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Playing the Claims Game

Confusing language, inconsistent enforcement of payment laws,
and constantly changing coding requirements have physicians
tearing their hair out. Take steps to minimize the hassles and
maximize your payments.

By Susan Meyers Published March/April 2005

When Tom Steele, MD, an internist in McMinnville, Oregon, completed medical school and residency training in 1999, he held some very idealistic and altruistic expectations about practicing medicine and helping improve the quality of life for others. However, like many physicians starting private practice, he wasn’t quite ready for the reality that would follow. Before setting up practice with two veteran physicians in the area, he began the credentialing process, then began seeing patients and billing for his services. That’s when the headaches began. He found no insurers would process claims until the credentialing process was complete. The claims were going out, but most were coming back rejected or not coming back at all.

It took nine months before he was credentialed by the main insurance company in the area, during which time he received no payment for his services. “It took a full year before I was getting paid enough just to cover my overhead,” says Steele. In his first year of practice, Steele provided more than $10,000 in free care to patients from these insurers. Even after he received credentialing by the necessary insurance carriers, the claim hassles continued. Some were paid, some were partially paid or down coded, and others were not paid at all with insurers saying the claims were lost or simply rejected. After billing, tracking down unpaid claims and refiling them, Steele figures it cost him an average of $30 to $50 to bill and follow each claim through the insurance system. “I was working the first three days of each week just to cover my overhead,” he says.

It’s not a new story to Jim Rohack, a cardiologist in Temple, Texas, and the chair of the American Medical Association (AMA) Board of Trustees. “These are the things physicians are not educated about in medical school or residency training programs but can make or break a successful practice,” he says. It’s also an issue that has received the attention of the nation’s lawmakers the last
few years.

Prompt payment legislation has been passed in 49 states and the District of Columbia as of August 2004 with the goal of stemming payer abuses and giving physicians an avenue for redress. Only South Carolina has no legislation to date. Most prompt payment laws require payment of claims within 30 to 45 days, however deadlines vary from 15 days to 60 days. Payment past the deadline can result in penalties levied against the insurance carrier. While physicians are seeing improvements, the effectiveness of the laws varies from state to state. “Prompt payment laws are only as effective as to how clearly they are written and how well they are enforced,” says Rohack. “Enforcement is now the weak link. States that have passed the strongest laws with regulations related to fairness, transparency, and openness have seen the greatest improvements.”

The prompt pay movement

The movement toward prompt payment legislation began in the late 1990s, spearheaded by the AMA at both the state and national level. Since 1998, state medical societies—in conjunction with the AMA—have surveyed 25,000 physicians nationwide. The results reveal a plethora of problems related to billing and collection, including partial payment of bills, lost bills, requests for resubmission, payment denial without reason, and requests for additional supporting information.

Billing hassles put a tremendous burden on a physician’s ability to practice medicine, says Rohack, who calls the problem an access issue. “Physicians are in the business of providing high quality care,” he says. “If they’re not getting paid fairly and promptly, they can’t provide these services and they may end up having to close their doors.”

That’s exactly the predicament Steele found himself in. After just two years in private practice, Steele chose to close down the shop and began working for the local hospital emergency department, where he had a guaranteed salary and was freed of many of the billing and insurance headaches he had to deal with in private practice. “I was working 26 to 28 days a month, seeing patients at my clinic during the day and moonlighting at two to three different hospitals during evenings and weekends and still I was only making $11 to $13 an hour,” he says.

Steele’s idealistic view of medicine was shattered. “I thought that if I just practiced good medicine, patients would come and I would be able to make enough money to support my family,” he says. “I had to be willing to make a greater economic sacrifice than I was willing to make.”

How effective are they?

A survey developed by the AMA’s Private Sector Advocacy area and implemented by state and local medical societies questioned 25,000 physicians nationwide. The findings suggest that prompt payment laws have had some beneficial effect. Physicians report that most health plans reduced the average of 90 to 120 days they once took to pay a claim. However, the survey found that most plans still fall outside the 15- to 45-day deadline required under state prompt payment laws. Why? Physicians and insurance plans don’t see eye to eye regarding what constitutes a “clean” claim—the second half of the prompt payment debate. Even with fines and restitution over the last five years totaling an estimated $50 million, according to AMA, insurers continue to hide behind the “clean claim” provision and other loopholes of the law and deny or partially pay claims it says are not filled out correctly. The fact is, what constitutes a clean claim varies from one insurance carrier to the next and it’s up to the physician or his billing staff to know these subtle differences.

“Tracking down denied claims is a huge burden and expense,” says Erik Swensson, MD, a general and vascular surgeon in McMinnville, Oregon, who has been playing the “billing game” since he set up private practice in 1998. In the process, he has come close to shutting his office down on several occasions and has lost three partners as a result of hassles with billing and cash flow. His problems with insurance carriers led him to play a leading role in the passage of a prompt pay law in Oregon.

The claims game

“There is a constant battle with cash flow,” Swensson says. He estimates that a small physician office requires two full-time office people per doctor to sift through the billing process. “That’s a huge drain on the entire health-care system,” he says. “Solo practice is now a rarity because physicians can’t survive the game of claims and malpractice.” Swensson refers to a March 2003 survey of physicians by researchers at the University of Albany in New York that found that only three percent of residency and fellowship graduates planned to seek solo practice upon graduation.

John Baltz, the chief administrative officer with Internal Medicine Associates, a 17-member multi-specialist group in Omaha, Nebraska, estimates that 20 percent of his business office staff time is dedicated to appealing denied claims, which average about 16 percent of all claims his office submits. “It boils down to a game,” he says, “and the insurance carriers are the judge and the jury. If the insurance company denies a claim, it is our responsibility to find out why. Then we have to resubmit additional documentation in paper format. This alone doubles the cost of manpower to prepare the documentation. In some cases, we might have to bill or contact a carrier up to 10 times for the same procedure before we’re successful in getting it paid.”

Swensson has managed to survive through creativity and ingenuity. As a solo physician, he requires a staff of four to keep the office running and cash flow coming in. This includes a receptionist, a medical assistant, a medical coder and a biller. To afford his office staff, Swensson worked out an arrangement with the local medical center in which he “rents out” the billing services of his office staff to other physicians. “I wouldn’t be able to afford it on my own,” he says.

How bad is the problem? Swensson says that in 1986, he received payment for 98 percent of what he billed. Today, even after haggling with the insurance companies, he is paid for approximately 60 percent of what he bills. The way Swensson sees it, “everybody needs to play under the same rules, but insurance companies claim they are private companies and they can have their own rules.”

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