The man President Obama originally wanted to oversee his dream of affordable health insurance for most Americans, former Sen. Tom Daschle, withdrew his nomination for Health and Human Services secretary in early February. While tax issues were the headline reason he bailed, the financial disclosure statement he filed with the Office of Government Ethics revealed the health care industry — which he was about to regulate — paid Daschle more than $200,000 over the past two years in consulting and speaking engagements.
Included in one of those speaking appearances was an exclusive, invitation-only conference in May 2008 at the Gaylord Palms Resort in Orlando, Fla., held by Ingenix, a research firm owned by UnitedHealth Group, one of the nation’s largest health insurers. Daschle gave the keynote address.
At the time of the conference, Ingenix was openly under investigation by New York Attorney General Andrew Cuomo in a case involving UnitedHealth and Aetna, which was settled in January. The suit alleged a conspiracy to lower health insurance reimbursements when patients see a doctor outside their provider network; Cuomo said patients were defrauded of hundreds of millions of dollars of unpaid claims.
“For the past 10 years, American patients have suffered from unfair reimbursements for critical medical services due to a conflict-ridden system that has been owned, operated, and manipulated by the health insurance industry,” Cuomo said in January. “This agreement marks the end of that flawed system.”
One flawed system may have ended, but another persists even as the president tries find experts not tangled in conflicts of interest to recast the $3 trillion American health care system to focus on health and not money.
As Miller-McCune.com reported a year ago, companies such as Ingenix produce what insurers call “claims review programs,” but which those on the receiving end call “denial engines.” These computer programs sift through millions of submitted claims to, in essence, lower the amount of money insurance companies pay out to doctors. Insurers see this as cost containment, and any shortfall between what the doctor charges and what’s received generally gets passed on to the patient.
Now doctors are fighting back, settling for hundreds of millions of dollars with the help of the AMA and consultants who are trying to quantify the losses with hard numbers.
Driving denials
Ingenix’s dozens of digital products primarily analyze health insurance claims data. They help hospitals determine average fees and help physicians manage their billing, but mostly they help insurers scrutinize submitted charges.
The program under fire by Cuomo allegedly cooked the numbers in a database that collected out-of-network charges. When insurers paid the average cost of a particular service, the “usual and customary” rate, they artificially – and intentionally, said Cuomo — lowered that rate.
Using technology to reduce payments to physicians for out-of-network services just touches the surface of physician discontent. Doctors argue that insurers underpay or flat out deny, as a matter of course, legitimate health insurance claims worth billions of dollars each year. This in turn costs them more in lost time and money to recover. They say, in the end, it’s the patients who suffer, paying more and getting less when insurers use secretive methods that rely on proprietary software.
There’s a virtual arms race taking place between hospitals and physician groups on one side and insurance companies on the other, each spending millions of dollars on software programs and claims reviewers to counteract their losses. Leading software designers include IBM, McKesson, Bloodhound Technologies, TC3 Health and Fair Isaac (which sold the claims review part of its business to Mitchell International last May). These companies boast their products can reduce insurance payments between 3 percent and 7 percent.
The extent to how often insurers use computer-generated edits to reduce payments varies widely — anywhere from less than 0.5 percent to more than 9 percent — according to the AMA’s National Health Insurance Report Card. The use of “undisclosed proprietary edits” to reduce payments — as opposed to publicly stated reasons for the reduction — varied from none at all to nearly 72 percent of the time. This lack of transparency largely contributes to doctors’ frustration, said Frank Cohn, senior policy analyst for MIT Solutions a health care consultant firm to physicians and hospitals.
“We’re trying to put medical practices on an even playing field with the payers,” Cohn said.
Insurers say the programs improve efficiency and save costs through real-time billing where patients can see what they owe and doctors know how much they’ll get paid right at the time of service, said Robert Zirkelbach, spokesman for America’s Health Insurance Plans, an industry trade group. Insurers reduce administrative costs through computer edits, in some cases offering cash back to doctors if they submit claims electronically.
Drawing the line
Attempting to put a cost to this, the American Medical Association last June tapped a group of consultants to analyze 5 million claims records from Medicare and seven national health insurers.
The study found that “inefficient and unpredictable” claims-review procedures by insurers cost the health care system $210 billion annually, diverting roughly 14 percent of physician resources. The research led to a campaign the AMA calls “Heal the Claims Process.”
