South Carolina Lawyer
Vol. 13, No. 2, Pg. 22.
Managing managed care: Providers fight back against HMOs
22Managing managed care: Providers fight back against HMOsBy Ralph W. Barbier and Matthew B. RobertsThe managed care market has become a battleground that pits hospitals and physicians against payors such as health maintenance organizations ("HMOs") and other entities that pay for healthcare services. What is at stake in this struggle between healthcare providers and payors? The answer is money (and lots of it) and, ultimately, control of the healthcare delivery system. Many physicians and hospitals believe that HMOs are turning the procedure for the payment of claims into a financial nightmare. Armed with the help of attorneys, regulators and legislators, providers are voicing their concerns over HMOs' payment for the delivery of healthcare services. Providers are most concerned about two things: the late payment of claims and wrongful denial of claims.
Typically, an HMO contracts with a hospital or physician to provide healthcare services to the members of the HMO plan subject to the rules of the HMO. The HMO uses such rules to "manage the care" of the enrollee in the plan. Once a patient is treated, the physician files a claim with the HMO, which either denies or accepts the claim. Too often, however, healthcare providers allege that their claims are unfairly denied by a payor or payment of the claim is delayed for an extended period of time. These two issues are the root of most disputes between providers and HMOs.
In the past, hospitals and physicians were content to simply be participants in an HMO's network. Times have changed, however, and today, providers are looking for a sound economic benefit for participating in a managed care network. If an HMO does not pay claims in a timely manner, or wrongfully denies claims, then this economic benefit cannot be achieved.
Consequently, hospitals and physicians are challenging the timing of payments as well as the denial of payments by HMOs. In a study based on a survey of 33 out of Maryland's 47 hospitals, the Maryland Hospital Association discovered that HMOs denied $74 million in hospital claims in 1998. According to the survey, HMOs denied at least part of a claim in 15 percent of hospitalizations. Studies by other state hospital and medical associations have indicated that the percent of denied claims is even higher in some areas of the country. HMOs counter by saying the denied care was not medically needed or that the hospitals failed to follow proper procedures when documenting the care. Providers argue that the "proper procedures" for documenting care are often a moving target which is arbitrarily changed by HMOs as a means of denying claims. Many hospitals and physicians complain that they are forced to submit the same claim numerous times in order to get the payor to begin to process the claim-only to have the payor deny the claim for no reason or some arbitrary reason.
Most HMOs have extensive utilization review procedures they use to decide the appropriateness of the provider's claims. While many providers allege that this process is akin to practicing medicine, the use of utilization review by HMOs is one of the foundations of managed care. The question in these disputes is whether payors are wrongfully using the utilization review guidelines to escape the obligation to pay for claims, rather than to manage the care of the patient.
Providers argue that when claims are eventually paid, they are often
25 paid late. Most provider agreements require payment of claims within 30 to 60 days of the receipt of the claim by the payor. Some providers feel that payors intentionally institute a pattern of delaying claims and using the money owed to the providers for the HMOs' own purposes. This process is then described as "managing care." This theme is echoed across the country, as health providers claim that they are losing millions of dollars due to egregious delays.
For example, of the $561 million that Massachusetts's HMOs owed...