Enforcing prompt-payment regulations: the Texas approach - Managed Care

Healthcare Financial Management, July, 2002 by Jim E. McCoy, Michael C. Han, Michael S. Malloy

Provider Responsibility

Payers often say problems related to prompt payment typically are caused by the provider failing to submit a clean claim. Last winter, during a public hearing in Fort Worth, Texas, of the state senate's Special Committee on Prompt Payment of Health Care Providers, Bill Taylor, medical director of Aetna U.S. Healthcare, which operates a major North Texas health plan, said many physicians submit claims for services that are not covered and then complain when they are denied. Taylor maintained that Aetna paid 99.5 percent of its medical claims on time in 2001.

Sending clean claims is vital for timely payment. Errors that can delay claims payment include submission of multiple claims for the same encounter, omission of patient gender information and other demographic characteristics, failure to identify a provider representative, lack of information regarding the initial condition for which the patient presented, and failure to submit the claim in a timely manner.

Conclusion

It is difficult for providers to determine the restitution owed for economic damages resulting from slow or insufficient payment of claims. Issues of clean claims and ERISA claims make it difficult to ascertain what the penalty calculation should be, and whether it complies with the contract and state law These issues are far too important to ignore because significant dollars, potentially reaching into the millions, are at stake. The good news for providers is that the healthcare industry continues to develop and refine processes to help resolve delays in payment and assessment of fines. In the future, these improvements will serve as a foundation for a more cooperative relationship between payers and providers.

EXHIBIT 1

EFFECTS OF STATE REGULATORY DIFFERENCES ON RESTITUTION AMOUNTS

State       Days to Payment        Penalty        Restitution Due

Texas             45         full-billed charges    $29 million
Washington        30         1 percent per month    $2.5 million
California        45         15 percent per year    $2 million
New York          45         12 percent per year    $1.5 million

Jim E. McCoy is senior manager, health sciences advisory services, Ernst & Young, LLP, Dallas, Texas.

Michael C. Han is an associate, Jay Alix & Associates, Dallas, Texas

Michael S. Malloy is a consultant, Ernst & Young, U.P. Dallas, Texas.

Questions or comments regarding this article may be sent to Jim McCoy at Jim. mccoy@ey.com.