insurer to manipulate the rate downward.
The impact is especially severe for patients who go out of network. Suppose a patient has a health plan that says it pays 80 percent for out-of-network care. The patient gets billed $2,500, and expects the plan to pay $2,000, or 80 percent of the bill. But the Ingenix database says that the usual and customary charge for that procedure is $1,000. So instead of paying $2,000, the plan only pays $800.
"When patients go out of network, they're reimbursed at a smaller percentage than the in-network rate, plus they're liable for the difference between what the insurer pays and actual charges, which can be significant," says Harvey Matoren, CEO of Claims Security of America, which assists consumers in managing medical bills and claims.
Under the terms of the settlement, United Healthcare will fund the establishment of a new, independent database run by a nonprofit organization, which will develop data collection protocols and other methodologies used in connection with the database.
The nonprofit will also develop a Web site where consumers around the country can find out in advance how much they may be reimbursed for common out-of-network medical services in their area.
The immediate impact of the settlement will be a change in how usual and customary rates are calculated, which will have a tendency to increase such rates, and therefore increase the amounts paid by insurers on claims. Under Ingenix, insurers essentially set their own reimbursement rates.
"The insurers pursued a loss minimization strategy which was to see how little they could get away with paying," says Matthew Josefowicz, director of the insurance practice at Novarica, a research firm. "The database wasn't accessible to consumers or doctors, so they had no idea what the reimbursement rate would be."
The effect of the settlement is to "warn all insurers that strategies based on loss minimization are going to be under pressure from regulators, and instead they'll need to focus on better loss control, underwriting, and operating efficiency," says Josefowicz.
While the short-term impact will be an increase in usual and customary charges, and hence an increase in the amounts insurers are required to pay out on a claim, the long-term impact is less clear. Those in the medical bill review industry, whose job is to contain costs by means of audits and fraud detection, say that over time consumers may not see much in the way of tangible benefits.
Providers could increase their rates, thereby undercutting savings to consumers from the increase in usual and customary rates.
"What's to prevent providers from simply raising their charges?" says Nora Johnson, vice president, auditing, compliance, and reimbursement at TrueFacs Forensic Auditing Claims System. "Insurance companies will not continue to keep raising their payments to match the increase in provider charges, therefore, out-of-net patients are back in the same boat."
The deeper problem, says Johnson, is that "the health reimbursement system is convoluted by methodologies." She tells of a landscaping worker who suffered an accident on the job and had to undergo multiple surgeries to repair damaged nerves and tendons. The patient was billed $39,000, but because all the surgeries had been performed in a single session, his insurer applied a "multiple surgical discount," meaning it would only have to pay a small portion of the bill, as little as $6,500. Most patients would have no way of knowing this in advance, and in any case would have little choice in an emergency situation.
Even in nonemergencies, most people won't know how to go online and check prices. If a doctor decides during an examination that a procedure is needed and performs it immediately, there's no time for research or negotiation. "History shows that fee databases, which are available for hospital charges in several states, are seldom used," says Richard Eskow, CEO of Health Knowledge Systems, writing in a blog.
Even if patients have been given advanced notice of the surgery, they'd need to ask their doctor which procedure codes they planned to use and find out what the charges were going to be for facility use, nurse support, and anesthesia. "And none of that prevents the doctor from opening me up, finding something unexpected and doing a different procedure altogether," says Eskow.
There are even deeper underlying problems with the health system, ones which the Ingenix settlement won't address and could even aggravate. "Usual and customary fees have scant relationship to market prices, inflation trends, or any other external economic forces," says Eskow.
If all the physicians in a locale decide to increase their rates for a particular procedure by 30 percent one year, a usual and customary database has no way of knowing what the right number should be. As a result, there's a good chance that usual and customary rates would go up dramatically, especially under the new settlement, even if the increase isn't justified, he says.
Another issue is the frequency with which procedures are performed. Medical economics dictates that providers respond to downward price pressures by increasing the frequency with which they perform certain services. And medical studies have shown wide variations in treatment patterns for procedures like cardiac surgery, independent of people's health or outcomes.
Changing the calculation of usual and customary fees for any given service will not affect the number of times that service is given, nor will it create a medically appropriate relationship between medical need and the use of that service, says Eskow.
Although the Ingenix settlement is directed primarily at group health insurance, it has ramifications for workers' comp as well.
"Even contracted provider rates in many workers' compensation managed care networks specifically reference percentiles of Usual and Customary to define amounts payable through their contracts," says Doreen Corwin, director of network affairs for StrataCare Inc. "This may well cause payors and review companies to consider other options for defining reasonableness in payments based not on charge data but rather some percentage of a widely accepted payment methodology such as Medicare."
Most states have their own fee schedules for determining reimbursement on workers' comp claims, but some states use Ingenix; the latter will need to switch over to the new database, as will bill review companies that operate in those states.
This shouldn't present much of a problem. "We use the Ingenix database; it's just a table of rates that varies by zip code and we assume they'll give us enough time to load the new data," says Jason Beans, CEO of Rising Medical Solutions.
In the meantime, bill review companies continue to develop ways to contain medical costs. TrueFacs, for example, conducts three types of audit: pricing, compliance and medical records. Pricing audits uncover pricing and data entry errors that translate into significant overcharges. Compliance audits uncover noncompliant billing techniques including unbundling of services, duplicate services and CPT codes billed in conflict with federal and/or AMA guidelines.
CPT codes are the specialized codes by which all medical procedures are identified, quantified, and billed; they determine the reimbursement for any given procedure and thus what an insurance company will pay a physician, hospital, lab or pharmacy.
Medical records audits are conducted by licensed registered nurses trained in bill auditing who investigate discrepancies and incorrectly billed items and services. This involves researching and documenting the precise location within the medical record of every billed item and service on the itemized statement and identifying unsubstantiated charges. "Itemized bills tell only part of the story," says Johnson. "We analyze and compare the UB04 and the coding abstract as well.Sometimes, you may need to inspect the actual medical records."
March 3, 2009
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