NJAASC's Jeffrey Shanton Challenges New Jersey's Largest Auto Insurer's Support of New PIP Regulations
Jeffrey Shanton, chair, Advocacy & Legislative Affairs Committee of the New Jersey Association of Ambulatory Surgery Centers, has issued a statement in response to a letter sent by Bernard Flynn of New Jersey Manufacturers Insurance Company, to 425,000 personal auto policyholders asking for their support of Proposal 163, the new personal injury protection regulations proposed by the New Jersey Department of Banking and Insurance.
The letter sent by Mr. Flynn, who is president and CEO of NJM, can be found by clicking here (pdf). In it he asks policyholders to send messages directly to DOBI in support of the Proposal 163, formerly known as PRN 2011-163.
Mr. Shanton's rebuttal to the claims made by Mr. Flynn in his letter is as follows:
Jeffrey Shanton: I would like to respond to Mr. Flynn's letter, regarding the proposed New Jersey PIP reform, PRN 2011-163.
Mr. Flynn asserts that an 'unfair situation' was not addressed in insurance reform enacted by the state of New Jersey several years ago, specifically: "the grossly inflated charges for treatment of auto-related injuries."
Medical (PIP) cost most certainly was addressed, and from the perspective of healthcare providers, in a rather draconian fashion! A more comprehensive PIP Fee Schedule (which included ASCs) was instituted, though implementation was delayed until 2009 by a lawsuit. When you compare reimbursement as a healthcare provider pre- and post-fee schedule, the difference is very dramatic. Indeed some types of providers, some specialties, saw a reduction in reimbursement of over 50 percent. If as the auto insurance industry claims, PIP payments represent (overwhelmingly) their biggest outlay, one could reasonably expect a savings. Those savings were, to my knowledge, never passed on to the consumer. I have not seen my personal auto policy premium go down.
So now DOBI, at the behest of the insurance carriers, has decided on another round of what can best be described as nothing more than additional cuts to healthcare providers. A new fee schedule based — inappropriately in my opinion — on Medicare (this time utilizing the 2011 schedule) has been rolled out, along with some very onerous and ominous new regulations. While proponents claim that this schedule is more comprehensive and inclusive (and it is a verbatim copy of CMS 2011 to be exact), it will reflect the increases and reductions of said fee schedule. As the overwhelming majority of PIP cases are soft tissue, pain management, those particular procedures will see another 18-20 percent reduction in reimbursement above and beyond current levels.
The NJM letter show examples from the physician fee schedule. The first two procedures listed — cervical and lumbar laminectomy — are of particular interest. Both are routinely preformed in an outpatient setting. However, under the DOBI proposals, these procedures would have to be performed in a hospital (inpatient) setting (they are not allowable on the OFS), with the resultant high cost associated. Hospitals are not subject to any fee scheduling under the proposed regulations, and indeed would be paid UCR. If NJM were concerned about holding down costs, then it should push for the dozens of procedures not currently on the OFS to be included, allowing them to be performed in the more cost effective and efficient outpatient setting.
Whether this result in lower premiums for the consumer, no one can predict. However, in a recent interview published Aug. 7, the commissioner of DOBI was asked the question: Who stands to gain from the new rules?
His answer: "Insurance companies will see the most immediate benefit if the cost of providing benefits goes down."
But it's unclear whether insurance companies will pass savings on to customers, instead of using the extra money to pad their bottom line.
However, it is not only the fee schedule that is up for change, it is virtually the entire system as we know it. Another target of the carriers is that of arbitration. Prior to any PIP related procedure being performed, a healthcare provider must seek pre-certification with the carrier. If the carrier denies the request, the procedure can still be performed and then arbitrated (medical necessity arbitration) in front of an independent DRP. If the carrier does pay the claim, but pays it incorrectly for whatever reason, this, too, can be arbitrated (administrative arbitration). This is one of the basic tenants of PIP in New Jersey, and allows for patients to receive treatment that is medically necessary, by his/her doctor, regardless of the pre-certification decision of the insurance carrier.
The current system allows for attorneys to be paid according to the work they put into the case. Thus, this payment varies from attorney to attorney, case to case, much to the chagrin of the carriers. In its letter, NJM is clearly upset with awards to attorneys (legal fees which it has to pay, by the way) that are higher than payments to the healthcare provider. Indeed, it gives several examples (outliers, the most extreme it can come up with, not the norm) of the disparity of payment. One would assume that the healthcare provider would be the one upset, but that is not the case, as providers understand that arbitration is their only recourse to get paid, correctly.
If the claim would have been paid the right way in the first place, there would be no need for arbitration. Indeed, we can go one step further. When payment is made, and the healthcare provider believes he or she has been paid incorrectly, he or she must file an appeal with the carrier. The carrier can then review, and one would reasonably assume, realize its error and make restitution. Thus, there are two levels wherein arbitration could be avoided. However, this is usually never the case, even if the error is very clearly noted. The case then has to go to an attorney, and is filed as an administrative arbitration.
NJM believes (in its letter) that an insurance company should only pay a medical provider's legal fees when the provider is successful. Now this does not mean that the provider wins the arbitration; no, the NJM definition of successful is when a medical provider is awarded at least half of its demand. Essentially, NJM is saying that even if the carrier is wrong, even if it is paid an incorrect amount, carriers should not be held responsible for the legal fees accrued by a medical provider's attorney in getting their claim paid correctly, even though the provider had the ability to get it right the first time, and then upon appeal. NJM is probably assuming that if providers had to pay the legal fees to recoup $25.00, they would not do so, which misses the point, is irresponsible and, in a nutshell, would allow carriers pay any claim incorrectly, without any checks or balances.
NJM gives examples, which are misleading. The disputed amount is the total of the bill, not necessarily the disputed amount in question. Regardless of the amount of the arbitrator's decision, no matter how small, this was clearly money owed to the provider — period. NJM can make light of this, but $72.00 here and there adds up. Indeed $278.00 may be the difference between a small medical provider paying the rent or making payroll. Incorrect payment is incorrect payment, no matter the amount.
I would make one further analogy: If I wrote my premium check to NJM for $25.00 less than what it actually was, NJM would not give me a policy or would cancel me.
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