The HIT Transition Weblog

UHC, Ingenix and...Hillary????

It's not like UnitedHealthcare needed any more bad news. First they and their Ingenix software division get the business-headline perp walk in New York Attorney General's investigation of the intentional skewing of "usual and customary" fee calculations that govern millions of Americans' out-of-network payments.  Then some uppity blogger points out that Cuomo planted his flag a the top of a very hefty deductible-sinking iceberg.

Then, adding insult to inquiry, they flat out lose a national popularity contest among hospital administrators. And they didn't lose by a little -- they doubled the score of their nearest competitor, Wellpoint.

Orangemen Take Football, Go Home
You'd think today's story would just be a minor piling-on thing, to look at it. Everybody wants to smack the gorilla when he's down, right? So, the lost business represented by University Hospital's decision to leave the UHC provider network over $1.5 billion in unpaid bills (okay, that's per the hospital's account, so I should say "allegedly unpaid bills" -- but why don't we ever read such disclaimers when the payers shout about the billions in fraud and abuse, when "abuse" is being determined unilaterally by the payers themselves? I digress.)

Other than the fact that I was born in or near that hospital (I was quite young at the time and haven't been able to follow the institutional mergers and acquisitions in the years since), this wouldn't have been much of a blip on my radar.

Why Let Readers Comment, Anyway?
But then alert reader Cyndee Weston, Executive Director of the American Medical Billing Association, sent me a note suggesting I read the story. And right under the press account, I found a comment from someone who had found a smoking gun tying presidential candidate Hillary Clinton to UHC.

When campaign finance reports first started coming out,  I wasn't too thrilled to hear that Hillary was accepting campaign donations from the insurance industry in disproportionate measure to the other candidates. Remember, though, that not all health care insurers are against universal care, and we at HITTG think that's the number one priority. So, I thought I'd judge her health care policy on its merits first, then dig for skeletons in her closet before I rendered judgment on the accusations that she was sleeping with the enemy.

I didn't realized she was the enemy.

Mathlete to the Line
According to the report she filed last June 15, and published at opensecrets.org, Ms. Clinton owns some stock in UnitedHealth Group, parent to UHC and Ingenix. I'm no accountant, nor am I a political snooper of much acumen, but the way I read page 38 of that report it looks like she checked the box under "Assets" in the $100,000 - $250,000 column, and the box under "Income" in the $50-100,000 with a "CG." Now, that CG looks like it might be referring to Capital Gains. So if the capital gain was at least $50,000 during the period covered by the report, then somebody with better financial brains than I have might be able to say whether that spread is closer to $100,000 than $250,000.

Can We Make Those Numbers Look A Little Better?
But for the sake of fairness, let's suggest it's right at the bottom and say, as far as we know, she owns merely $100,000 in UHG stock.  Heck, that's just 20 years worth of deductibles for a family on a HDHP plan.  Or, if you use a customized database to adjust the patient's payments, you can boost that $5K deductible to as much as $12,987 and whittle that down to a mere 7.7 years of deductibles (that's $100,000 divided by the $12,987 a family would actually have to pay to satisfy their annual deductible, using our proprietary U&HC deductible-skewing engine. Change the deductible amount from $2000 to $5000 when that spreadsheet loads and watch the magic happen!).

There's Nothing to See Here, Mister
So, when you do the math just right, she really only owns about 8 families-worth of unpaid claims, in the what hospitals say is the worst healthcare payer in the country. (Hey, don't shoot the messenger! I love UHC!).  And that's only if someone in the family gets really, really sick. What kind of story is that?

No story, really. But where she got the stock? That might be a story.

Luckily, this is a healthcare IT blog, and we don't do politics. The one time we tried, it really came out badly.

What's that? I seem to have some overdue editorial on curing the systemic economic failure that drives up healthcare costs. That's more up my alley than tracing individual money trails.

Cuomo's Probe Gets Bigger

Where's Andrew's Big Fat Lawsuit? posits a mid-afternoon WSJ blog post. The Journal wonders whether last month's warnings were just a matter of brinksmanship, leading up to quiet settlement prior to court action. They quickly pulled an Emily Latella, though, when they learned that the New York AG was broadening his inquiry, subpoenaing payer CEOs and internal emails.

Eet Eess Not My Dog!
Cuomo's missing the point, though, when he emphasizes that there is an inherent conflict of interest that the pricing engine is designed by a software company owned by a payer. UHC could spin Ingenix off tomorrow and they'd still be selling a secret -- I mean proprietary -- system that allows its clients to set prices by adjusting variables in ways they don't have to disclose to anyone.

Free Rider
Okay, here's a question for all you free marketeers.  How many markets allow one party to unilaterally name the price they will pay after the service has taken place and the other party has already taken on the commitment to pay a third party in full?

