By: Andrew Silverio, Esq.
In the final hours of 2019, a coalition of New Jersey medical providers filed a voluminous, 150-page complaint against CIGNA in federal court in New Jersey. The providers, in general, are challenging the validity of CIGNA’s reference-based pricing (“RBP”) program, which guides the payments of numerous self-funded plans in and around New Jersey. As would be expected with such a lengthy and thorough complaint, there are various causes of action being pursued – some allege criminal activities like “embezzlement, theft, and unlawful conversion,” and “a pattern of racketeering activity” under RICO. Others strike more directly at basic and common aspects of any RBP program, while others allege practices that, if the allegations are true, would certainly be reasonably classified as problematic.
In the coming weeks and months, we will be monitoring this case closely and providing in-depth analysis and commentary in our upcoming webinars and other releases, but for now, we wanted to highlight some key allegations being made. If the case progresses to any sort of substantive holdings, it could have significant effects on RBP as a whole, depending on which causes of action ended up “sticking.”
A key element of many of the complaint’s allegations is that CIGNA and its vendors, in repricing and processing non-contracted claims, fraudulently represent that the amounts paid are in fact agreed-to, contracted amounts which the providers have agreed to accept as payment in full. The providers state that there is in fact no agreement, which is almost certainly true, but also allege that the amounts actually paid are less than is required under the individual plans. For this second element, the complaint cites to no evidence. This issue would certainly be a matter of plan document language, which is not touched on in the complaint.
In support of these allegations that CIGNA fraudulently represents a nonexistent contractual agreement, the providers allege that the EOBs CIGNA sends to plan participants differ from those it sends to providers. Specifically, the patient EOB allegedly describes the portion of charges disallowed after repricing as a contracted discount, stating that the patient has saved money, while the provider EOB describes this same amount as an “amount not covered,” instructing providers not to balance bill the patient, but to contact CIGNA’s repricing company instead with any disputes. The providers give several examples of such claims paid at 1-3% of billed charges and describe a negotiation and dispute process which they allege is a “war of attrition,” aimed at creating delay, expense, and frustration rather than a good faith procedure truly aimed at resolution.
An allegation key to the RICO/racketeering causes of action stems from CIGNA’s billing practices, which the providers describe as a fraudulent scheme to convert plan assets. The complaint claims that CIGNA and its vendors retain a flat percentage of savings fee based on the initial repricing, and importantly, retain that full fee even when, after a negotiation/dispute process, the plans end up paying additional amounts, sometimes up to a full billed charge, negating any actual savings. For illustration, the complaint describes a situation in which a plan pays 1% of a billed charge, a 30% percentage of “savings” fee to CIGNA, then ends up paying the full billed charge after a provider dispute. The end result is the plan paying 130% of a billed charge, with the extra 30% going to CIGNA.
At the complaint stage, it’s important to remember that all the allegations described here are just that – allegations. Some take aim at practices which, if they are actually being engaged in, are objectively problematic, while others strike at core elements of RBP itself. We will be closely monitoring the case as it develops and providing commentary and analysis on an ongoing basis.
By: Jon Jablon, Esq.
For those of you who have a player in the reference-based pricing game, you know that circumstances can arise when things don't go as planned. There are some providers, for instance, that are so dead-set on penalizing RBP plans and their members that they will accept nothing short of the full billed charge. As we all know, though, nobody gets paid full billed charges, and it's wildly unreasonable for anyone to expect that. But what is the end game, then, when a provider makes unreasonable demands and refuses to settle?
One option that's becoming increasingly popular is litigation – in other words, proactively suing a hospital, to help protect the patient. The suit needs to be filed by the patient, since the patient is the one to whom the balance “belongs” and therefore only the patient has standing to sue, but health plans and TPAs often provide assistance to patients with this endeavor, for obvious reasons.
Proactive litigation, or even just the threat, can serve a couple of important functions: it can compel a settlement when none was previously available; it can force the provider to publicize (and try to justify) its charge data; it can incentivize the provider to accept the Plan's payment or settle at a reasonable rate; or it can even lead to the formation of a direct contract that's acceptable to the Plan.
