Don’t Get Shortchanged When Treating Medicare Plan Patients Out of Network
When you treat a patient who’s a member of a Medicare plan and you don’t have a contract with that plan, you expect to be paid the full amount you’re entitled to under Medicare. But many providers are getting shortchanged. Plans have begun to pay their lower contract rate instead of the Medicare rate to noncontracted – that is, out-of-network-providers. This can bleed a lot of money from your bottom line.
You can fight this practice by carefully checking your claims payments, rebilling the plan for the underpayment amount, and complaining to the plan whenever you find a discrepancy, experts say. Here’s a discussion of this advice. And based on this advice, we’ll give you a strongly worded letter that you can send to the plan to complain and demand payment.
How Plans Shortchange Providers
Plans contract with the Health Care Financing Administration (HCFA) to tap into the rapidly growing Medicare market. HCFA pays the plan to provide Medicare-covered services to Medicare patients who join the plan and become plan members. But Medicare plan members often go to out-of-network providers for treatment. They’re more likely to need emergency or urgent care services than are younger plan members. They may also spend extended time during the winter away from home in places like Florida or Arizona, and may need medical services there. If that happens, federal law allows the out-of-network provider to demand payment of up to the amount it would have been paid if the patient had been in the traditional Medicare program, sometimes called “original Medicare,” according to Texas attorney Robert Wolin.
Traditional Medicare requires providers to accept the lower of their charges or Medicare’s fee schedule rate. “The Balanced Budget Act (BBA) and regulations are clear on this issue,” Wolin notes. Because most providers’ charges are higher than the fee schedule, the provider typically gets reimbursed at Medicare’s fee schedule rate.
But many plans have been applying their own fee schedule when they pay out-of-network providers for services provided to Medicare plan members, warns Monica Lelevich, head of managed care for a hospital in the Pacific Northwest. If their contracted rate for a service is lower than Medicare, they’ll act as though there’s a contract even if there isn’t and pay the lower contract rate instead of the Medicare rate.
This unsavory practice is financially painful for any affected out-of-network provider, but it’s probably worst for hospitals paid under Medicare’s prospective payment system. Under prospective payment, Medicare pays hospitals a standardized rate for in-patient services according to the diagnostic related group (DRG), whether it costs the hospital more or less than that DRG rate to treat the Medicare patient. Medicare’s “lesser of Medicare or actual charges” payment rule doesn’t apply to in-patient services, according to Lelevich. For example, if treatment for a Medicare patient costs more than the DRG rate, the hospital gets only the DRG rate and takes a loss on that patient. But when another Medicare patient is admitted for the same problem and the hospital’s actual cost for treating the patient is less than the DRG rate, the hospital still gets the DRG rate and may pocket the difference. “The hospital’s overall costs are evened out,” says Lelevich.
But many Medicare plans will pay the hospital the lowest rate among the contracted rate, the DRG rate, or the hospital’s actual charges, even though the hospital never agreed to accept a rate lower than the Medicare DRG rate, says Lelevich. She recently discovered that one Medicare plan was shortchanging her hospital by $75,000 this way.
This practice often occurs without the provider’s approval or knowledge, notes Lelevich. “Plans don’t even apply one particular fee schedule consistently, so they can’t even argue that they believed that the provider had agreed to their payment methodology,” she says. But if this happens to you, going to your Medicare intermediary won’t help, notes Wolin, because it’s a private business matter between you and the plan.
What’s worse, since you don’t have a contract with the plan, you can’t use any rights ordinarily available under the contract to stop this unsavory practice, according to Tennessee attorney Kevin Outterson. “It’s not a contract issue, since you don’t have a contract to enforce or even terminate,” he says. “Your only legal recourse is to take the plan to court.”
Take Two Steps
Fortunately, there are two steps you can take to recover underpayments without having to go through a costly and time-consuming lawsuit, experts say.
Step #1: Determine amount of underpayment. Your first step, according to the experts, should be to compare the amounts billed to Medicare through plans with which you don’t contract to the reimbursement amount you actually got for treating the Medicare patients. “Don’t assume that you’re being paid correctly,” Lelevich warns. If you find the payments are correct, you should still continue to monitor your claims.
