The case was a precedent-setting success for ambulatory surgery centers against predatory payment practices from commercial payers.
Here Mr. Prochnow discusses the case in further detail and shares how ASCs can both prevent payment abuses from occurring and fight back against payers not fulfilling their obligations.
Question: Why did Chatham Surgicore’s owner decide to take the payment dispute to court?
Douglas Prochnow: Chatham Surgicore was an unlicensed, out-of-network surgical center on the south side of Chicago. In Illinois, a license is not required, for example, if it’s for a single-specialty and less than half the cases are devoted to the surgical center. The gist of this cause of action was that the podiatry practice and surgical center wasn’t getting paid on a lot of their claims. Blue Cross Blue Shield of Illinois placed them in a “quality management audit,” which really means a pre-payment review of the claims. Blue Cross ended up not paying roughly half of the ASC’s claims over about a five-year period.
Q: What was your main defense?
DP: We tried the case to a judge, not a jury, on a single theory — promissory estoppel. That essentially means you have an unambiguous promise to pay. You have the payer intending that the provider rely on the payer’s representations and the payer foresaw the provider would rely. The provider has to rely reasonably and the lack of payment has to cause damages to the provider, which was a foregone conclusion in our case.
All these providers must call in advance to make sure there is coverage. When the payer says coverage is available that constitutes the unambiguous promise to pay. Payers always will make these representations over the phone. Sometimes the payer will then quote the level of benefits available, but sometimes they don’t. It’s not essential. The critical thing for purposes of prosecuting the claim is that they do make the promise that coverage is available.
Q: How did Blue Cross Blue Shield of Illinois defend their payment practice?
DP: One aspect of Blue Cross Blue Shield’s defense was that we were unlicensed, and Blue Cross said they didn’t have to pay because we were unlicensed and aren’t covered under various policies for patients. However, they didn’t tell us about that limitation on coverage during the phone calls. If they had, we would’ve made arrangements for the patient to pay or with another facility. We then moved for a summary judgment that they couldn’t raise that limitation as a defense, and the court agreed.
Another defense they tried to invoke revolved around their phone disclaimer. They, and other insurers, have a recording you have to listen to before speaking with a person that says something to the effect that a quotation of benefits is not a guarantee of payment. However, we responded and said, “We aren’t saying because we talked to you on the phone that you are guaranteeing payment; we still have to do the procedure.” The disclaimer doesn’t reach the crux of the case.
They had a couple of other defenses. One was that Chatham’s reliance wasn’t reasonable because after they failed to pay a few of the claims, the center should’ve known they wouldn’t pay them. The defense to that was they paid half of the claims. How could the center have known from one claim to the next whether they would pay or not?
Q: Is this type of treatment toward surgery centers common?
DP: I think it’s pretty routine. ASCs routinely get the short end of the stick on these claims. Most ASCs only ever see partial payments. They may think they are getting 60 or 80 percent of billed charges based on the phone call, but they actually get much less. They have grounds to discuss the dispute with Blue Cross Blue Shield with the view toward avoiding litigation. Those types of cases are easier to prove because there’s no question about the coverage.
Q: If other ASCs are not receiving dollars from payers, how should their owners proceed with addressing the problem before it gets to the point of litigation?
DP: For the surgical center that hasn’t been paid on a bunch of claims the important question is, “Do I have good enough paper work to support all of my claims?” What that means is at the time the facility’s representative calls to verify coverage, they should fill out a verification worksheet that contains all the information they get from the payer. It needs to have straightforward things, such as their name, the date of the call, the procedure being done, who they are talking to at the insurance company, what the insurance rep told them and, if possible, direct quotes from the insurance company citing exactly what was said. That paper work will go a long way toward resolving disputes, and it can sometimes resolve disputes before litigation.
Q: What’s the first step ASCs should take when receiving a payment denial?
DP: If a claim is denied, then normally when you get the denial there is number to call. Call the number. Make sure they didn’t deny the claim because the form was improperly completed in some way. Make sure everyone is in agreement that you submitted a clean claim. In the Chatham case, this was not an issue, but if you don’t have a clean claim, you can lose outright. Find out first if there are any coding problems with the form, and then resubmit claim. Once you have a clean claim, let’s assume it’s an out-of-network ASC, and they verified coverage. Tell they payer they verified coverage and ask why they aren’t paying. It’s always good to hear their answer.
Also, just as the provider is filling out a verification worksheet, the payer’s representative is filling out similar form on their end with similar information. Blue Cross Blue Shield of Illinois calls this an IRIS note, or information and remote inquiry system. One of the things a provider can do if there is a dispute over something said in the phone call is ask to see the IRIS note. I’m not saying they will give it to you, but you at least have a fighting chance.
Q: Are any other problems cropping up for ASCs getting full payments?
DP: The other thing we are seeing a lot more of these days is payers sending out what they call recoupment letters, in which they are seeking to recoup money they have already paid to providers under a variety of excuses. They may say, for example, the provider upcoded the claim or improperly labeled an office visit a level five instead of a level four.
If you get a recoupment letter, get a hold of a lawyer. Those requests are sometimes not for very much money, but we’ve seen requests for more than $2 million. If you find Blue Cross making anything other than a typical request for records, be sure to find out what they are looking for. They will ask for a sampling for records and then say, “Based on this sample we think you are doing this [improper claim submission] to all patients.” And then they will ask you for money back, and it could be millions.
Q: Is there anything else ASCs should know to stay protected?
DP: Too often providers accept these denials from payers as the cost of doing business and don’t do anything about it. When you see one of these lawsuits that gets to litigation, it’s normally because millions of dollars are at stake, and the owner agrees it’s big enough to warrant the expense.
One thing to be aware of is that when Blue Cross or another payer doesn’t pay one of these claims or only pays in part what they should have paid, the provider in most states is going to be entitled to interest on the unpaid amount. It could be substantial. In Illinois it’s 9 percent. I know Blue Cross Blue Shield of Illinois is aware of their obligations under the Prompt to Pay Act. Most states, about 45 or so, have some version of that law.
In summary, follow up on phone calls, and do other things you should do for basic good business practices. Keep track of accounts receivable, and if you see unpaid claims start to grow substantially, don’t wait to look into them.
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