Gloves Are Off in War between Payers, Providers

May 19, 2013
Martin Merritt

Healthcare is quickly becoming a war of all, against all, turning physicians, hospitals, insurers, drug makers, and device makers into blood rivals.

The United States healthcare system was described by Maggie Mahar in her book "Money Driven Medicine," as a "war of all, against all," turning physicians, hospitals, insurers, drug makers, and device makers into blood rivals.

As available funds decrease, providers are seeking new ways to secure reimbursements, and health insurance carriers seek new and more clever ways to deny, delay, and frustrate physicians. This is no more pronounced than the war between Blue Cross and Blue Shield of Texas (the Blues) and medical providers - and things have been getting nasty of late, particularly in the area of "out-of-network" claims.

Last year, two hospital groups sued 30 out-of-state "Blues" who do business in Texas alleging the insurers authorized payment then either denied payment, or offered payments so low that the hospitals could not stay in business. "It’s basically a claim that the insurance companies are not paying their healthcare providers," said Dallas attorney Larry Friedman of Friedman & Feiger LLP, who represented the hospitals, in the Dallas Business Journal.

Emily Wey, an attorney with Polsinelli Shughart PC who specializes in payment disagreements between hospitals and payers of medical claims, told the Journal that disputes of this type are becoming increasingly common.

"Out-of-network" claims used to pay more than "in-network," because the provider did not have a contract with the insurer.  Thus, physicians and hospitals were supposed to receive a "fair and reasonable" reimbursement payment. This was also the understood justification for the low levels paid by Medicare and Medicaid; the providers could make up the difference elsewhere. Then, the Blues started paying at rates near the Medicare level. "This has been a significant change in the last four or five years," according to Wey.

Upping the ante, private and public plans have demonstrated a willingness to resort to complaints in front of state medical boards.

Referrals to the state medical board may also have an unintended negative consequence for patients. In a recent address to a group of healthcare professionals, James Patterson, managing partner with Agape Healthcare Partners, said the results of a complaint before the medical board over simple charting and billing may adversely affect the ability of the physician to obtain malpractice insurance, especially where the physician has agreed to some type of administrative remedy. This means much needed medical malpractice coverage may be unavailable when a patient needs it most.

In the current environment, what once was considered an unthinkable "dirty trick," is becoming commonplace. This "war of all against all" shows no sign of abating in the near future.