http://www.latimes.com/business/la-fi-insure23-2008oct23,0,442561.story
From the Los Angeles Times
The battle of the medical bills
Doctors and insurers blame each other for an
administrative headache that is driving up the nation's healthcare
costs.
By Daniel J. Costello, Lisa Girion and Michael A.
Hiltzik
October 23, 2008
Last of three parts
In late 2007,
Centinela Hospital in Inglewood was losing nearly $1 million a month and had
piled up $15 million in debt. Among the causes of the crisis: $25 million in
overdue bills.
Collecting that money would have given Centinela a measure
of relief. But the bills went unpaid, and the century-old medical center was
sold. The new owners slashed services, closed half the operating rooms and laid
off a third of the employees.
Who owed Centinela that elusive $25
million? According to hospital officials, it was health insurance
companies.
"Insurers have found a very creative way of denying, delaying
or slowing payments in a way that is having a real impact on patient care and
some of our survival," said Von Crockett, Centinela's chief executive. "Every
single doctor and hospital is writing off money they are legally owed but don't
collect. It's an insane situation."
Doctors and hospital executives say
collecting payments from insurers has become an expensive headache that is
driving up the nation's healthcare costs.
Billing disputes and protracted
payment delays are one consequence of a massive consolidation among health
insurers that has created de facto monopolies in much of the country, the Los
Angeles Times found.
Two decades ago, the top 10 insurers covered about
27% of all insured Americans. Today, four companies -- WellPoint Inc.,
UnitedHealth Group, Aetna Inc. and Cigna Corp. -- cover more than 85 million
people, almost half of all those with private insurance.
A 2007 survey by
the American Medical Assn. found that in two-thirds of metropolitan areas, one
health insurer controlled at least 50% of the market. In the Los Angeles area,
two companies dominate -- Kaiser Permanente and WellPoint's Anthem Blue
Cross.
As a result, doctors and hospitals have little negotiating power
and few options when an insurer rejects a bill. Some physicians are dropping out
of insurance networks or turning away new patients. Others have moved to
cash-only practices. Some smaller hospitals and solo-practice physicians say
they are being driven out of business entirely.
The insurance industry
lays much of the blame for billing problems on doctors and hospitals. Insurers
question or reject claims "when we don't get full information or when we get
duplicate bills," said Karen Ignagni, president of America's Health Insurance
Plans, the industry's lobbying arm in Washington. "Efficiency is a two-way
street."
In some cases, she said, insurers are simply trying to ensure
that doctors treat patients consistently and in accordance with the highest
medical standards -- that they're not wasting premium dollars by overusing
costly treatments or ordering unnecessary tests.
"Utilization review is
coming back," she said, referring to heightened scrutiny of doctors and
hospitals. "You can't run a health plan today without using some of these tools
and techniques" to control costs.
But Ignagni acknowledged that billing
processes were inordinately complex. She said insurers were aware of providers'
complaints and were trying to streamline billing systems.
"No question
that administrative simplicity has to be job one," she said.
Reading
the fine print in policies
Arcane and ever-changing coverage rules
are a leading cause of fee disputes. Patients and physicians are compelled to
pay special attention to the fine print in healthcare policies.
Dotti
Smith, office manager for a group of surgeons affiliated with St. Mary's
Hospital in Long Beach, recently billed a major insurance company for a
gallbladder operation. The insurer had preauthorized the surgery and the surgeon
was a member of the insurer's network of preferred physicians, Smith said. But
the company refused to pay the $3,100 bill.
Why? The patient was enrolled
in a subcategory of coverage with a smaller network of doctors that did not
include the Long Beach surgeon.
The surgeon's office contacted the
patient, who replied that the bill should be her insurer's
responsibility.
Smith said the time she spends on billing issues has
doubled over the last six years.
"It used to be a breeze," she said.
"You'd bill Blue Cross or Blue Shield, and you'd get paid. Now you have to
constantly stay ahead of the ball."
Doctors, nurses and other staff
members are spending more and more time haggling with insurers over claims or
obtaining advance approval for treatments.
Dr. John A. Glaspy, a UCLA
oncologist, said that nurses who used to care for patients full time "now spend
40% of their 60- to 70-hour workweeks filling out forms and phoning for
authorizations."
Walking through his office suite at UCLA Medical Plaza,
Glaspy pointed to offices of clerks and medical assistants busy securing
insurance approvals for even routine procedures.
"We have one employee
just getting radiological approvals, eight to 10 a day," he said. "That's
$45,000 in salary, plus benefits, not going to healthcare. It can take us a
whole day just to find out who to get the authorization from."
Glaspy
called the administrative burden an "incalculable" waste. "When patients sign up
with an [insurance] company, they don't say, 'Find a doctor who's good at
jumping through hoops.' "
More than 30 cents of every dollar spent on
healthcare goes to administration, according to a 2007 survey of insurance and
medical executives. That translates to about $630 billion this year. It is
nearly twice the 16.7% spent on overhead in neighboring Canada.
In
California, about 21% of private health spending goes to insurance paperwork,
according to a 2005 report in the journal Health Affairs. That represents $26
billion a year.
"This is a substantial cost to the system . . . and,
unfortunately, those dollars don't do anything to provide care to anyone," said
Christopher G. Dawes, chief executive of the 264-bed Lucile Packard Children's
Hospital in Palo Alto.
Dawes said the hospital employed "well over 100
people" working on billing and collections.
"And that doesn't really talk
about the hidden costs, which is the actual delivery of care -- nurses,
physicians and actual providers who are spending extra time on documenting to be
sure they are paid for what we expect them to do," he said.
Patients
caught in the middle
Patients are often dragged into the financial
tug of war.
