Is the health care industry gouging consumers?

Is the lower-reimbursement environment that’s being shaped by the Affordable Care Act, for both government and private payers, causing so much financial stress on health care providers that they are trying to recapture lost revenue with inappropriate medical billing?

Denials by the American Hospital Association notwithstanding, recent press accounts of unusual or unexpected charges on medical bills have raised questions, especially as more medical costs are being shifted to employers and patients.

The New York Times has been leading the charge, especially with respect to one recent account of so-called “drive-by” doctoring during a neck surgery involving an assistant the patient had never met. The assistant added $117,000 to the patient’s medical bill, and because the assistant was out of network, the insurer refused to negotiate on price.

Health care consumer advocates have also expressed alarm, and the somewhat mysterious practice of medical billing is partly to blame for the confusion. So are cost pressures caused by various provisions of the ACA — costs that are being passed to insurers, then to employers and the employees they buy insurance for.

Fees for service

Count John Healy, partner and senior account executive for M3 Insurance in Madison, among those who don’t think the low-reimbursement environment deserves all the blame for some of the fees patients are seeing. Still, he has seen new fees on local medical bills.

“In my opinion, I’m not sure that you can say that it’s as a result of the environment itself,” Healy said. “I just believe that there are more facility fee payments now, and they do happen at certain facilities more often than at others. I probably shouldn’t say which ones locally, but we have noticed for the last couple of years that people do see facility fee payments that [patients] didn’t expect to see.”

“Medical bills are confusing, and the terminology is foreign and not readily understandable. The whole process is confusing to consumers. ” — Cheryl DeMars, president and CEO, The Alliance

According to Healy, if patients have deductibles and/or coinsurance, they are going to have those particular costs. For example, they might have to pay a deductible and then some coinsurance depending on the size of the bill; in addition to that, they might see a separate payment that does not fall under either of those categories.

“It can make [patients] unhappy because they were not expecting to see that,” Healy noted.

With more costs being shifted to employers and patients, the additional fees will have an impact on the cost of employer-provided insurance. Healy called the cost-shifting a natural outcome of high-deductible plans, which he is seeing more of across the insurance market and across the country. The high-deductible plans, he added, are the result of health care reform and the added costs in the system that require employers to find ways to control those costs.

Generally, when the cost goes up a certain percentage for an employer, it goes up by the same amount for the employee. “In a lot of cases, [employers] are getting a minimum of an additional 4% added to their renewals just to cover the cost of several of the components of the ACA,” Healy stated.

He predicted this health care cost pressure would continue to escalate and be borne to a greater extent by employees, because in order for employers to continue to offer health insurance plans that are affordable to them, they need to offer high-deductible plans that shift more costs to the end-user.

As a local insurer, Healy said there is no alternative but to pass these costs on to employers buying insurance. “If you’re talking about locally, the HMOs are all operating very close to 100% [medical] loss ratio, so they are not making a lot of money,” he explained. “To add 4% to their cost structure without passing that on to the employer, they just simply can’t do it.”

(Editor’s note: By way of explanation, if an insurance company pays $80 in claims for every $100 collected, its loss ratio is 80% and the remaining 20% is used to pay operating expenses. To ensure that a certain percentage of insurance revenue is spent on health care services, the ACA established minimum medical loss ratios for different markets — 80% for small-group markets and 85% for large-group markets.)

Private parties

With government payers like Medicare offering less in terms of reimbursement, private insurers are expected to follow suit. There is disagreement about the extent to which this is already happening, but Cyndee Weston, co-founder of the American Medical Billing Association, says it’s well underway.

The association was formed to help third-party medical billers and the staffs of physician’s offices stay informed about insurance changes, and the changes keep coming. “Most of the Affordable Care Act plans people have, they reimburse less for the same work and they pay just a little bit, a fraction more than what Medicare pays,” Weston said. “Typically, when Medicare does something, the industry follows suit. They set the same rules, if you will, after Medicare does it.”

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The same dynamic has been unfolding “forever,” not just since the passage of the ACA, Weston added. “Not just with lower payments but the way they allow certain things … the way things are coded, [private insurers] follow Medicare,” she said. “A few years back, Medicare stopped accepting consultation codes because they felt that people were getting it wrong, so they quit paying those codes and then it wasn’t long before the commercial industry did the same thing. Now, there are still a few that pay them, but the majority of carriers don’t pay them anymore. They don’t reimburse for that because Medicare doesn’t, so this sort of thing has been going on forever.”

