In the slugfest that constitutes the working relationship between health insurers and physicians, health plans landed a stinging blow when the California Supreme Court declared in January 2009 that balance billing by emergency physicians violates state law.
Of Pens & Principles: Collateral Damage of Crackdown on Promotional Items
By BRITTANY GLENN
Special Contributor to Annals News & Perspective
For physicians, who have probably never had to actually buy a pen in their professional careers, the ban on Pharma freebies may be a mild annoyance, but for the promotional products industry it is a billion-dollar death blow in an already fraught fiscal environment.
“The pen companies took a huge blow,” said Steve Slagle, president and CEO of Promotional Products Association International. “Any company in the writing instrument or notepaper business took a hit. It's been very damaging.”
Responding to criticism of the billions of marketing dollars Big Pharma spends annually, the Pharmaceutical Research and Manufacturers Association (PhRMA) revised its Code on Interactions with Healthcare Professionals, effective January 1, 2009. The new policy prohibits handing out “non-educational items” such as pens, mugs and other “reminder” objects adorned with a company or product logo.
“Not all of the industry's supplier companies sell pens, notepaper and the other items commonly found in doctors' offices and hospitals,” Slagle said. “And not all of the industry's distributor companies had pharmaceutical clients.”
There are 25,000 distributor companies and 3,500 supplier companies in the promotional products industry, but Slagle said the revised code only affects about 500.
“For the most part, the things that have been banned are the small items that are useful in a doctor's office,” Slagle said. “In some cases, companies have reported losses of millions of dollars … up to 75% of their business or more…. Some companies have closed their doors.”
Funding and support: Brittany Glenn is a contributing writer to two publications of Promotional Products Association International.
The ruling leaves out-of-network doctors with little control over how much they are paid when they lack a contract with their patient's managed care plan. Physicians in California worry the decision will make it that much more difficult to provide full panels of doctors in the state's already beleaguered emergency departments (EDs).
“This is potentially very devastating to the emergency care safety net,” complains Myles Riner, MD, former president of the California chapter of the American College of Emergency Physicians (ACEP). “It could potentially undermine the ability of emergency physicians and groups to operate in California.”
Riner and William Mallon, MD, Cal/ACEP's current president, predicted in the chapter's newsletter that California emergency medicine groups will respond to the loss of revenue by curtailing coverage where they can, using more physician extenders, exiting hospitals with poor payer mixes and challenging out-of-network fees with state regulators.
But the state's Department of Managed Health Care, which oversees HMOs in California, hailed the decision in Prospect Medical Group vs. Northridge Medical Center as a victory for consumers who would no longer be “caught in the middle of billing disputes.” At the same time, the agency said it would continue its efforts to make sure that doctors are paid fairly.
That didn't really help California emergency physicians rest easy as the next shoe dropped on them shortly after the Supreme Court's January 8 ruling: A proposed class action lawsuit was filed in southern California against Scripps Health and La Jolla Emergency Physicians Medical Group seeking balance billed amounts to be refunded to ED patients. Scripps contends that not only did it not balance bill in the case of this patient, treated in 2007, but it would also be unfair to retroactively apply the 2009 ruling.
Cal/ACEP has already received calls from concerned emergency physicians wondering if they'll be next, says Elena Lopez-Gusman, the chapter's director of governmental affairs. “It would be devastating” if the court in that case decides to retroactively apply the Prospect ruling and require months' or years' worth of balance billing to be repaid to consumers, Lopez-Gusman says. Either way, she adds, it will be expensive for the providers involved to defend themselves.
Both hospitals and physician groups could be targets of these lawsuits, predicts the Los Angeles health law firm Hooper, Lundy & Bookman. “We believe class action lawyers will continue to file similar class action lawsuits, as they locate patients around the state who they believe could serve as representative plaintiffs,” the firm said in a February advisory.
Patient or Profit Protection?
ACEP is following the issue closely, and a spokesperson said the organization opposes efforts to sue providers based on the state Supreme Court decision. The organization also worries that the decision could force the closure of more California EDs -- 70 have closed in recent years. “(P)rohibiting balance billing is not a patient protection initiative; it is a profit protection initiative for managed care companies, and it would curtail free market competitive pricing and protect already profitable HMOs….,” a statement on ACEP's website says.