Now, please don't leave this blog post thinking that every claim should be proactively litigated. Litigating a small claim can actually lead to spending more on attorney's fees and costs than the full balance amount. We at The Phia Group have taken drastic steps to help with this dilemma, though; our patient Defender service is intended to give TPAs, employers, and plan members a sense of security with respect to their RBP plans, with the knowledge that the member has an attorney ready and waiting to go to bat when they need it. Most importantly, this attorney is pre-paid at no cost to the member, for a small, budgetable PEPM fee paid by plans or their TPAs.
Reference-based pricing is a tricky business, but there are programs that are designed to make it more manageable. Patient Defender is one of them. Have you found others? Tell us about them! We want to hear your stories.
As those of us involved in self-funding know, there are multiple considerations involved in most decisions. Even something as simple as negotiating a pre-payment bill can involve questions such as: (1) Will the stop-loss carrier reimburse the negotiation fees? (2) Will the agreement hold up if the provider or plan changes its mind? (3) Does the TPA incur liability if it enters into the agreement on behalf of the health plan? (4) How should the TPA treat patient responsibility pursuant to the agreement? ...etc.
And that's just pre-payment negotiations, which are generally considered to be very straightforward!
Reference-based pricing is far more complicated than simple, "traditional" pre-payment claim negotiations. Post-payment negotiations of any kind add a layer of complication, but add to that the human factor (i.e. the employee!), and situations tend to be delicate and can quickly become volatile.
All that aside, however, the purpose of this blog post is actually to talk about how stop-loss treats RBP. There are certainly different ways that different carriers view RBP in general - some view it as a boon, yet others as a bane. An issue that comes up across many different carriers, however they may view RBP, is reimbursement and calculation of "Usual and Customary" in the stop-loss policy.
Many carriers define U&C in the "traditional" way, which is often calculated simply as an amount the carrier deems reasonable as the result of an audit. That can be very dangerous to a plan using a PPO, since network rates are almost universally higher than stop-loss carriers' audits of claims - but for an RBP plan, even though payments are lower, something that cannot be ignored is the potential to settle large claims after the initial payment.
If the policy will cover this type of top-up settlement payment (and that's a big "if"), you'll still need to investigate how the policy will treat the allowable amount paid. Many medical providers will not settle claims for amounts less than the amount a stop-loss carrier's conservative auditor deems payable, which can result in denied claims!
As always, the best general advice we can give is that if a health plan incurs a large non-contracted claim that is paid subject to Medicare-based pricing, it may be worth it to discuss the potential outcomes with the carrier, since balance-billing can happen, and the plan may need the carrier's cooperation down the line! Without proactive communication, though, the chance of getting the claim covered by stop-loss diminishes significantly.
Employers, TPAs, and brokers primarily choose to utilize reference-based pricing programs to cut costs. Instilling systemic changes in the industry can also be a goal of those utilizing this methodology, but cost-containment is a much more tangible goal.
The reference-based pricing mentality can carry with it the opinion that medical providers are crooks – charging many times the fair market value of services with no meaningful system of checks or balances. While that may sometimes be accurate, it’s still important to remember the law that surrounds reference-based pricing and, more importantly, balance-billing, when deciding whether to “stick it to the man.”
Some employers refuse to negotiate balances with medical providers, even if the health plan offers very few or no options for contracted providers. Aside from the Department of Labor’s not-so-favorable stance on this matter (see https://www.phiagroup.com/Media/Posts/PostId/376/unraveling-faq-part-31), medical providers retain the right to send patients to collections, or even file lawsuits against them. Although there is an increasing amount of litigation in the industry regarding this exact topic, there is not yet any concrete guidance that removes a medical provider’s right to send patients to collections or sue a patient.
It’s sometimes tempting to walk away from the bargaining table in frustration, but remember the ramifications on the member if that’s the route taken. My advice is certainly not to bend to any given provider’s whim when it comes to payment – but keep an open mind, and consider the potential consequences associated with every option.