The University of Because I Said So
The payer community displayed no sense of irony when it suggested that the real culprits were the providers, for setting prices that needed to be discounted. They also cited a helpful academic who established the importance of including systematic bias in their calculations:

Contractually, the health coverage is linked to the in-network status of providers, explains Sara Rosenbaum, a law professor at George Washington University School of Public Health. "I must say I am at a loss to understand the investigation," she tells HPW. "The higher premium is to get the insurer to pay something for out-of-network care. If one buys PPO coverage that allows partial payment for out-of-network care, the insurer is completely free to come up with any methodology it wants to figure out the out-of-network amount. The UCR can be whatever it desires. Otherwise the premium would be astronomical, since it is in-network use that controls pricing for the plan."

Actually, I thought the difference was to be accounted for by establishing a copay or lowering the patient responsibility percentage to encourage use of in-network providers. The policyholder is warned  they will pay a much higher proportion of the fee for out-of-network. The "usual and customary" language is clearly in there to protect the payer from excessive fees, but I don't remember Whatsoever We Desire being in any of the many policies I've owned. Did I miss a footnote somewhere, professor?

I guess I thought "reasonable and customary" meant reasonable and/or customary, not "any methodology [we] want."

Four-F
It's not free, it's not fair, but is it fraud? That depends on what the AG's office finds when it looks under the electronic covers. Unlike a lot of my readers, I'm not one of those throw-em-in-the-clinker critics when it comes to payers' business practices. Our system is designed to propagate such systematic and innovative abuses of policyholders and patients. The reason that so many payers have adopted the Ingenix engine is that so many other payers have adopted the Ingenix engine. If they want to stay in business, they can't pay full price for claims that their competitors discount to a fraction.

(Bet you didn't think that was going to be the fourth F-word, did you? Sorta took me by surprise, too.)

Don't Forget to Wear Sunscreen
It won't be enough for the AG to kick some health plan booty, or even to put payer CEOs to work picking up litter on the Thruway. We need a common pricing system that's fair, open and visible. No more secret pricing.

Transparency has to work both ways, or it's just a mirror looking out on a lot of devastated patients, who put their trust in a system of premeditated avarice.

Are Cuomo's Estimates Too Low?

When we read the coverage of NY Attorney General Andrew Cuomo's accusation that Ingenix, United Healthcare and a host of other payers had systematically underestimated the "Reasonable and Customary" fees used to calculate reimbursements for out-of-network services, one frequently-repeated statement caught our eye:

Lacewell said, in one example, the office's investigation showed that when $200 was a fair market rate for a 15-minute doctor's visit for a common illness, Ingenix determined it was $77. Therefore, United would pay $62 when it should have paid $160, leaving the consumer with a $138 bill. [Emphasis added.]

Actually, the United would probably not pay a dime. The patient would have to pay the entire $200 bill -- at least until the deductible was satisfied. That got us thinking about deductibles, so we took our question over to the AskLeslie group -- those coding and billing folks that handle all those claims for providers and their patients.

We asked this question: When a non-participating plan estimates a U&C price lower than the actual fee, which value gets applied to the patient's deductible -- the actual payment, or just the discounted amount? The response was overwhelming: The patient only gets credit for what the plan says they "should" have paid for the service, not the amount of the check they actually had to write.

Be Careful What You Solve For...
So today, when I read where the Ingenix execs Andy Slavitt and David Ostler say, "We believe that the issue of how to calculate out-of-network charges and reimbursement is an important one, but we also believe that it is a small part of a larger issue: improving the healthcare system by improving the quality and quantity of information available to its participants," I thought maybe I would apply some rules of basic algebra to the "improve the quality and quantity" of information at hand.  To wit: How does such fee repricing affect annual expenses?

Ingenix Chief Offers Transparent Denial

In a letter to the New York Times, Ingenix Chief Executive (what, no office for this guy?) Andy Slavitt offers a carefully-worded rebuttal to the charges that his company is helping insurers rip off policyholders, as NY Attorney General Andrew Cuomo and NYT editorial writers have accused.

We do not know the source of the $77 figure your editorial cites from the New York attorney general as Ingenix’s calculation of the “fair market rate in New York City and Nassau County for a 15-minute consultation with a doctor for an illness of low to moderate severity.” Instead, a health plan reimbursing this consultation using our Prevailing Healthcare Charges System data at the 80th percentile would price this service at $160.

Cuomo's office pointed out that pricing a service at $77 which actually cost $200 would result in a payment of about $62, leaving the patient responsible for a balance of almost $140.

These Bongs are for Novelty Purposes Only
Slavitt seems to be saying that his product could be used ethically. But note that even Slavitt's more optimistic calculation hints at a couple of important issues.  One is that his product allows lots of discretion to the user -- they can use geography, of course, and set percentile rankings.  Others have suggested that the tool offers a lot more capacity than that -- that certain "outliers" can be excluded, and who knows how many wheels and levers of severity and exception can be set to drive the estimates down.

In an underwhelming bit of double-speak, Slavitt asserts "[t]here is absolutely no systematic bias that eliminates high charges in the data."  So the bias must be coming from....?

