Tricks of The Payer Trade

How to handle the physician-payer relationship

You rely on commercial payers to make ends meet. But the physician-payer relationship is often stormy, thanks to what physicians commonly view as annoying payer antics. From an operational standpoint, these are often related to coding, payment accuracy, and bundling. Administrative antics are much more sinister, including the systematic and purposeful delay of reimbursement.

In either case, it's worth knowing that you are not alone in your frustration with these tactics. Better, there are some relatively easy ways to turn their games into your gains.

Operational snafus

Coding. It's hard enough for the physician who was in the exam room and intimately knows what went on to get coding right every time. It defies reason that an insurance company employee miles away -- someone who probably has little or no medical training --could feel confident overruling a physician's code. Nevertheless, payers routinely change coding, fitting it to their own ideas about what the patient needed or what the physician did.

The practice of changing codes is certainly foolish, but it's easy enough to stop it in its tracks. How? Document in full, including a complete explanation of medical necessity, so that the payer has no room to imagine alternatives. Some practices go so far as to routinely attach relevant pieces of the chart.

Reimbursement. This is another area in which payers often play fast and loose with what's right. Many physicians and other healthcare providers do not know if they are paid correctly. While this can and should be avoided, it is not license for the health plans to pay whatever they want -- although many do.

For example, I was recently auditing payments for an internal medicine practice and got stuck on some numbers from one particular HMO; the payments seemed low. I reviewed the contract and the payments several times, convinced that I had done the math wrong. In fact, the HMO was reimbursing incorrectly on every single code. The higher the level of service, the more off-track the payment was.

The only way to put an end to this before it takes a major bite out of your bottom line is to match every payment to your contracted rates. It may seem like a nuisance, but so is lost reimbursement. You simply can't rely on the payer to get it right.

Bundling. Many surgical practices today say it is the bane of their existence. Every time they submit a claim, the payer insists on "bundling" all the charges. But is this bundling by the book? Not exactly. Most health plans have taken the formal rules for bundling laid out by the Correct Coding Initiative and added on their own proprietary bundling edits. In other words, they pay for only one or two services and claim the rest are covered by those payments. In billing offices coast-to-cost, frustrated surgeons ponder the unthinkable: returning patients to surgery so they can get paid in full.

That, clearly, is not a right or viable solution. What you can do is debate the issue with your payers and get them to put their rules in writing.

Administrative antics

In the investment world, time is money: The longer funds remain in the market, the greater their potential to grow in value.

Depending on their medical-loss ratio, insurance companies may pay out as much as 95 percent of what they take in, which clearly has an impact on their ability to hire people, lease office space and equipment, perform marketing, and other necessary business activities.

So payers get ahead based on the amount of time they get to keep your money, invest it, and gain on the interest it earns. In a good investment period -- like the strong bull market of late -- payers make lots of money simply investing the premiums for as long as possible.

It stands to reason, then, that payers are looking for ways to pay physicians as slowly as possible. Insurers vehemently deny this, but there are certainly plenty of barriers to speedy payment. Watch for these:

Unclean claims. Payers routinely deny payment because a claim isn't "clean," or contains minor errors. There are certainly legitimate reasons to send a claim back if the information it contains is wrong, but valid instances of this are rare. I have seen claims denied because the place of service or the sex of the patient was incorrect. In short, the denial is usually for some minor problem that could easily be corrected by conscientious office personnel.

Unfortunately, minor errors are easy to make on claim forms. Nevertheless, your office staff fills out the current HCFA 1500 billing form -- or has the computer do it -- hundreds of times a day, depending on how big and busy your practice is. Rarely does staff have time to actually scan through the forms to be sure they are always correct.

Once a claim is denied for some minor error, the real chaos begins. Your staff has to find the right form on the right date of service for the right procedure. It takes time, and it inevitably becomes a bottom-of-the-pile task that gets delayed, again and again. In the meantime, the payer is sitting on your money.

I can offer only two solutions to the clean claim conundrum. First, try to define what a clean claim is in your payer contracts. Better yet, try to limit the definition. The fewer items they are allowed to deny, the better. Second, take the time to review forms before they go out. It is a time-consuming task, but it's easier than dealing with the appeal once the mistake-laden claim inevitably comes back a month later. This is time well spent to get your money back faster.

Medical necessity. When I hear that a claim has been denied for lack of medical necessity, I wonder how it is that a medical assistant is telling our nation's best and brightest, fellowship-trained and board-certified physicians, that a patient does not need to be admitted to the hospital for right lower quadrant abdominal pain, but can instead follow up in the office the next day.

The best option for dealing with these denials is to come out swinging with all the force of your fellowship-trained and board-certified opinion. Keep copies of medical journal articles on file supporting your medical decisions that are routinely denied. Send them with your appeal, along with letters from respected colleagues, pieces of the medical record, and whatever else will support your well-founded opinion. If the payer gets fed up with your "informative" packages, it will stop denying your claims.

Pre-authorization for services. I have seen statistics that show requests for pre-authorization are granted upwards of 95 percent of the time. Pre-authorization can be a legitimate process of investigation and approval designed to be sure that patients get the proper care at the right place and time. But it can and should be eliminated for all but the more obscure services.

We have had success applying "gold card" status to the services of well-established and well-respected physicians. The payer's medical director can often be convinced these excellent physicians should not need to get pre-authorization for routine services. It helps to point out that this saves the payer staffing costs, too.

In short, it's awfully easy to rage against payers and their games, but it can be more productive to recognize that they, like physicians, are in a very competitive marketplace and under pressure from sometimes-contradictory federal and state regulations. Indeed, physicians can be their own worst enemies by not understanding their rights and responsibilities in the payer relationship. There is no time like the present to set things straight.

Todd Welter is president of R.T. Welter & Associates, a Denver-based consulting firm specializing in coding and reimbursement. He can be reached at

This article originally appeared in the July/August 2002 issue of Physicians Practice.