By: Ron E. Peck, Esq.
Why do employers offer health benefits to employees? Some might point to the Patient Protection and Affordable Care Act (“PPACA” or “ObamaCare”) and say the law forces them to do so. Yet, prior to the law’s passage in 2010, many (if not most) employers voluntarily offered health benefits to their employees. There are a number of reasons for this, but suffice it to say, it was meant to attract and retain the best talent.
Indeed, once upon a time, health benefits were just that – “benefits.” Now, it’s assumed health insurance is included in an employment package, and what was once a benefit is now an entitlement.
Why does this matter? It matters for many reasons, but as it relates to reference-based pricing, or “RBP,” it matters insofar as RBP ultimately – more often than not – puts the patient (“a/k/a” the employee or their family) in the crosshairs when disputes arise between providers of healthcare services, and the benefit plans that utilize an RBP pricing methodology.
Perhaps – long ago – when health benefits were welcomed as “icing on the cake,” the fact that an individual may be limited in who or whom they could utilize for care, or risk being balance billed the difference between what the plan pays and what the provider charges, would not have been so onerous. The employee might have thought, “Heck! It’s better than nothing; and I suppose I could avoid the bill by selecting a provider that works with my plan.”
Today, however, not only do we expect to receive health benefits, but we are outraged when our out of pocket expenses increase. This attitude, on the part of plan participants, is anathema to RBP.
At the same time, recall that RBP is a response to changing opinions as they relate to networks, and PPOs. Looking back in time, one of the values inherent in PPOs was a discount off of provider billed charges. It was assumed – “back in the day” – that the billed charges against which the discount applied were reasonable, and as such, getting discounts on top of reasonable charges had value. The fact that the provider, by agreeing to accept the network rate as payment in full, had the secondary impact of protecting patients from balance billing, was just icing on the cake.
Today, however, we recognize that billed charges are so exorbitant, that network discounts do next to nothing to counter the abuse, and thereby are worthless. As a result, the thing that once was a secondary benefit of network enrollment – balance billing protection for the patient – has become, more or less, the only valuable element of a network. Yes; if asked why they are still using a network, most plans would not state it’s for the discount, but rather, it’s to avoid balance billing and protect patients.
Thus, we must ask ourselves – how much will we pay to avoid balance billing and protect patients? If a provider charges $60,000, there is a discount of 30% ($18,000), $42,000 is thus expected as payment, and the reasonable fee is $5,000, is it worth $37,000 to protect the patient from balance billing? If not, what will you pay – instead – to protect patients, if anything?
This is ultimately the question every plan contemplating RBP must ask itself. How much more, beyond reasonable charges, am I willing to pay to protect my plan participants?
Piling onto this, politicians, lawmakers, regulators and courts seem more than happy to offset the rising cost of healthcare onto the benefit plans as well. From FAQs released by the DOL, indicating that a failure to offer “adequate access” (“a/k/a” a network) will result in balance billed amounts counting against maximum out of pockets – and thus make the remainder of the billed charges owed and payable by the plan, to court decisions overturning previous rulings that determined hospitals can’t force patients to agree to pay whatever the hospital charges and sought to calculate fair prices when no fee was agreed upon, those in power seem dead set on allowing providers to charge whatever they want, and protect patients from any undue out of pocket expenses – by forcing plans to either contract with providers, or pay the cost.
I have personally advocated for working directly with providers, identifying value, and finding ways to create win-win scenarios without increasing how much the plan pays; instead offering providers things of value – other than cash – that incentivizes them to accept plan maximums as payment in full. Yet, this effort is put into serious jeopardy whenever anyone “forces” a plan to enter into contracts or networks with providers. Politicians and providers seem to treat (or want to treat) “networks” like a silver bullet. The issue is, however, that networks are just a nice label for a “contract.” If any rule or law “requires” a payer to enter into a contract with a payee, and failure to do so results in penalties for the payer, it puts an unfair advantage in the hands of the payee. One key to successful negotiation – whether it be a provider network deal, buying real estate, or settling a law suit – if both sides don’t have something to gain, something to lose, and the freedom to leave the table, the “deal” won’t be fair.
