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California hospitals, physicians may recoup millions in insurer payments

Seven plans are fined nearly $5 million and agree to make up late or incorrect payments as part of a settlement with the state.

By Emily Berry — Posted Dec. 13, 2010

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The agency that regulates HMOs in California has ordered seven of the largest health plans to pay nearly $5 million in fines, and to compensate doctors and hospitals for millions more in late or incorrect payments.

The health plans also will have to pay back hospitals and physicians, plus interest, for claims identified by the Dept. of Managed Health Care during a coordinated 18-month audit of the seven companies' payment practices.

"This is not a glamorous issue, but it is the bread and butter of our health care system," Cindy Ehnes, director of the Dept. of Managed Health Care, said at a Nov. 29 news conference announcing the fines.

The department found that health plans failed to comply with the state's prompt-pay law, and that insurers' appeals processes were in some cases far from independent reviews -- sometimes the same person who denied a claim reviewed the appeal.

Anthem Blue Cross of California was fined $900,000; Blue Shield of California, $900,000; UnitedHealth Group, $800,000; Health Net, $750,000; Kaiser Foundation Health Plan, $750,000; Cigna, $450,000; and Aetna, $300,000. The insurers did not officially admit wrongdoing, but Ehnes said all had agreed in principle to pay the fines, and she did not expect any appeals.

All of the plans failed to meet a threshold of paying 95% of claims accurately and on time, Ehnes said. A DMHC staffer at the news conference said the actual rate of compliance varied, but probably on average, only about 80% of claims were paid on time and in the correct amount.

In a statement released in response to the fines, the California Assn. of Health Plans said its members "have long recognized that the administrative side of health care coverage can take valuable time away from patient care, which is why plans have been working to streamline processes both at the health plan level and in doctors' offices."

Ehnes said claims repayments could total tens of millions of dollars but mostly would go to hospitals, because they submit more claims than do physicians. Neither physicians nor hospitals will need to file any paperwork to get their money. The exact total is yet to be determined, because DMHC expects to go beyond the sample of claims that were the basis of the fines to do a more thorough audit.

But even tens of millions of dollars is hardly a hit to highly profitable health insurers, said California Medical Assn. President James Hinsdale, MD, a trauma surgeon from San Jose.

" 'Chump change' is not an exaggeration -- this is just the cost of business the way they look at it," he said. "It's nice to see, but long overdue."

Ehnes said her department also will require the HMOs that were fined to change their claims payment systems, particularly in regard to appeals, to pay claims more quickly or else pay interest, and to make sure that appeals are legitimate reconsiderations, not just a reprocessing by the same people who make the initial denial.

The DMHC's investigation was prompted by complaints from physicians unhappy with the department's support of a ban on balance billing in California. Ehnes said doctors told her they needed to be able to collect payment from patients because it was so difficult to get insurance companies to pay them for care.

"A profound statement to me from one emergency room physician was that mostly what they were seeing in the ER were people who had no insurance, but even when they had insurance, they didn't get a payment -- what they got was a ticket to chase payment," Ehnes said. "Those emergency rooms and emergency room physicians cannot sustain themselves on an empty promise to pay."

But Dr. Hinsdale said one fine two years after the balance billing ban went into effect does not make up for the damage done to physicians.

"They disadvantaged doctors when they led the charge to disallow us to balance bill," he said. "We all knew there's a huge problem trying to get insurance companies to pay us."

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