Recent moves in some states by insurers to restrict the use of out-of-network facilities by their members have created a headache for many ASCs around the country. Although out-of-network facilities continue to be successful, a growing resistance from insurers against paying billed charges and, in many cases, reasonable and customary rates to out-of-network providers signals a growing challenge for ASCs.
In the early days of ASCs, many insurers were willing to pay billed charges in full or at a slight discount to non-participating ASCs who treated patients with out-of-network benefits, often paying more to out-of-network providers for services than they did to participating providers who were performing services at contracted rates. Although this continues to be true in some areas of the country and for some insurers, in the past few years, other insurers have begun to find ways to reduce these payments drastically.
As private insurers look for ways to reduce costs, they have increased their efforts to target out-of-network providers in a number of ways. Some large health plans are taking steps in many markets to curtail the ability of ASCs to treat patients out of network. Some insurers are trying to substantially reduce, withhold or, in some cases, even recoup reimbursements paid to out-of-network providers. In many situations, the insurers also oppose efforts by providers to reduce patient copayment or coinsurance responsibility and increasingly take the position that if the patient is not required to pay, then the payor is not required to pay either.
ASCs need to be aware of four of these practices and be proactive in resisting them, when possible.
1. Pressuring physicians to refer in-network
ASCs that have avoided contracting with insurance networks are at risk for losing out-of-network volume.
“We are beginning to see efforts by some insurers to pressure physicians to refer to in-network facilities,” says Thomas Michaud, chairman and CEO of Foundation Surgery Affiliates. “In several states, insurers, such as Blue Cross, have sent letters to physicians who have a pattern of referring to out-of-network facilities and basically threatening to revoke the physician’s contract if the pattern continues.”
Jeffrey Shanton, director of billing for American Surgical Centers, says that Horizon Blue Cross Blue Shield of New Jersey recently terminated 17 physicians from one out-of-network ASC in the state for referring to the out-of-network facility.
“The physician contracts almost certainly contain non-cause termination language, which is how the insurer is able to terminate the contracts,” says Mr. Shanton. “However, in this case, Blue Cross did not seem to have another reason for the termination other than referral patterns. As a result, there are some efforts here in New Jersey to take this issue to court.”
Some physicians have already begun to fight back against these practices with some success. In Texas, the state Attorney General investigated BCBS’s practice of rating physicians based on claims data, which resulted in lower ranking for physicians who referred out of network. BCBS recently settled the investigation by agreeing to cease using claims data to determine affordability.
In Georgia, a group of ASCs recently filed a class-action lawsuit against BCBS of Georgia, alleging that the insurer reimbursed out-of-network providers at only a fraction of usual and customary charges despite the fact that members paid increased premiums for coverage at these facilities. A decision on the case has yet to be rendered.
Other physicians, however, have yielded to the insurers threats.
“Some physicians will just finally say, ‘enough,’ and refer the patients to in-network providers, which can sometimes end up costing the insurers more,” says Linda McKinney, owner of LMc Solutions, Inc., a California healthcare consulting firm specializing in payor contracting. “A good example is a patient who has outpatient surgery at an in-network hospital versus an out-of-network ASC — it’s likely that the cost of care in this example is actually greater to the insurer.”
According to Ms. McKinney, pressuring physicians is one of many “strong-arm” strategies used by insurers to “get everyone contracted and pay everyone at contracted rates.”
Since individuals with out-of-network benefits pay for the ability to use providers outside their network, leaders within the ASC industry object to efforts by insurers to restrict patient choice.
“At the end of the day, these policies are more expensive than an HMO,” says Mr. Michaud. “Someone pays more for the option to have choice. Insurers who try to direct patients to a specific facility or threaten physicians based upon referrals are blatantly acting against the law. The patient has the right to select where he or she wants to go.”
Some insurers also use fee schedules to incentivize physicians to refer to in-network facilities. For example, Blue Cross of California’s PPO fee schedule is a two-tier fee schedule: Physicians who routinely refer patients to out-of-network providers without proper prior authorization are penalized with a lower fee schedule for their services, says Ms. McKinney.
Some ASC industry sources also report that representatives from certain insurers have called patients directly to inform them about the additional costs associated with using an out-of-network facility. Such actions may be, in effect, an attempt to persuade the patient to use an in-network provider.
2. Bifurcated deductibles
ASC leaders also report an increasing number of patients with separate in-network and out-of-network deductibles, which may discourage members from using out-of-network providers.
“Four to five years ago, most of the patients we treated had a single deductible of, say, $2,000,” says Mr. Michaud. “Today, we see some patients who have separate in-network and out-of-network deductibles, both at the same amount we were seeing for one deductible in years past. This can be especially frustrating for patients, especially if they are looking at scheduling a surgery toward the end of the year and therefore face ‘starting-over’ again in using down the other deductible.”
Mr. Michaud recommends that physicians take a professional approach in discussing surgery facility options with patients who have these split deductibles. “Our physicians present each patient with a form that lists where they are credentialed and then discuss options,” he says. “A physician can say ‘here is where I prefer you go’ and then work with the patient in perhaps scheduling the procedure after the new year or explaining why the increased fee may be worth it for a better patient experience.”
3. Capped out-of-network benefits
Another way that some insurers have successfully reduced payments to out-of-network providers is by capping members’ out-of-network benefits. Although reimbursement rates vary greatly by state and are subject to state laws and regulations regarding reimbursement, insurers in several states have already begun to set maximum reimbursements for out-of-network providers.
Blue Cross of California recently capped out-of-network benefits for all out-of-network ASCs at $381 per procedure, according to David Thoene, vice president of business development at Titan Health.