Step #2: Write to plan. If you discover that a plan has shortchanged you, send a copy of the bill for your services to the plan along with a letter outlining your complaint and demanding full payment. (Use certified mail, Lelevich suggests.) This will put the plan on notice that you won’t let it get away with shortchanging you and that you expect to be paid the amount you’d be entitled to for these claims under traditional Medicare. “This is a cheap way to try to get paid correctly,” says Outterson. “If a plan gets several letters like this from providers, it may pay you the full amount and pay you correctly in the future.” At the very least, it creates a record that you attempted to resolve the problem informally before resorting to further action, notes Wolin.
You can send a letter for each individual underpayment you find, or “bundle” all of the underpayments. If you don’t have a regular contact person at a plan that has underpaid you, send the letter to the plan employee who arranged for the Medicare plan member to go to you for treatment, and send a copy of your letter to the plan’s president, suggests Wolin. If no representative was involved, send the letter directly to the plan president.
Negotiator Says: Check your records and have your attorney check state law before sending a complaint letter, warns Washington, D.C., attorney Thomas Brock. You must make sure you didn’t somehow inadvertently agree to a lower rate for treating a Medicare plan’s members. For example, if you’ve typically accepted a plan’s fee schedule as payment in full instead of the traditional Medicare rate, the plan may argue that you’ve in effect created a contract for that fee. In some states, taking the plan’s lower rates even once may be enough, he says.
What to Say in Letter to Plan
Your letter to the plan should do the following:
Give identifying information and demand payment. Tell the plan the claim number(s), the member’s name, and date of your services to the member. Include a copy of the original bill. Also attach other documents, such as the member’s medical record, if you believe those would be helpful [Ltr., par. 1].
Cite law. Cite the section of the BBA that says that noncontracted providers get paid the traditional Medicare rate for treating Medicare plan members. There may be additional sections of the BBA that you can also cite, says Wolin. For instance, the section on Medicare point-of-service plans also states that noncontracted providers are entitled to the regular Medicare rate for services provided to Medicare plan members. Ask your attorney to review the situation and then look at the BBA and any applicable HCFA manuals or guidelines for additional relevant sections or documents [Ltr., par. 2].
Specify no contract exists. Tell the plan that no contract exists between you and it covering the services in the claim. Also say that you never agreed to accept a lower rate on this claim [Ltr., par 3].
Demand payment and set deadline. It’s reasonable to demand that the plan pay you within 14 days from the date of the letter, say the experts [Ltr., par 4].
Warn plan of consequences. Tell the plan that if your claim isn’t paid by the deadline, then you may have to take “further action.” If you use this deliberately vague phrase, you don’t limit your options [Ltr., par 4].
Send copy to HCFA. Send a copy of your letter to Dr. Robert Berensen, Director, HCFA’s Center for Health Plans and Providers, 7500 Security Blvd., Baltimore, MD 21244. And include a “cc” at the end of the letter so the plan knows about it. “A plan may pay you faster if it sees that you’ve sent a copy to HCFA,” notes Wolin.
While HCFA won’t intervene in a private payment dispute between a plan and a provider, HCFA does want to know if its contracted plans are underpaying providers, according to one high-ranking HCFA official. “If we feel there’s an issue, we’ll look into it, especially if we receive several letters on one plan,” he says. “Plans aren’t supposed to circumvent the Medicare regulations.”
You may also want to send a copy to your local or state medical society or trade association. If your association learns that several of its members are experiencing this payment problem with a particular plan, it may get involved on your behalf, says Outterson.
If Plan Won’t Pay
If the plan doesn’t respond to your letter with payment, talk to your attorney about what to do next. For instance, you may be able to sue the plan, bill the patient directly for the underpaid amount, and/or deny plan members future access to your services, says Wolin.
Sources
Thomas Brock, Esq.: Proskauer Rose, 1233 20th St. NW, Ste. 800, Washington, DC 20036.
Monica Lelevich: Director of Managed Care Contracting, Peace Health, St. John Medical Center, P.O. Box 3002, Longview, WA 98632.
Kevin Outterson, Esq.: Baker, Donelson, Bearman & Caldwell, 1700 Nashville City Centre, 511 Union St., Nashville, TN 37219.
Robert Wolin, Esq.: Baker & Hostetler, LLP, 1000 Louisiana, Ste. 2000, Houston, TX 77002.
Reprinted with permission from the montly newsletter, Managed Care Contract Negotiator, December 1999. Copyright 2000 by Brownstone Publishers, Inc., 149 Fifth Ave., New York, NY 10010-6801. Call 1-800-643-8095 for a free sample issue.
Leave A Response