“Due to EMTALA, emergency care providers are uniquely and severely punished by a ban on balance billing. Emergency physicians cannot choose to see or not see patients because of their insurance status. The overcrowding problem at Emergency Departments could easily worsen as the ED becomes the de facto in-network option for everyone.”
The attack on balance billing continues in state capitals around the country as legislators and regulators see consumers as third-party victims in the bruising fight over reimbursement between doctors and managed care plans. ACEP is working to ensure that where the billing practice is eliminated, there is accompanying language to ensure some type of fair payment option, Dr. Riner says.
Broad Financial Impact
The potential impact of the issue is more widespread than just a few out-of-network situations, he argues. When physicians lose the ability to seek what they see as fair payment for non-contracted work, Dr. Riner says, there is added pressure pushing down rates for contracted work.
“If health plans are allowed to set the rate unilaterally for paying non-contracted providers, it gives them incredible leverage to reduce contract rates as well,” he says. “Even if a small percentage of your services are non-contracted, (that rate) has a substantial impact” on contracted rates, he adds.
The California Association of Health Plans characterizes the issue differently, arguing that additional billing by emergency physicians adds unfairly to health care system costs.
The Supreme Court decision in Prospect was unanimous and overturned both a trial court and court of appeal, which had ruled in favor of the emergency physicians. But the state high court interpreted the state's Knox-Keene Act as meaning that doctors may not bill a patient for emergency services that the HMO is obligated to pay.
“Billing disputes over emergency medical care must be resolved solely between emergency room doctors, who are entitled to reasonable payment for their services, and the HMO, which is obligated to make that payment,” the court said. “A patient who is a member of an HMO may not be injected into the dispute. Emergency room doctors may not bill the patient for the disputed amount.”
California Fight
The California Supreme Court decision was the latest disappointment for physicians in a long-running debate over balance billing in California. The state's Department of Managed Health Care issued a regulation banning balance billing in October 2008, on the theory that it was protecting consumers from getting stuck with unexpected medical bills and taking the brunt of a conflict that should be resolved between health plans and doctors.
Physicians sued to turn over the Department of Managed Health Care regulation, but the state Supreme Court's action in the Prospect case makes that challenge moot, says Lopez-Gusman.
Before the decision, during the 2008 legislature, Cal/ACEP was willing to accept the end of balance billing in return for a reimbursement rate it saw as fair. In the 2008 California legislative year, the chapter helped broker a compromise in collaboration with consumer groups. SB 981 would have eliminated balance billing while ensuring an out-of-network physician fee of 250% of the 2007 Medicare rate, with regular cost of living increases.
The bill splintered California's doctors. The California Medical Association and anesthesiologists opposed it, concerned that it would set a reimbursement precedent they'd be locked into.
With the sponsorship of then-state Senator Don Perata, the powerful president of the Senate, SB 981 was approved by the state legislature. But it died when Governor Arnold Schwarzenegger vetoed it, calling the bill “a piecemeal approach to our broken health care system” that simply would guarantee one group of physicians a continued financial slice of the pie.
Given Schwarzenegger's position on the issue, Cal/ACEP sees the only option for permanent change to be waiting for a governor who is more sympathetic to physicians, says Lopez-Gusman.
This leaves physicians in California dependent on the Department of Managed Health Care's dispute resolution process, which the agency says it uses to help providers and insurers work out their differences. Physicians have been unwilling to use the process, Lopez-Gusman says, because they don't agree with the criteria used for determining “usual and customary” fees, and because the process itself carries a fee for the filing party.
Balance billing is a continual issue in other states as well. In Texas, for instance, medical groups and health plans face off every session on legislation that would ban the practice, reports Pam Udall, spokeswoman for the Texas Medical Association.