As a result, the DOL FAQs, case law, and proposed laws that would “force” a payer (plan, carrier, etc.) to broaden their network, and force them to sign a deal with a provider, will result in one-sided deals, as providers know that the payer cannot “leave the table” without a deal.
These are all things one must consider when asking themselves whether to RBP or not to RBP.
This is a topic we’ve discussed numerous times in memos, phone calls, conferences, webinars, and any other time reference-based pricing is discussed – and it continues to be a relevant topic throughout the industry. A health plan utilizing some sort of RBP will get the most bang for its buck if the language in its SPD is strong – and of course if the language is weak, the plan’s payment methodology will be extremely difficult to enforce, and could even subject the Plan Administrator to liability.
Simply put: if your plan is using reference-based pricing – whether for all claims, only out-of-network claims, facility only, or any other subset of claims – your plan must have clear and accurate language.
Clear language describes what the plan will pay in a comprehensible manner. An example of clear verbiage is “This plan’s benefits equal 150% of the applicable Medicare rate, when such rate can be calculated by the Plan Administrator.”
An example of unclear verbiage is “All claims are paid at 150% of Medicare. Participating facility claims are subject to this rate only if the physician is nonparticipating. All facility claims are paid at the lesser of the reference based pricing amount or 70% of billed charges when inside the plan’s service area.” (Both examples are direct quotes from SPDs.)
Accuracy is just as important as clarity, if not more; an example of accurate verbiage is “When a given service is performed by an in-network provider, the Maximum Allowable Charge will be the PPO rate applicable to that provider. For all other claims, this plan pays the lesser of the following factors…”.
An example of inaccurate verbiage is “All in network claims are subject to code review and will be paid based on an amount deemed usual and reasonable and customary by this Plan, including but not limited to a multiple of the prevailing Medicare allowance.” (Again, both quotes are taken from real SPDs).
These are just a few examples of what we see on a daily basis; as medical providers begin to treat RBP differently than ever before, it is similarly more important than ever to make sure the plan’s language is optimal.
As a final note, the idea that language needs to be strong, clear, and accurate applies to all plans – not just those using RBP. It just so happens that RBP is a bit more novel than other traditional plan designs, so RBP language is sometimes less well-established in many SPDs. But together, as an industry, we can fix that!
Plan sponsors of self-funded health plans have a lot to think about. From deciding which services to cover to making tough claims determinations, there are lots of moving parts to consider and be mindful of. Plans that utilize reference-based pricing are in the same boat, of course, except they have added even more moving parts to their benefits programs.
As many plans that use reference-based pricing are aware, some claims need to be settled with providers to eradicate balance-billing. A claim initially paid at 150% of Medicare may need to be ultimately paid at 200%, for instance, pursuant to a signed negotiation between the health plan and the medical provider. Fast-forward two months later, to when the plan receives notice from its stop-loss carrier that the carrier is only considering 150% of Medicare to be payable on the claim, and the extra 50% of Medicare (which can be a significant amount!) is excluded.
When the plan asks why it isn’t receiving its full reimbursement, the carrier quotes its stop-loss policy and the plan document. The former provides that the carrier will only reimburse what is considered Usual and Customary – and the latter provides that Usual and Customary is defined as 150% of Medicare, by the Plan Document’s own wording. The carrier’s liability, therefore, is limited to 150% of Medicare. The plan’s has chosen to pay more than that. Even though it’s for a very good cause, the stop-loss insurer may deny that excess payment amount. In this example, there is a “gap” between the plan document and stop-loss policy such that the plan has paid a higher rate than what the carrier is obligated to pay.
