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Hospitals only can go so far in reversing payment denials until they’re willing to arbitrate, contends Linda Fotheringill, partner in a Towson, MD, law firm whose specialty is using the principles of contract law to get hospitals paid.
The cover story in the February 2002 issue of Hospital Access Management described the successful experiences of two Maryland hospitals that engaged the law firm of Siegel & Fotheringill to go after denied accounts on which all appeals had been exhausted.
Below, Fotheringill responds to the questions of several HAM readers who asked for more information on the process used by her firm.
Question: Is the process used in your firm only for commercial insurance denials, or has it also been applied with success to Medicare and Medicaid cases?
Answer: It has been applied with great success to Medicare and Medicaid cases. We do the appeals, handle them as with any other case. For the most part, the cases we get are denials of medical necessity or inappropriate level-of-care denials, although we do get some technical denials. We do an exhaustive review of the records. It’s a very detailed, very specific appeal, and we’re very successful at getting them overturned at the appeal level, assuming the appeal is filed in a timely manner.
In Maryland, the [time limit for appeals] is 30 days from the date of the denial for Medicaid, and 60 days for Medicare. When the case is not resolved to our satisfaction at the appeal level, sometimes we negotiate. Say four days have been denied, sometimes they say, "We’re willing to pay for two; but with the last two, we think [the cases] truly did not justify an acute level of care." We might be willing to settle for something in between. Sometimes we agree to take a certain number of days at the acute level and some at the administrative rate. Sometimes we feel strongly that we should proceed.
At any rate, when we are not happy with the result, we go to the next level and request a hearing. We think that is relatively unusual. I certainly don’t know of any firms doing this on the East Coast. We have had tremendous success with Medicare. In Maryland, the Medicaid Office of Administrative Hearing has been rather adamant about not giving in before the hearing. We’re starting to see them recognize that we are very serious about our cases, that we are willing to go to the mat, and they’re becoming a little more willing to evaluate our appeals.
Question: How many of the cases you handle are related to admissions through the emergency department (ED)?
Answer: We’ve handled hundreds, if not thousands, of ED cases, and have had tremendous success with [turning around] ED denials. There are two kinds — those where the services are flat-out denied and then, more often, those where the cases are denied based on the final diagnosis code. What we are seeing is, for example, a patient who comes in with abdominal pain, is evaluated, has blood work and an ultrasound, and the final diagnosis is dysmenorrhea, constipation, or some other benign diagnosis. As matter of course, we’ve found many payers are denying cases based on the final diagnosis code.
The most dramatic example of this we’ve handled is a case in which the diagnosis code was something that meant "cuts and bruises." The case involved a 9-year-old girl who was hit by a car and thrown 30 feet through the air. The physicians were trying to rule out internal injuries so they did a huge work-up. Fortunately, the child was fine, but obviously the work-up was warranted. The payer covered the EMTALA (Emergency Medical Treatment and Active Labor Act) screening fee, which was $30 or $50, and that’s all. They denied the rest of the charges. We’re very successful in overturning those cases.
ED cases are not a big part of our practice because not all of our clients refer us those cases. Those that do, refer all of them. It depends on how the hospital system is set up. They’re usually divided into inpatient and outpatient, and usually focus on the inpatient cases first. Generally speaking, [the dollar amounts of] ED denials are less, but still can be a huge loss. Because each case has a lower dollar amount, the focus isn’t there. I’m not sure a lot of hospitals understand there can be a lot of success in overturning ED denials. Because we’re able to group cases, and because we have a system where we’re able to deal with them in an efficient manner, we’re able to work with them even if the amount is low.
Ideally, hospitals have their own system for tracking denials, but not all do. We have a system for tracking all the cases referred to us, so what we can do for our clients is let them know how many cases were ED denials from a particular insurance company and what the reason was. They can use that in contract negotiations, to go back at negotiation time to seek some better language. If it were me, and I saw a pattern, I would be working out an agreement ensuring that payer does not have a system set up to automatically deny all cases with a benign diagnosis code.
If [hospitals] know up front that a pattern exists, it may be that as a last resort they should have the billing department send records [documenting the case]. The UB92 is not set up to come to a diagnosis based on a "rule-out" — like an ectopic pregnancy, which could be life-threatening. And sometimes rule-outs aren’t expressed in the ED records, which are not geared toward getting reimbursement. Some things are so obvious they’re not writing them down — like a pregnancy test being given to a young girl with abdominal pain to rule out ectopic pregnancy.