Two states have laws on the books that emergency physicians feel they can live with: Colorado and New Jersey ban balance billing but also provide fair payment clauses. Other states addressing the issue include Connecticut, Delaware, Florida, Iowa, Maryland, Massachusetts, Rhode Island and West Virginia.
Balance billing is outlawed in nearly all states for work done under contract with health plans, and it can't be done under the Medicare system. The American Medical Association would like to see lawmakers change that Medicare policy.
The American Medical Association is also working in the courts to challenge the way insurance companies set the “usual and customary” rates used for out-of-network transactions. On March 25 the organization filed a class action lawsuit in Los Angeles federal court against WellPoint Inc. alleging the insurer underpaid physicians for out-of-network care, forcing patients to pay the difference. This joins a pair of class action lawsuits filed in New Jersey on February 9 against CIGNA Corp. and Aetna Health Inc., by the American Medical Association and several state medical associations, arguing that the 2 big insurers rely on a skewed database run by a firm called Ingenix to set out-of-network rates.
“We can no longer ignore the improper business practices of health insurers who decide to play by their own rules without regard to patients, or the legitimate costs required to care for them,” American Medical Association President Nancy H. Nielsen, MD, said in a statement.
Ingenix, a subsidiary of United Health Group, has been the target of New York's activist attorney general, Andrew Cuomo, who alleged that the Ingenix database was tarnished by a conflict of interest because it is owned by a health insurer. He pursued an investigation of insurer practices, concluding that the database “intentionally skewed ‘usual and customary’ rates downward through faulty data collection, poor pooling procedures, and the lack of audits.”
A Better Billing Database
The result of Cuomo's year-long investigation was a series of settlement agreements in early 2009 with insurers doing business in New York, including UnitedHealth Group, WellPoint, Aetna, CIGNA and some other smaller firms. They agreed to stop using the Ingenix database and contribute a total of more than $90 million into a new, independent database.
In agreeing to the settlements, the insurers issued statements expressing their interest in working cooperatively to develop a transparent database. “We are committed to increasing the amount of useful information available in the health care marketplace so that people can make informed decisions, and this agreement is consistent with that approach and philosophy,” said Thomas L. Strickland, executive vice president and chief legal officer of UnitedHealth Group in a statement.
Wellpoint, which agreed to a $10 million contribution to the new database, said it was “committed to fairly reimbursing healthcare providers for covered services under the terms of each member's contract, while at the same time protecting our members and group customers against excessive charges by some non-participating providers,” according to a statement by Ken Goulet, executive vice president and CEO of WellPoint's commercial business. It acknowledged the conflicts of interest in the Ingenix database.
A spokesperson for CIGNA said the firm expects to use the resulting new database in other states where it does business.
According to the agreements, the database will be established and operated by a “qualified, independent, university-level school of public health or other appropriate school in New York.” The school would set up a not-for-profit corporation with a representative board of directors approved by the attorney general's office.
The new company would collect data and make rate information public “in a transparent way.” The resulting information would be available for academic research and to health insurers to determine reimbursement rates for at least 5 years. It would attempt to establish itself “as an independent, credible source for reimbursement information nationwide.”
Despite the settlement, the out-of-network issue continues to be debated on the national stage. Senator Jay Rockefeller (D-WVa) held a pair of hearings in late March exploring the insurers' practices, which he characterized as “deceptive,” and told the New York Times he may be interested in pursuing federal legislation on the issue.
At a March 26 hearing of the Senate Commerce, Science and Transportation Committee, the American Medical Association's Nielsen argued that the calculation of “usual, customary and reasonable” rates should be more transparent. While praising the new database being set up as a result of the New York settlements, Nielsen said those that have been harmed by underpayments should be compensated.
For its part, UnitedHealth Group stands behind the work of its subsidiary Ingenix, said the parent firm's president and CEO Stephen Hemsley at the March 31 hearing of the Commerce panel.
“Our recent agreement with the New York Attorney General did not relate to the manipulation of data or other similar misconduct,” Hemsley said. “We agreed to transfer the databases to an independent, non-profit entity in the hopes of increasing information transparency and public confidence in the quality of and access to the data that will be used to set future out-of-network reimbursement rates.”
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