There’s a New Squid in Town: the view from the belly of the beast part II

In the first installment of my three-part series on healthcare, I covered the insanity of trying to get things covered by the private insurers.  Today I’m going to examine the second half of the problem: getting things paid.   If you are a healthcare consumer, you are likely at least a little familiar with the former, but not so much the latter. I know I’m spending a lot of time describing the problems with the system. But the thing is, we cannot adequately discuss solutions, or what proposed solutions will and will not work, and WHY, without having a very thorough understanding of just what the problems are from both the patient and the provider end.

I’ll first have to give a quick, VERY simplified primer on how medical services are billed.  Providers do not send a bill to an insurance company saying “20-minute office visit for diabetes and jock itch, $74.”  They use a system called CPT, or Current Procedural Terminology, that assigns a specific numerical code to everything a doctor does, from office visits to counseling to procedures. Office visits are rated from 1-5, depending on how complex the presentation, and how many medical problems were dealt with that visit. There’s a lot of these codes – the current CPT book is a good 4 inches thick. The codes are then fed into a computer, and the insurance pays accordingly, by a contracted fee schedule.   Diagnoses are entered via a separate set of codes, ICD, that must match up with and “justify” the CPT codes used. Got it?

I mentioned in part one the “perpetual adversarial chess game”, and it comes into play here.  The providers are always trying to figure out how to “correctly code” what they did, and the insurance companies are always trying to figure out ways to have the computer reject any given code combination.  Please keep in mind that because there are  so many similar codes,  the “game” gets interesting.  There may be 5 different diagnosis codes for a single illness, and THIS insurance company decides that they require you to use the second one, while THAT one kicks it out unless you use the 3rd one in conjunction with certain CPT codes.  Oh, and they change what will “kick out” all the time, so the code that resulted in your getting paid last month will not necessarily go through this month. Confused yet?

Here’s where it really gets interesting.  Matt Taibbi wrote his infamous article a couple of months ago, about the tentacled squid that is Goldman Sachs, and the questions over whether they have proprietary trading software that games the market in their favor.  Well, GS is not the only one who can play that game.  Insurance companies have been doing it for years.  Let me introduce you to some of these practices.

Bundling, downcoding, and black box edits:

Bundling is the practice of taking multiple procedures or codes that are billed, and deciding to proclaim by fiat, and with ZERO evidence, that they were not separate services at all.  For instance, let’s say a physician sees a followup patient with something like congestive heart failure.  So he/she bills for the CPT code associated with that service.  But on the way out of the room, the patient mentions that they have a skin lesion that is concerning. So the doc takes a look, and decides “Yeah, we’d better nip a sample and send it for biopsy”.  So he tacks on the procedure code for that entirely separate and unrelated bit of work, in addition to the heart problem visit he already did with the patient. Please note that he is NOT attempting to charge two duplicate office visits – merely an additional, usually modest fee for doing the biopsy/excision on top of a regular office visit.   The insurance company’s computer detects that two services are being charged, and “bundles” the two, paying only for the lowest-priced service. That’s bundling.

Let’s move on to downcoding.  It’s a pdf, so I won’t link it, but The Florida Medical Association has a good explanation of downcoding (emphases and brackets mine) :

What is “downcoding” of claims?

“Downcoding” occurs when an insurer unilaterally reduces an E/M [evaluation and management, i.e. a simple-to-complex office visit] service level. The typical scenario occurs when a practice submits a claim for a patient visit based on a CPT code definition (for example, new patient visit code 99204 — a “level 4”) and the insurer automatically “downcodes” the claim to a lower level (for example, new patient visit code 99203 — a “level 3”) and then reimburses at a lower rate. Typically, the physician receives no explanation for the change but simply receives lower reimbursement. Occasionally the EOB form might include an ambiguous explanation such as “level of service (or procedure) has been adjusted” but more typically the only way to detect that downcoding occurred is to be familiar with the fee schedule and compare that to the amount received on the EOB form.

Sometimes insurers downcode based solely on the diagnosis code. In other words, the insurer assumes (most likely through a software system) that when a patient presents with certain diagnoses, the clinical evaluation can never be more complicated than a certain E/M level, regardless of the specifics of the individual case. This assumption has no clinical basis. In order to appeal the decision, the practice is stuck with the administrative burden of having to submit additional justification for the level of service performed.