For this reason, it is so incredibly important for plans that are using reference-based pricing to talk to their stop-loss carriers. Some carriers will say “we don’t care – your SPD says 150%, so we’ll reimburse 150%,” but other carriers will say “we understand that reference-based pricing saves us money, and we understand that it’s not always as simple as paying 150% and walking away – so we’ll work with you in terms of reimbursement.” Other carriers still will agree to place a cap on reimbursements higher than what’s written in the Plan Document; in other words, if the plan provides that it’ll pay 150% of Medicare, the carrier may agree to reimburse settlements up to 200% of Medicare, if applicable and if necessary.
There are lots of options for how a stop-loss carrier might react to reference-based pricing, and the only way to find out is to have a conversation. If you don’t ask, you’ll never know (until it’s too late, that is).
Moral of the story? If you’re going to adopt reference-based pricing – whether full network replacement, carve-outs, out-of-network only, or any other type – put stop-loss high up on the laundry list of considerations.
Reference-based pricing is one of the most mysterious self-funding structures out there. At its core, it’s a simple enough idea: the plan changes what it pays for non-contracted claims. At its most basic level, it’s a way to redefine the traditional notion of U&C; generally, RBP plans base payment on some percentage of the Medicare rate. Guess what, though? If your plan defines U&C based on a database such as FairHealth (for instance), that’s a form of RBP too!
RBP isn’t a structure with a well-defined set of rules. Different plans, TPAs, and vendors do things very differently. The common denominator is that pricing for claims isn’t based on billed charges or an arbitrary percentage off billed charges, but an objective metric based on the value of services. If the plan considers rates set by a popular database to be indicative of the value of services, then that’s the reference upon which prices are based (there’s the R, the B, and the P!).
While of course there are practical differences between popular databases and Medicare, the easiest example being differences in the actual amounts generated), the major conceptual difference is that providers are generally more likely to accept rates generated by popular databases as payment in full than to accept Medicare rates as payment in full from the same payors. Even though the majority of hospitals do accept Medicare, the prevailing opinion among hospitals is that Medicare rates are essentially thrust onto them in a contract that they sign out of necessity (since many hospitals would lose a large percentage of their business if they didn’t accept Medicare). While payors may consider Medicare rates or a percentage above them to be reasonable, the majority of hospitals tend to disagree – at least at first.
When a health plan accesses the FairHealth database (again, just for example) to obtain pricing, there is often no patient advocacy needed, since many providers access the same database or consider those rates to be generally accepted – but to contrast that to Medicare-based pricing, a plan paying Medicare rates is much more likely to need some sort of advocacy since Medicare rates are not nearly as widely-accepted by providers. Patient advocacy is one of the must-haves in “traditional” RBP, which typically uses Medicare rates.
The morals of this story: (1) you may already be using RBP without realizing it! And (2) make sure your RBP program has patient advocacy, if necessary. If your chosen RBP payment methodology doesn’t need patient advocacy, then your RBP experience will probably be a bit simpler – but if you do need it, don’t skimp on it.
As you may know, the regulators have been impressively sparse in their opinions of reference-based pricing (or RBP, for short). Courts have scarcely weighed in at all, and the DOL has published a few bits of guidance, some more helpful than others, but it’s still the wild west out there in the RBP space.
One of the central themes – and in fact one of the only themes – of prior DOL guidance has been that balance-billed amounts do not count toward a patient’s out-of-pocket maximum. That’s from way back in the ACA FAQ #18, published in January 2014. Then, in April 2016, the DOL clarified a bit. Question 7 of FAQ #31 (which we have previously webinarred about, and yes, that’s a word, as of right now) indicates that the previous guidance still holds true.
Well, sort of.
Yes, amounts balance-billed by out-of-network providers are still exempt from being counted toward a patient’s cost-sharing maximum, but the wording “out-of-network providers” apparently specifically implies that there are some in-network providers, according to the DOL. Many RBP plans have no in-network providers whatsoever; the result is that balance-billed amounts are counted toward the patient’s out-of-pocket if there are no “in-network” options. What does “in-network” mean, though, in this context?