Weston has seen her share of questionable billing practices, and lately she’s seen more examples of out-of-network services being provided to patients without their knowledge, and the result is often an unexpected line item on medical bills. “I’ve even had billers call me and say, ‘How do I get carriers to pay more because my doctors are out of network and they’re trying to limit me to a percentage of what they would pay, a fraction of what they would pay, and we’re not in network? So how do I appeal that?’” she explained.

According to Weston, whenever patients go to an in-network facility, they never know if they are going be working with doctors or other medical professionals who are out of network. “It happens every day, where you get a bill from someone you’ve never met, or who you don’t know that worked on your case, or something was provided to you by a company you have no clue about. Your own doctor or your surgeon or anesthesiologist, you can check on those because you know that up front. It’s the people that you don’t know, that you don’t see when you’re under anesthetic, that provide services that you are unaware of.”

Julia Hobbins, a Madison-based independent inpatient and outpatient claims analyst, reviews and negotiates claims on behalf of patients and their families. During the course of her career, she has worked for several regional hospitals and clinics and a Fortune 500 insurance company.

Regarding the link between health care’s emerging economic model and questionable medical billing, Hobbins said the situation is more complex than a changing reimbursement environment. “It’s driven by the contracts that providers have with the payers, and it’s also reimbursement as established by Medicare and Medicaid, government payer, or private,” Hobbins noted. “So there are a lot of variables to it.”

If a provider bills something, that doesn’t necessarily mean he or she will be reimbursed at that rate, Hobbins added. The billing may be challenged by the payer’s specific guidelines, because one firm might consider something investigational or experimental while another might approve it.

Cracking the code

Cheryl DeMars, president and CEO of The Alliance, a Madison-based cooperative for employers that self insure, does not believe billing irregularities are common, but she acknowledged that medical billing is somewhat confusing.

Patients, she noted, might get an initial bill from the provider, followed by an explanation of benefits, or EOB, from the health plan/insurer, which tells them what the bill has been reduced by, based on contracts, and what the plan intends to pay. Then they get a final bill from the provider, so they are getting three pieces of paper generated from one visit, which in and of itself is confusing.

“I don’t know that we are seeing more billing issues,” DeMars stated. “Questions about medical bills have been longstanding. Bills are confusing, and the terminology is foreign and not readily understandable. The whole process is confusing to consumers.”

Hobbins agreed with that, noting that consumers are often intimidated by the medical-billing process. They call, and customer service does not give them the right answers, or they don’t even know the right questions to ask. “An example is when you go to one of our hospitals locally,” she said. “They will get a fee for the facility, and they will get a fee for the doctors, and they might also get a fee from the radiologist who read your X-rays. With all these bills coming in, they look like they’re in duplicate and in triplicate, and they don’t know if the deductible and their coinsurance is handled correctly when they get the explanation of benefits.”

Under the current coding process, coders receive from the physician’s offices information about a medical visit or treatment, and based on what transpired in those episodes of care, they determine the charges that are contained in a medical bill. Coders must therefore interpret the information they get from physicians.

According to Weston, a lot of things are fair game. When doctors ask you about past family history, or your medical or social history, they are trying to get an idea of what you might be susceptible to, such as cancer. That counts toward being able to use a certain code for a visit. If they look at your ears, eyes, nose, or throat, that often counts, too, and those examples don’t even involve performing a procedure.

“[Medical billing] is open to interpretation, I’ll give you that,” Weston says. “So whenever a doctor treats a patient, or whatever the case may be, they write down in the patient’s chart a brief synopsis or scenario of what transpired. From that, the coding is done from the notes that are made in a patient’s medical record.”

The number of codes is about to increase dramatically as a result of ICD-10 (international classification of disease), an effort to provide more specificity to the medical codes that influence billing and take some of the guesswork out of the coding process. ICD-10 is a massive undertaking that has been delayed several times, but unless there is another delay, the transition to the new coding system is set to take place on Oct. 1 of this year.

When completed, the effort will take the number of codes from the current 13,000 to about 68,000. Some believe the transition will result in more inappropriate billing, while others caution that more specific billing practices might not result in lower costs.

Whatever transpires, “ICD-10 … will change everything,” Hobbins said.

Weston said ICD-10 will allow doctors to be more specific when it comes to diagnoses, but she doesn’t believe it’s going to solve a lot of issues with miscoding or inappropriately applying benefits by insurance carriers based on procedure codes. “All of the things carriers pay on are typically tied to the procedure, and then the diagnosis, so it can make a difference,” she explained. “But accuracy as far as the diagnosis, they could get that wrong and it would still be something that the [insurance] carrier would consider as payable.”

