A VOB Can Overturn Denied Claims, But Managed Care Contracts Should Strengthen Your Rights
Managed care providers are slowly chipping away at the strength a verification of benefits holds during a claim appeal.
Securing a verification of insurance benefits has long been the first step providers take to ensure payment of medical expenses.
In addition to the importance of knowing the patient copay and deductible, a sound verification of benefits can also give the medical provider an edge if benefits are denied later due to lack of coverage or benefits for the treatment.
In the landmark Texas ruling of Hermann Hospital v. National Standard Insurance Company, the court ruled that the verification of benefits acted as an inducement on hospitals to provide treatment to an insured person. The Hermann decision ruled that insurers who misrepresent coverage during the verification process can be liable for any damages the hospital incurs as a result of admitting that patient for treatment. Similar rulings came out of at least eight other states after the Hermann case established this important argument in favor of medical providers.
Verification is Key
Newt Courtney, Director of Patient Financial Services for Nix Health Care System, is one of many financial directors who occasionally sends a copy of the verification to the carrier in an effort to overturn a denied claim.
“I can’t put a number on the times we have done that because we just don’t track that figure. But we have had cases where we pull the file and tell the carrier we talked to (a customer service representative) and were given benefits for this stay,” Courtney said.
Such appeals have been successful, Courtney said, especially if they have all the necessary information, including the full name of the verifier. But the future of such appeals may be in jeopardy when it comes to managed care contracts.
“I have two contracts on my desk I have not signed. Both of them have a clause stressing the importance of verifying benefits and actually indicating there will be no payment if benefits are not verified. Then there is a little clause further on which says even if you do all that, the carrier still has the right not to pay the claim,” Courtney said.
“They make the wording so strong that you have to verify and then turn around and say they can change their mind about the coverage.” Managed care providers have been vulnerable to suits for misrepresentation of benefits during the verification of benefit process. In Response Oncology v. Blue Cross of Missouri, the court determined that Blue Cross of Missouri was liable for chemotherapy treatment rendered subsequent to a written preauthorization. Although the treatment was later determined not to be covered under the terms of the preferred provider agreement, the court stated that the theory of promissory estoppel barred the insurer from denying the hospital’s claim despite the high-dose chemotherapy exclusion.
In order to pursue payment under promissory estoppel, the court stated that four elements must be present: (1) promise, (2) on which party relies to his detriment, (3) in way promisor expected or should have expected, and (4) resulting in injustice which only enforcement of promise could cure.
However, such suits may become more difficult as managed care contract drafters seek to limit their liability through clauses addressing this issue. In fact, almost all managed care contracts contain some wording stating the precertification in not a guarantee of payment, according to Jim Carlough, Vice President of Business Development for Dallas-based Innovative Managed Care Systems (IMaCS). IMaCS designs software to allow medical providers to assess the compliance and profitability of their managed care contracts. The company also offers providers contract negotiation consulting.
“They don’t guarantee payment until the claim comes through the system,” Carlough said. “You will have a hard time negotiating that out of the contract.”
Carlough said that most carriers are primarily concerned with the possibility of the insured precertifying treatment and then immediately dropping coverage. In such cases, the coverage may actually terminate before the scheduled treatment takes place.
Negotiate a Binding VOB
When renegotiating contracts, providers may have better luck renegotiating the terms of clauses which indicate that precertification is not a guarantee of payment. Providers may be able to stipulate that carriers can only deny coverage on precertified treatment if coverage was terminated by the patient after precertification was obtained. Or, contract language could be inserted which indicates that precertification is binding if the verifier misinterpreted policy terms when providing the verification.
Carlough states that providers may have better luck negotiating for faster processing terms.
“You could say, ‘O.K, we will agree to the precertification language if you will agree to pay within 30 days’,” Carlough said.
This will allow providers to mitigate potential damage from faulty precertification. Insurers will not guarantee payment because the terms of the policy must be carefully applied when the bill is received. However, providers can argue that, without a substantial guarantee of payment, they are just extending credit during the processing time. Therefore, a shorter processing time is only fair to the provider.
Carlough also encourages providers to negotiate rates for as many procedure codes as possible. Many carriers seek to negotiate only the top ten codes. However, providers should stipulate payment on twice that number if possible.
“Studies are now showing that managed care payers underpay hospitals from three to twelve percent,” Carlough said. “They often don’t know what reimbursement rate to apply. They can’t figure out their own contract.” Finally, always request the precertification in writing. A written precertification lends weight to the provider’s argument that the patient was admitted based on the promise of payment. The precertification wording may also be crucial to providers appealing a denied claim based on promissory estoppel.
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