California regulators on Monday fined the state's seven largest health plans $4.85 million after finding widespread patterns of unfairly processing, delaying, and denying physician and hospital reimbursement claims for patient care.
As a result of the penalties, health plans throughout the state will soon be repaying "tens of millions" of dollars more to providers they owe—about 70% to hospitals and 30% to doctors—as health plans make restitution for their bad practices, said California Department of Managed Health Care Director Cindy Ehnes.
"As one hospital provider said to me: I regard a claim with a health plan as a ticket to chase my dollars, not as a guarantee of payment; that's unacceptable to this department," Ehnes said in a news briefing announcing the fines.
All seven plans failed to pay 95% of their claims correctly, the minimum legal threshold, she said.
The seven fines were as follows: Anthem Blue Cross, $900,000; Blue Shield of California, $900,000; United/PacificCare, $800,000; HealthNet, $750,000; Kaiser Foundation Health Plan, $750,000; Cigna, $450,000 and Aetna, $300,000. The fines were assessed in part based on the health plan's size. But mostly, the fine was based on "the willfulness of what we see as a violation; that's the biggest factor," Ehnes said.
The 18-month investigation, which Ehnes said was the only one like it in the nation, began after her agency received persistent complaints from providers who, despite filing legitimate claims, said payment was either held up or denied. They alleged that the provider complaint process, designed to appeal a denied claim, was deeply flawed.
In fact, the agency found that it was, she said.
One "common error" was that in five of the seven plans, claims processors or units that reviewed physician and hospital appeals were "the exact same person or unit that denied it in the first place, with no real reconsideration of the claim. That was the most notable error we saw."
Another common problem was the failure of the health plan to pay interest and penalties when paying claims beyond the amount of time required.
Ehnes emphasized that while most other states have provisions allowing review of health plan claims payment processes, California's new action is the first time a state regulatory agency has reviewed a large group of plans en masse, specifically targeting how the plans deal with appeals.
One result of the investigation, Ehnes said, is that health plans are now being required to beef up their appeal process resources, including adding staff and providing management and oversight "to avoid further violations of state law."
"Our clear and consistent message is that California's hospitals and physicians must be paid fairly and on time," Ehnes said. "Providers are struggling to stay afloat in a very difficult business environment," exacerbated by the fact that many health plan beneficiaries are now in high deductible plans.
The agency's announcement was supported by the California Hospital Association, the California Medical Association and several health consumer groups.
"We congratulate DMHC for taking aggressive action to ensure that hospitals and doctors are paid accurately and on time. In levying these fines, DMHC is addressing an ongoing, systemic issue that harms the ability of providers to care for their patients," said Jan Emerson-Shea, CHA vice president for external affairs.
CMA president James Hinsdale, MD, however, called the fines "chump change that amount to little more than a slap on the wrist for highly profitable health plans that systematically deny legitimate claims and routinely block, delay or limit physician reimbursements as one tactic to boost their bottom lines."
"Every battle over a claim hurts access to care by taking a physician's time away from treating patients," Hinson continued. "Unpaid claims also cause patients immense stress that can undermine their recovery. It's crucial that DMHC and other regulators remain vigilant and force insurers to follow the law so that doctors can focus on patient care."
But the California Association of Health Plans had a different take on the state's announcement.
"The DMHC found that plans are generally meeting state requirements for timely payment and they will work collaboratively with the state and providers to meet the full extent of regulatory requirements and improve performance," said CAHP President & CEO Patrick Johnston.
"Plans are committed to ensuring our members have access to the health care they need every day. We have long recognized that the administrative side of health care coverage can take valuable time away from patient care, which is why plans have been working to streamline processes both at the health plan level and in doctors? offices," Johnston said.
The DMHC is the only stand-alone state HMO watchdog agency in the nation, and covers plans that enroll more than 21 million Californians. Since 2004, the department's provider complaint unit's investigations have resulted in $22 million in additional payments to providers.
Some of those were because of systemic claims practices that violate state law, and a $1.6 million fine against Anthem Blue Cross, paid to seven Southern California hospitals that complained to DHC about claims they felt were wrongly denied.
DMHC staff said that they are working with health plans to make sure improperly delayed or denied claims are paid back to the providers, and urges California hospitals and doctors to visit the agency's web site for information about fighting wrongly denied claims.