Dr. William A. Dolan, a member of the AMA board of trustees, said doctors should be spending no more than 1 percent of their revenue on billing. As an orthopedic surgeon in New York, Dolan has seen bills for certain types of surgery automatically get bumped to a similar surgery with a lower reimbursement rate. He draws a distinction between sifting out fraud and the automatic denials or requests for medical records that insurers impose. The latter, he said, simply exist so insurers can pay less.
“There is medical fraud on the part of doctors, but that’s a small number of people,” Dolan asserted. “You can catch various forms of fraud with different software that identify certain codes. But here are insurance companies committing fraud by downright underpaying physicians for their work.”
Some companies are selling programs to both sides of the battle (to payers and providers), but in a war that insurers are by and large winning, doctors and hospitals should be skeptical of this dual role, said Cohn.
“It’s like owning a military base on a communist island or renting a room to my ex-wife,” he joked.
While such computer programs play a worthy role in capturing a fraction of the billions of dollars in likely fraud, for the honest physician, these programs cause far more problems than they solve, Cohn said. Typically more than half of denied claims challenged by doctors are overturned on review, he said.
“What would you think of a judge who had 60 to 70 percent of cases overruled on appeal?” he asked, pointing to “denial engines” as the primary culprit.
A worthy role
Insurers by and large defend their billing software as useful tools to reduce administrative costs and improve care. The federal stimulus bill, with $2 billion for health information technology, should increase the use of computerized billing, an aspect sometimes lost by attention on electronic medical records, Zirkelbach said.
“As new technologies come on the scene, health plans are assessing their ability to streamline the billing process and ultimately improve the care patients receive,” Zirkelbach said. “There is a lot of evidence showing that new (billing) technologies are making things better.”
Billing software can allow a doctor to spend less time with balance sheets and more time with patients. Insurers can also use claims data to help doctors better comply with evidence-based medicine and make some determinations about quality, ferreting out such things as how many cardiac patients might return to the hospital within 90-days.
Not long ago, doctors made a similar advance against insurance companies. A series of settlements between the AMA and major insurers, including with Aetna in 2003 and Blue Cross plans in 2007 worth hundreds of millions of dollars, focused on diminishing the administrative hassles by insurers.
UnitedHealth and Ingenix declined to comment directly for this story, instead pointing to press releases. Aetna issued a lengthy written response touting numerous efforts to improve electronic billing since the 2003 settlement. Out of 1.6 million claims filed per year, 79 percent are submitted electronically and 80 percent are paid within 2.6 days, said Paul Marchetti, head of Aetna’s national network and contracting services. He likened what Aetna does to a similar program under Medicare.
“Aetna’s claim system is a highly customized platform designed to meet Aetna’s commitment to paying physicians and other health care providers quickly and accurately,” Marchetti said.
In recent years, Aetna launched several initiatives designed at paying claims on time, correctly and transparently when there are denials or corrections — all with the assistance of software vendors and an online tool called NaviNet, where doctors can submit claims to multiple insurers through a single portal.
“Aetna is helping take the administrative hassle out of medicine,” Marchetti said. “That’s why we are aggressively investing in e-technology and introducing new services that directly help physicians and hospitals run successful practices and focus on the thing that matters most: caring for their patients.”
Insurers settle out-of-network
In the January settlement Cuomo hammered out, a nonprofit group will replace Ingenix in managing the database for out-of-network charges. UnitedHealth agreed to pay $50 million and Aetna $20 million toward its operation. Settlements with other insurers continue.
A few days after the civil settlement with Cuomo, the AMA announced a settlement of its own with UnitedHealth: $350 million, directed to physicians and plan holders. On Feb. 10, the AMA said it would join a similar suit against Cigna and Aetna. Referring to out-of-network charges, the AMA says the insurers used “rigged data to dramatically under-reimburse physicians,” according to a press release.
“(Insurers) haven’t been punished hard enough,” said Dolan, with the AMA. “Even $350 million can be peanuts to these companies.”
Marchetti called the AMA lawsuit “disappointing.”
“This will not help advance what we believe is our mutual desire to transform health care,” he said.
For others, the financial reparations may not be enough. “I’m disappointed Cuomo settled the way he did,” said Cohn, who worked with Cuomo’s office in devising an alternate fee schedule to the Ingenix program. “I’m all for physicians who commit fraud going to jail, but who’s out there putting payers who commit fraud in jail? Apparently they just have to pay a fine.”