Question: Could you explain more about the fee arrangement you use?
Answer: Everything we do is on a contingency-fee basis, which means it’s risk-free to our hospital clients. If we work a case and there is no recovery, there’s no cost to the client. There is a range of percentages, depending on the kind of cases we’re getting. Some of our clients are sending us a mix of aged accounts receivable (AR) and denials. In that mix, there obviously are easier cases and administrative denials that don’t require as intensive a review. Obviously, an aged AR is easier than a case that’s been appealed unsuccessfully, where the hospital already has done everything in its power to overturn a denial, including having the medical director of the hospital write the appeal or having the CFO talk directly to the payer. Some clients send only medical necessity and clinical denials, which are all incredibly difficult. So our fee is based on where in the spectrum the case falls, and whether we’re incurring all of the risk for out-of-pocket expenses. We have one client we work with for a lower percentage. That client gives us an extremely large volume and advances the arbitration and out-of-pocket litigation costs. [Fee arrangements vary] with community hospitals compared to tertiary centers. Very often a $4,000 case is just as difficult as a $50,000 case.
Question: On what basis do you revoke untimely filing denials when those deadlines are contractually spelled out and the facility doesn’t meet them? Is it on the basis of medical necessity? But if that’s it, then what good is the clause in the contract?
Answer: It is done on the basis of fairness. When we get an untimely filing denial, we look at what went on. Very often there’s a reason. Maybe the patient came in as an emergency, and didn’t have an insurance card, and days and months went by before the hospital got the information. Or maybe the patient gave information that was incorrect, the wrong insurance company was billed, and the deadline came and went. We look very carefully at the reason for untimely billing.
We argue for equitable remedies that are available in contract law. These contracts, more often than not, are written so that most of the burden is on the hospital. The hospital must do this, must do that, or it doesn’t get paid. On the other hand, what is in that contract that is going to happen to the payer when they make a mistake? It’s all one-way, and that’s not fair.
Rarely do you see in a contract where there is a penalty to the payer when it doesn’t pay in a timely manner. There are prompt-pay laws, but those are rarely utilized. Certainly, we see that payers are making mistakes all the time. Whatever happens to them? Nothing. If it’s a large-enough case, even if the hospital did make a mistake, it’s worth arbitrating on the basis of contract law.
There is a principle of contract law called quantum meruit that is based on fairness. In that case, the hospital would be seeking judgment or payment for the value of the services given before the breach of not sending the bill on time. There’s another legal principle based on "unjust enrichment." The bottom line is that it’s unjust to have a situation where the hospital provides services, and some minor technical problem occurs. Usually there’s a reason, and it’s not a common occurrence, so why should the payer benefit from that? It’s not a major breach of the contract. It’s a pretty minor mistake, and you did save somebody’s life.
Most of contract law is based on common sense and fairness. We use those principles to get around [contract breaches]. We wouldn’t take just any case based on not getting a bill filed in time, but we usually find a good reason. Even with a pretty large dollar amount, we’re willing to argue common sense. Why should the hospital always be the one to suffer? Some contracts are slanted in the payer’s favor, but they can’t subtract your legal rights. We’re willing to give it a go.
Question: To what extent is your approach dependent on state law? Are Maryland hospitals taking advantage of favorable statutes in their state, or is this a viable alternative everywhere?
Answer: We’re always using state law. There are some favorable statutes and case law in our state, but there also are federal laws that are helpful. Most states have statutes that can be helpful to hospitals. We represent hospitals all over the country, not just in Maryland. As issues arise, we research the laws of that state that would apply on a case-by-case basis. There are certain kinds of statutes that we typically see. Some relate to ED services and say no authorization is needed. Some say that if the payer provides authorization, the payer can’t go back and retract payment on some basis. There are federal laws regarding payment for mother-and-baby services, as well as prompt-pay laws. Plus, the contract-law principles apply in every state, although they may be interpreted differently. The general principles are there in every state and would apply to every state.
[Editor’s note: Linda Fotheringill can be reached at The Susquehanna Building, 29 W. Susquehanna Ave., Towson, MD 21204. Telephone: (410) 821-5292 or (800) 847-8083. E-mail: firstname.lastname@example.org.]