When their bills are rejected or reduced by insurers, doctors
often try to recover unpaid balances from patients, even if the amounts exceed
what they are responsible for paying under their insurance plans. This practice,
known as "balance billing," is being scrutinized by regulators in several states
-- including California, which recently banned the practice for emergency room
care.
Francine Gair of Chico, Calif., got entangled in the billing wars
after she tripped over her dog in June and broke her elbow. Three days later,
doctors put a 4-inch metal plate in her arm. Gair, 62, a freelance writer,
thought she was free and clear after paying the $4,000 deductible on her health
plan. The surgeon and the outpatient center where the operation was performed
were both in her Blue Shield of California network.
But even before she
had her stitches removed, she was surprised to receive a $1,200 bill from the
anesthesiologist. He informed her that he had dropped out of the
network.
Gair says she should have been told this beforehand and is
refusing to pay. Blue Shield is considering her appeal. Gair is holding off on
follow-up surgery to remove the plate until the dispute is resolved.
"I
think the whole system is messed up and needs to be changed," Gair said. "I
regularly paid my insurance, but even when I had an accident I get stuck with a
bill."
Physicians are fighting the insurance giants in court. In
class-action lawsuits, thousands of doctors alleged that the nation's largest
insurers, including WellPoint, Aetna, Cigna and Humana Inc., were involved in a
"conspiracy. . . . to deny, delay and diminish payments to healthcare
providers."
The suits accused insurers of systematic efforts to
shortchange doctors, including reclassifying treatments to reduce payments,
arbitrarily rejecting claims and purposely delaying reimbursements while earning
interest on the money.
To settle the litigation, insurers set aside
hundreds of millions of dollars to pay doctors who successfully challenge
disputed bills in arbitration. WellPoint and Aetna alone committed $235 million
to the recovery fund. Several smaller groups of doctors have similar lawsuits
pending.
Insurer reimburses after being sued
Doctors and
patients in New Jersey sued Woodland Hills-based Health Net Inc. over
out-of-network fees. Without admitting liability, the insurer agreed to
reimburse as many as 2 million people who complained of inadequate insurance
payments from September 1997 through July 2007.
U.S. District Judge Faith
Hochberg ruled that Health Net used a database that set out-of-network payments
too low. Most health insurers use the same database, produced by Ingenix, a
subsidiary of UnitedHealth Group. Doctors, patients' rights groups and some
state regulators are trying to get the system overhauled.
In February,
New York Atty. Gen. Andrew M. Cuomo announced that his office was investigating
UnitedHealth and Ingenix. He accused them of cheating patients by using faulty
data to reduce out-of-network payments. Cuomo said the case could affect 70% of
Americans with private health insurance.
UnitedHealth defended the
Ingenix data, saying it was "rigorously developed, geographically specific,
comprehensive and organized using a transparent methodology that is very common
in the healthcare industry."
The insurance industry has invested billions
of dollars developing software for processing claims. The software, with 45
million separate codes for medical procedures, sifts claims for inflated
charges, errors or inconsistencies that could provide grounds to deny or delay
payment.
Because most physicians use paper billing records, many say that
challenging the insurers is like going into a gunfight with a butter knife. To
even the odds, some doctors, clinics and hospitals are investing in software of
their own or outsourcing their billing to national companies that aim to pool
enough providers to match the insurance industry's muscle.
Companies such
as Boston-based AthenaHealth and National Healthcare Exchange Services (NHXS) in
Sacramento examine disputed charges to help doctors and hospitals support their
original claims. The companies typically charge up to 10% of doctors'
revenue.
NHXS, founded in 1999, represents 7,000 clients in 33 states.
The company uses a database of insurer payment rules to analyze reimbursement
patterns.
Mark Rieger, president of NHXS, said the data showed that
insurers denied at least partial payment about 30% of the time on the first bill
and ultimately denied appropriate payment in 6% of cases.
Insurers "are
processing millions of claims a day," he said. "If they save a few dollars per
claim, that's real money. They can say it's no big deal. But how often is your
paycheck wrong? And if it was, would you allow it?"
In June, the American
Medical Assn. released its first rating of insurers' billing patterns. It found
that United Healthcare paid physicians the contracted fee 62% of the time, Aetna
paid 71% of the time and Medicare paid 98% of the time.
The new owner of
Centinela Hospital, a for-profit company called Prime Healthcare Services, has
grown rapidly in Southern California by withdrawing from most private insurance
networks. The company gets most of its patients through its emergency rooms and
admits many for further care. Prime Healthcare then bills the patients' health
plans at rates much higher than the insurers' negotiated rates for member
hospitals.
Crockett, Centinela's CEO, defended this approach, which has
sparked controversy and lawsuits. "What other choice do we have?" he asked.
"Insurers have tied our hands."
Last fall, Dr. Michael Hurwitz, a general
surgeon at Hoag Memorial Hospital Presbyterian in Newport Beach, dropped out of
Anthem Blue Cross of California, a WellPoint subsidiary, after the insurer
reduced reimbursements for his procedures by 30%. If he treats a Blue Cross
patient at the hospital, he bills the patient directly.
Hurwitz,
president-elect of the Orange County Medical Assn., said he had no
choice.
"My bills go up 4% or 5% a year just to pay my staff, my rent, my
malpractice insurance. All these continue to rise, but what am I getting back?
The disproportionate advantage insurers have is astounding."
Girion and
Hiltzik are Times staff writers. Costello, a former staff writer, contributed
reporting before leaving
The Times in August.
lisa.girion@latimes.com
michael.hiltzik@latimes.com
Copyright 2008 Los Angeles Times