What this last part essentially means is that the provider says he did X amount of work, and the insurer, with no basis whatsoever, simply says “No you didn’t.” Then he/she has to prove it. Sometimes he has to send the entire medical record, or large parts thereof to the insurance company, or at the very least go through more of that endless hoop-jumping, with more and more “justification” and “documentation” required to get paid for simple, everyday stuff. The insurers do not just do this on “fishy” claims, or on odd and unusual procedure combinations. That would be a pain in the ass, but not crippling to a practice. They do it across the board, on purpose, not just on a few but on hundreds and hundreds of perfectly ordinary claims, every damn day.

Please pay attention here: THE INTENT is to make it onerous.  THE INTENT is to overwhelm the billing office.  THE INTENT is to make it so difficult that the doctor will simply eat the loss on a certain percentage of denied claims, rather than go through the HELL of trying to meet the “requirements” and send them ever-increasing pieces of paper, only to have them ask for yet ANOTHER piece of paper, on claim after claim after claim.

And this is where the the proprietary software squid comes in, aka random claim-denial algorithms, aka BLACKBOX EDITS

A second common form of bundling is through “black box” coding edits. “Black box” edits refer to claims editing software that insurers purchase and then customize to automatically ignore certain modifiers or to group certain CPT codes together in a manner contrary to CPT instructions. The term black box comes from the fact that insurers consider these edits proprietary and keep them secret. The physician typically is reimbursed for just one procedure and receives no reimbursement for the second procedure.

Black box edits are very problematic because of the secretive nature of the edits. For example, some third-party vendors will customize surgical “packages” for insurers’ billing purposes. What services or procedures are included in the package are often unknown and may not be consistent with CPT.
Moreover, there are any number of idiosyncratic edits that are difficult to even decipher from an explanation of benefit (EOB) form. Sometimes physicians can only figure out certain edits after getting numerous denials or lower reimbursement for the same service or procedure.

So what we have here is a situation where physicians have no way of accurately predicting or knowing just what the coding and reimbursement practices are of any of the dozens of insurers they deal with. They have no idea HOW to get paid consistently. The insurers are not made to tell them. They do NOT disclose the secret “requirements” of these programs to the physicians. Ever. And they can change it at will, also with no consent from or even notification to the providers. These practices are fraudulent, and often violate the very CPT guidelines to which every insurer in the country is supposed and has agreed to adhere. And they know it. They pretty much do whatever the hell they want, and leave the providers scrambling to keep up, to figure it out. Forget practicing medicine, you need a huge staff devoted to nothing but poring over claims, and trying to figure out some sane pattern in how and WHY they are being denied (this week). And the providers do not have millions to invest in software to try to counteract the latest “black box” random-claim-denial algorithms of the insurers. The Squid has waaaaay more tentacles then they could ever hope to have.

Many of these practices are obviously fraudulent, so why don’t the docs fight back, you may ask? Well, there have been a few class-action suits, which the physicians have won, BTW. But getting the evidence together and filing one is very very difficult.

Part of the reason is that doctors are forbidden by law to share a lot of that type of information, because private practitioners fall under the anti-trust statutes. A doctor CANNOT just pick up the phone and talk to other docs in the area, comparing notes on who is getting paid what, or what claims what insurers are denying, and whether the fishy patterns she sees in her own claims are happening to others. It’s illegal to do so. Yes, the laws are subject to interpretation, and they can speak of the general problem. But the practical reality is that anytime a doctor does anything even approaching “colluding” with other doctors, or comparing specific insurance contracts or payment practices, he will get slapped with an anti-trust violation suit so fast it will make your head spin. So there is very little pushback, because collective bargaining or a unified front is not possible for doctors – it could and often has been considered “price-fixing” on their part.

Ironic, huh? The huge corporations with the deep pockets are very obviously “price-fixing” and communicating with one another with impunity every day. It is uncanny how if ONE insurer begins some odious new denial or pre-cert or unfair practice, the others will follow suit pretty quickly. No one in our government bothers applying too much anti-trust scrutiny to THEM. But god forbid some pediatrician call around to other pediatricians to find out if BigMedPlan2 is reducing payment to all of them. Then you’ll have a hue and cry about the evil monopolistic greedy doctors wanting to defraud the insurers.

So, what to do? In parts one and two, I think I’ve laid out that the problem is leverage, and who has it. It’s not the patient. It’s not the providers. Almost all of the leverage to determine what is covered and at what cost in our system resides solely in the realm of the big insurers. What of Medicare? I’ll get to that. It’s much, much better, but not perfect. Whatever solution we propose HAS to deal with this issue of leverage, and where it resides. Is there a way to do single-payer and still put the leverage back where it belongs, with the patients and doctors, rather than just handing over complete and unthinking broad control to the government? I think so. If we do it right.

Stay tuned….

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