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Tips to obtain payment, despite plan denials

Radiology Administrator's Compliance and Reimbursement Insider, December 1, 2008

Tips to obtain payment, despite plan denials

Sometimes, a plan will mistakenly verify coverageor preauthorize a service, and later refuse to pay forthe procedure.

For example, a plan may verify that a patient is covered for a follow-up CT scan but later deny payment, which is unfair to your practice.

You’ve contacted the plan to make sure the service is covered and followed the utilization management rules, so you should receive payment in a timely manner.

You don’t have to accept the plan’s payment denial, experts say. You may be legally entitled to payment for claims mistakenly verified or preauthorized. Simply sending a letter that says the denial is unacceptable will cause many plans to reverse the denial, says Randal L. Payne, Esq., at Sullins, Johnston, Rohrbach, and Magers in Houston.

Payne frequently drafts challenge letters for his provider clients to send to plans.

Why mistakes happen

The employee who takes your precertification call may only check whether the member generally has that service as a covered benefit.

After you’ve provided the service and the plan reviews the claim, it may discover other information, such as the member’s employer canceled the employee’s health insurance.

At that point, the plan will often refuse to pay the claim, says Lisa Manziel, Esq., at Manziel LawOffices in Dallas. “There has been a big increase in this type of denial,” Manziel says.

Some physicians don’t even realize when a plan has denied a claim for this reason. “The denials sometimes aren’t that specific, and the physician’s billing department writes off the claim when it really isn’t necessary,” explains John Clark, Esq., at Clark, Mascaro, and Aziz, PC, in Atlanta.

Most plans refer to the contract to justify their denials in this situation. In particular, they may note that the contract contains a disclaimer that “any preauthorization or verification of coverage is not a guaranteeof payment.”

Even if the contract doesn’t have this disclaimer, the plan may have used disclaimer language when initially verifying coverage or giving preauthorization. Or the plan may include such language as a justification in its denial letter.

Some plans also try to justify their right to deny these claims by telling the provider that the Employee Retirement Income Security Act (ERISA)—which may bar lawsuits pertaining to denials of benefits—governs the plan.

How to overturn denials

To reverse these denials, send the plan a letter challenging the denial. Address the letter to the individual who sent the denial or to the head of the plan’s claims department.

This works when you have the law on your side, explains Manziel.

“If a plan is going to give a physician verification or preauthorization, it has a duty to do it in good faith and with due care,” she says. “The practice relies on that verification or preauthorization when it provides services to the member.”

And any disclaimer in the contract isn’t automatically enforceable, says Payne.

“Pro-plan language won’t affect your legal claim that the plan deceived you,” he explains.

“Having the disclaimer doesn’t give plans a license to lie,” notes Clark. “These disclaimers probably won’t hold up in court.”

In many states, laws or court decisions specifically protect physicians from this type of payment denial. These protections vary widely.

For example, some states say a plan can’t retroactively deny payment for preauthorized services.

Other states don’t automatically bar plans from retroactively denying payment, but their courts have rules that ERISA doesn’t bar the provider from suing the plan for payment.

There’s no downside to sending a letter challenging the payment denial. “Providers have nothing to lose,” says Tammy Tipton, president of Appeal Solutions in League City, TX. “Often, the letter itself is enough for the plan to reverse the denial.”

What to include in the letter

“Model letter,” which can be found on p. 3, is a letter drafted by Tipton.

The letter acknowledges the denial, states that it is not acceptable, and includes specifics about the practice’s contract with the plan.

Should you need to write a challenge letter, make sure to show the letter to your attorney for approval first. If you already have such a letter, compare it to the sample letter and add any needed improvements or clarifications.

If the plan ignores your letter, send a second letter, copying the plan’s CEO and medical director. It pays to be persistent, Tipton says.

If the plan still doesn’t respond or refuses to pay you, you may want to consider taking legal action.

“Sometimes, suing may be the physician’s best course of action,” says Clark.

Providers shouldnegotiate contract terms that state that the carrier can deny only precertified treatment under agreed-upon circumstances, says Tipton. “Contract language can also clarify that the precertificationis binding if it was extended, due to the carrier’s error in applying the policy terms,” she says. “If the carrier is reluctant tosuch terms, your office may need todecrease the exposure related to poor verification by submitting a written pretreatment request for benefit disclosure.” Phone verification is provided as a courtesy, she adds.

However, if the provider submits a written requestand establishes the right tobenefit information, the carrier is under more legal obligationto respond.

“Under the ERISA ClaimProcedure Regulation applicable to many group health plans,fines can actually apply if the carrier ignores a request from a qualified party,” Tipton notes.

Insider sources

John Clark, Esq., Clark, Mascaro, and Aziz, PC, 550 Pharr Road, NE,Suite 440, Atlanta, GA 30305, 800/365-5771; jclark@cma-law.com.

Lisa Manziel, Esq., Manziel Law Offices, 8330 Meadow Road, Suite 100, Dallas, TX 75231, 214/369-5500; lisa@manziel.com.

Randal L. Payne, Esq., Sullins, Johnston, Rohrbach, and Magers, 2200 Phoenix Tower, 3200 Southwest Freeway, Houston, TX77027, 713/521-0221; rpayne@sjrm.com.

Tammy Tipton, president, Appeal Solutions, P.O. Box 191, League City, TX 77574, 888/399-4925; ttipton@appealsolutions.com.

Model letter

Tammy Tipton, reimbursement specialist at Appeal Solutions in League City, TX, developed the following sample letter, which refers to a denial made by a healthcare plan and tells the plan that the denial is not acceptable.

Show this letter to your attorney and get his or her approval before using it. If you already use a similar letter, compare it to this one and add any improvements or clarifications.

January 1, 2009

Re: Claim #123

Dear Ms. Doe:

We have received your denial of the above claim. This denial is unacceptable. We properly obtained preauthorization for the procedure and relied on that preauthorization when we performed the procedure.

We called and spoke to Mr. Smith in your office at 2 p.m., June 22. Mr. Smith confirmed that the member was covered, that the procedure was a covered benefit, and that the coverage was not exclusively contracted to any specialty provider.

We acted in good faith and had no knowledge that ABC HMO would find that it had made a mistake.

Under general principles of law and equity, plans must act in good faith and with due care.

Once you preauthorize a procedure and we perform it, you cannot deny coverage.

As you know, any disclaimer that states “preauthorization or verification does not guarantee payment” is not automatically or necessarily legally enforceable.

In addition, our contract states that ABC HMO agrees to perform in good faith. We believe that the denial of this claim is not in good faith and that it is a violation of our contract.

We hereby request that you reverse the denial and pay the claim in full within 30 days of this letter.

If you do not, we may have to take further action to protect our interests.

Yours truly,

Jim James, Office Manager

Random Radiology Group

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