In addition, the conversion to ICD-10 is a major undertaking for doctor’s offices. The conversion has already been delayed twice, medical offices are losing productivity in the process of moving to the new codes, and implementing the necessary software isn’t cheap. Hobbins cited one study that pegged the cost at $100,000 for a three-doctor office.

Whether the increased cost is another inducement to recapture revenue is anyone’s guess, but the low-reimbursement, higher-cost environment isn’t the only challenge for health care. Finding the skill level needed to process claims is already difficult, and the bar is about to be raised. Add to that the cost associated with the ACA’s requirements for meaningful use with respect to electronic medical records (which are also supposed to improve billing accuracy), and the cost pressure on providers is coming in all directions.

In the short run, there will be a steep learning curve associated with the new codes, so consumers will need to watch for surprises. In the long term, if the new coding system does result in more precise bills, it could affect the cost, but only marginally.

“I think anything that has a technological advantage has the ability to lower costs, but I don’t know if that’s going to have a significant impact on bending the cost trend,” Healy said. “I think it’s one of the components that could help to keep the trend from increasing more steeply, but I don’t think it’s a magic bullet in and of itself.”

Hobbins suggested that documentation by physician’s offices will be even more important as codes become more specific. If they don’t document what they do, it’s not even considered for payment — the service “never happened,” she says — and that documentation is what the coders are looking at when they are creating the codes that go on the claim.

“Documentation is the key to effective and clean claims, and this is something that providers are really going to have to address with ICD-10 because it’s more coding-specific,” she said. “Doctors who previously did not do a lot of documentation are going to have to be more detailed and specific in their documentation so that coders are coding accurately with ICD-10.”

Buyer beware

Perhaps it’s an inevitable part of the move to more high-deductible health plans that consumers actually are paying more attention to medical bills and therefore finding discrepancies. With more out-of-pocket costs, the provision of health care services is no longer an arm’s-length transaction, which DeMars considers a good thing.

“There have been errors in medical bills forever,” she noted. “If you’re not the one paying the bill, you don’t notice. It’s really the consumer that’s in the best position to detect an error because they know what care is delivered.”

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You Billed What?

What can consumers and/or employers do to protect themselves and to question or challenge a medical bill that doesn’t look right? Some of the steps they can take are actually preventive things that are part of pre-procedure due diligence, and in the age of consumer-driven health care, consumers must take charge even if they are afraid of the process.

Tip #1: Look into a pre-auth

Many consumers don’t realize that some medical procedures require prior authorization, but it’s ultimately their responsibility to make sure the procedure is authorized by the insurer, especially if it’s an expensive one. Consumers should also get price information from their insurer or health plan. “A lot of times, provider organizations will work through that [prior-authorization] process for the patient,” noted Cheryl DeMars (The Alliance). “I don’t think the patient should assume that it’s being done.”

Tip #2: Conduct an examination

After the fact, if something does not look right, compare what is being charged with the care that was actually delivered. Mistakes do happen, and sometimes consumers are billed for a procedure or a test that did not take place. In addition, consumers should look at who is billing them. “Somebody might be billing them for something they never received, or maybe they received it and they really don’t know it. So who is billing them?” asked Cyndee Weston (American Medical Billing Association).

Tip #3: Get doc’s documentation

If you feel you’re being overcharged, call the provider to make an inquiry, and also call the insurer to explore what your options are. Physicians can be helpful because they often don’t know how the care they’ve delivered is actually being billed. “If they have documented something in such a way that it’s being billed inappropriately, they can sometimes intervene on your behalf,” DeMars said.

Tip #4: Watch for code violations

With the health care industry moving to a greater number of more specific medical codes, be on the lookout for charges that are denied by health plans due to improper coding. Such charges often get passed on to consumers on their billing statements or past-due amounts. If this happens, notify both the providers billing you for the charges as well as your health plan to make sure you don’t end up paying extra.

Tip #5: Appeal the denial

If something isn’t covered that should be and your attempts to resolve a disputed claim with your provider and insurer are unsuccessful, you have the right under the Affordable Care Act to appeal decisions made by health plans created after March 23, 2010. This external appeals process is outlined on the CMS.gov website. “If an insurance company upholds its decision to deny payment, the law provides consumers with the right to appeal the decision to an outside independent decision-maker, regardless of the type of insurance or state an individual lives in,” says John Healy (M3 Insurance).

The good news, according to Hobbins, is that providers are often willing to fix a claim.

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