In New Jersey, Mr. Shanton says Horizon BCBS of New Jersey began implementing an out-of-network fee schedule for ASCs in 2004 that caps reimbursement rates at 130 percent of Medicare.
Mr. Shanton says that although these percentages may seem adequate to the average consumer because they are above Medicare’s rates, it is important to remember that Medicare fees are usually much lower than commercial payor rates and even payments double or triple Medicare may not recoup the facilities’ costs to perform some procedures.
Insurers can add language to their policies that caps the out-of-network benefit offered by their plans as well, says Ms. McKinney.
Reduced or capped out-of-network payments benefit insurers and hurt out-of-network providers, but it is important to keep in mind that the reason insurers with plans designed to cap these benefits remain active is because they are attractive to employers looking to reduce insurance premiums and healthcare benefits overall.
“I think that providers often lose sight of the impact of the employers’ contractual relationship with the insurance company,” says I. Naya Kehayes, founder and managing member of EVEIA HEALTH Consulting & Management. “The contract between the employer and the insurance company and the premiums that are paid are typically based upon the in-network and out-of-network benefits that are included in the benefit design of the plan that the employer purchases. By reducing out-of-network benefits, employers can reduce premiums, thereby saving themselves and their employees money.”
CIGNA recently released a statement to providers stating, “most plan sponsors have elected to incorporate in their plan a Maximum Reimbursable Charge provision that caps reimbursement for covered services received from non-participating providers.” CIGNA plans to cap these benefits in one of two ways: As a customer-elected percentile applied to a range of charges for a procedure in the applicable geographic area using a third party database of billing records or as a percent of schedule amount, ranging from 110-200 percent, using a Medicare-type methodology.
As more employers select to reduce these benefits, out-of-network ASCs may need to rethink their strategy. “These reduced benefits create a disincentive for the providers to remain out of network,” says Ms. Kehayes. “The benefit of out-of-network reimbursements may decline quickly and not be beneficial anymore.
“While an individual is entitled to use their out-of-network benefits to select an ASC that may offer a better environment for a procedure, I think we will begin to see more reductions in this benefit as insurers and employers look for ways to reduce premiums,” she says.
4. Leasing of insurance networks
A final way the insurers have begun to reduce payments to out-of-network providers is to lease insurance networks. Insurance networks, such as Interplan, Concentra or Cofinity, give providers access to a payor and its members in return for discounted services. For example, an insurance network’s contract might state that a provider will perform services at 75 percent of billed charges. However, they limit a providers’ ability to seek out-of-network charges for services.
Second-tier networks have grown in popularity, but providers that sign with them should be clear about the benefits as well as the risks before signing a contract, according to Ms. McKinney.
“Second-tier networks operate like this: If a provider decides not to contract with a patient’s insurance plan, but that insurer has leased a second-tier network to which the provider does have an agreement with, the insurer will pay the second-tier network’s rate, not an out-of-network rate,” says Ms. McKinney. “Second-tier networks can be beneficial in that they can give a provider access to a greater number of patients and the potential for increased case volume. On the flipside, this additional caseload comes at a price that the provider may not necessarily be aware of until after the patient is served.”
How ASCs can respond
ASCs that opt to continue treating out-of-network patients can help ensure that they draw out-of-network patient volume and are reimbursed for these procedures by offering discounts, verifying benefits and requesting payment upfront.
Mr. Michaud says that his centers may reduce the overall rate, rather than waiving deductibles or co-insurance fees, because they want to uphold the co-insurance ratios set forth by the patient’s insurance plan.
The waiving of out-of-pocket costs for out-of-network commercially insured patients is practiced by ASCs; however, any ASC considering this should analyze its own state laws, says Andrew Wachler, Esq., of Wachler & Associates. ASCs should examine their states’ false claims laws, anti-inducement laws, anti-kickback laws and unfair competition laws in addition to their state Attorney General’s opinions and state case law in order to determine if there are rules that could that create legal entanglements for the centers.
It is also very important that ASCs verify insurance benefits for out-of-network patients, whenever possible.
“We pre-certify every patient and check for inpatient and outpatient deductibles, including how much of the deductible is used and then determine what their bill will be before the day of surgery,” says Mr. Michaud.
However, insurers in some states have restricted access by out-of-network providers to benefit information, according to Mr. Shanton. “In New Jersey, out-of-network ASCs cannot verify benefits or find out the deductibles of Blue Cross patients, which makes it very difficult for us to determine what type of payment we’re working with.”
Some insurers’ plans actually require preauthorization for payment. “In California, some Blue Cross plans will not pay for a procedure performed at an out-of-network facility without preauthorization,” says Ms. McKinney. “However, Blue Cross typically does not require prior authorization for outpatient surgeries. It’s very confusing for providers. If it’s not required for outpatient surgeries, the facility may not think it needs to get the authorization and then later finds out it won’t get paid at all.”
ASCs that have patients with capped or inadequate out-of-network benefits should consider requiring patients to pay upfront for their out-of-pocket expenses or work with patients to develop payment plans before the procedure takes place.
This is especially important in some states, such as California, where out-of-network reimbursements often go directly to members, and the member is responsible to pay the facility, says Ms. McKinney.
ASCs that want to rely heavily on out-of-network patients and even those that enjoy continued access to the occasional out-of-network patient must be forward thinking in their continued response to shrinking out-of-network reimbursement rates and the reduced access to out-of-network patients.
“Here in New Jersey, where the majority of ASCs remain out of network, we are literally fighting for our lives,” says Mr. Shanton. “ASCs need to have a united front. If one or two centers jump ship and contract, the remaining centers could be boxed out from signing with that carrier in the future. We have to band together and fight for the continued success of our centers.”
Contact Lindsey Dunn at lindsey@beckersasc.com.