At first blush, the concept seems to create a problem for RBP, since having “in-network” providers is antithetical to RBP. In most cases, however, RBP is not administered in a vacuum; usually, RBP is administered, at least in part, by a vendor, and that vendor generally has some processes in place for avoiding member balance-billing. The plan must somehow ensure that members are not balance-billed above their out-of-pocket limits, unless they had options and consciously chose not to utilize them.
For instance, if a plan is using RBP for out-of-network claims only – that is, accessing a primary network, but paying based on a reference price for anything falling outside that network – the plan could, in theory, allow any patients to be balance-billed for any amounts, if those patients have chosen to go out-of-network. That’s because the plan has established options for the patient to avoid balance-billing – but if the patient has chosen to not utilize those options, that’s the patient’s prerogative.
The problem arises, however, in the context of a plan that uses no network and has no contracted providers; if a provider balance-bills a patient above the out-of-pocket maximum when the patient had no choice but to be balance-billed, that’s when an employer could be in a state of noncompliance.
Greatly simplified, the regulators have specified that plans using reference-based pricing must provide patients some reasonable way to avoid being balance-billed. If all providers are non-contracted and will balance-bill, the plan is not permitted to sit idly by and allow the balance-billing to occur without doing anything about it. The plan will have no choice but to settle those claims with providers on the back-end. If, however, patients have “reasonable access” (whatever that means) to providers that will not balance-bill the patient – whether through some sort of network, or direct contracts, or even case-by-case agreements – the plan will have met its regulatory obligations, and can continue to not count balance-billed amounts toward patients’ out-of-pocket maximums.
The take-away here is that if you’re doing RBP, make sure you’re doing it right! The legal framework may be the wild west, but your own individual RBP plans shouldn’t be. Contact The Phia Group’s consulting team (PGCReferral@phiagroup.com) to learn more.
If you’ve dabbled in reference-based pricing, or RBP, then you know about the legal and business challenges involved. From the inability to compel providers to bill reasonably to the difficulty in settling at a mutually-agreeable rate, RBP is tough. There’s a lot to it, and the law has always been on the side of the providers, making fighting the good fight just that much more difficult.
Recently, however, the Texas Supreme Court (in In Re North Cypress Medical Center Operating Co., Ltd., No. 16-0851, 2018 WL 1974376 [Tex. Apr. 27, 2018]) has ventured a change from its historical position, and has indicated that “…because of the way chargemaster pricing has evolved, the charges themselves are not dispositive of what is reasonable, irrespective of whether the patient being charged has insurance.” Historically, Texas courts have opined that the chargemaster is somehow the reasonable price of services.
This case indicates that evidence of accepted rates (from all payers) is in fact relevant to determining the reasonable value of medical services; although this case doesn’t actually determine the reasonable value or assign any relative weight to the amounts paid, it is a stepping stone that RBP plans can use to try to enforce their payment amounts and perhaps induce more reasonable settlements.
To be sure, the court indicated that “[t]he reimbursement rates sought, taken together, reflect the amounts the hospital is willing to accept from the vast majority of its patients as payment in full for such services. While not dispositive, such amounts are at least relevant to what constitutes a reasonable charge.” In other words, amounts the hospital accepts from all payers are relevant – but “not dispositive,” such that no one accepted amount is conclusively considered reasonable simply by virtue of having been accepted in the past. The Texas Supreme Court’s opinion that those amounts are even relevant, however, is a big step, and presents RBP plans with a valuable tool.
According to the court, “[w]e fail to see how the amounts a hospital accepts as payment from most of its patients are wholly irrelevant to the reasonableness of its charges to other patients for the same services.” We concur! This decision gives health plans some ammunition to counter the popular hospital opinion that Medicare rates are not relevant (since arguably they’re not “negotiated” but are instead forced upon the hospital by the government). We have always argued that no hospital is required to accept Medicare payments, but hospitals choose to because presumably those payments are valuable and worthwhile; we expect this case to help the argument that Medicare rates must be considered relevant when determining reasonable value – and the chargemaster rates themselves are all but meaningless.