And doesn't it look like even setting the price at the 80th percentile ranking already accelerates a discount, since the payer will use that price as the starting point for their 80/20 split with the patient? My guess is that payers would be a lot more likely to start their calculation at the 50th percentile of whatever PHCS turns out in any case. The whittling could begin from there.

Sometimes You Do the Math, Sometimes the Math Does You
Remember, also, that what's left doesn't necessarily go to the patient.  That $62 will, more often than not, come out of the patient's pocket and simply be counted toward a deductible -- that increasingly balooning number that keeps more and more patients from getting a dime of reimbursement for medical services.

In a high deductible health plan, you might do the math and say, "Well, after $2,000, it will start helping me out." Guess what? If the plan discounts every $200 you pay to $77 covered charges, you'd actually pay $2,000 and still have $1,230 deductible ($2,000 actual payments - $770 in "reasonable and customary" charges) left to satisfy.

If only 38.5% of your payments go toward the deductible (that's what $77 out of $200 means), then you would actually pay $5194 before the insurance company recognized the $2000 as being satisfied. (This takes a little algebra -- send me a note and I'll send you the worksheet. WARNING -- The numbers will scare you.)

I'm Not From the Government, Therefore I Must Be Here to Help You
Still, we should be grateful to Ingenix for providing this sophisticated pricing tool to the insurance industry.  The only alternative, according to Slavitt, is for  "health plans that offer out-of-network benefits...to make reimbursement decisions based on government-set pricing similar to Medicare or in the absence of any statistical data at all."

Not that he's limiting his market to his payer friends, mind you. You might see the market-expanding pitch he makes in his closing comment: "We look forward to an open and balanced dialogue about the very real need to provide more accessible information to all stakeholders in the health care industry."

We still think that the impact of PHCS on out-of-network patient visits pales in comparison to the death-by-four-million-cuts that Ingenix's iCES -- and the denial engines developed by other companies like ViPS, McKesson, HCI and Bloodhound -- apply to the entire claims stream. But it's nice to know a little bit more about how PHCS's "transparent methodology" actually works, isn't it?

Denial Engine Vendor Ingenix Keeps more than Usual and Customary Dollars

In my warnings to providers about denial engines -- those sophisticated analytics tools that payers are increasingly using to reduce, deny, or re-collect claims payments -- I try to emphasize that they can be used ethically.  One of the common features of such tools is that they allow the payer to produce a detailed "defense" for the dollars they are refusing to remit.

The argument I've been trying to focus on is that providers and their vendors need to understand these tools and respond -- not that this is some Good vs. Evil battle over payments that all providers unquestionably deserve.

It's not necessarily that the payers aren't fighting fair, I say.  It's that the providers aren't fighting back.

UnitedHealthcare and its Ingenix division seem to want to give the lie to that even-handed approach.  New York Attorney General Andrew Cuomo has accused them of employing "convoluted and dishonest systems for determining the rate of reimbursement" for use by both UHC and a lot of other insurers, including Aetna, Cigna Corp., Empire Blue Cross & Blue Shield and Humana. This post isn't about that issue. The phenomenon I'm concerned about is probably a lot bigger, since it applies to all claims and thousands of discount and denial codes, not just out-of-network "usual and customary" adjustments.

Denial Engines Still Lack Response from Provider Vendors

It's been almost two years since I published my piece on a new segment of payer software tools that offer a suite of editing tools so sophisticated that it basically allowed payers to tune them to whatever percentage of revenue retention they thought providers would tolerate.  I dubbed the tools Denial Engines and suggested that provider vendors had been seriously outflanked and needed to up their game.

This new category of vendors digs deeper, into the literally millions of edits available.  They employ various ways to improve on the previous technology, such as greater selectivity (applying edits to some providers and not others), longitudinal comparisions (i.e. based on patient history), and pattern matching (i.e. upcoding).  Regardless of the approaches they choose, these vendors make the sale based on the fact that they can recover more money than the payers' existing edits, and they provide the analytics to prove it....The "best" of these denial engines point to independent sources for the edits.  This helpful feature allows providers to learn from their mistakes. Such evidence may also tend to keep providers from pursuing appeals that will ultimately prove unsuccessful.

In my research since then, I've learned a lot more.  Some of these DE tools will go so far as to edit against best practices published in medical journals, and integrate a link to the citation in the automated defense. 

Worse, DE tools are being used by Recovery Audit Contractors (RACs) to do commission-based re-adjudication of old Medicare claims.  They're not just subtracting from what they owe you, they're taking back money you thought you'd earned years ago.

Leaving Money on th--Hey!  Where's My Table!?
I even suggested that there were (software) revenue/market opportunities to had, if provider vendors could just alert their clients that they were having an additional 4% or more of their payables systematically denied, and come up with an effective response mechanism.  I even architected a potential solution and showed it to a few of them.

Providers Fighting RACs

Back when I ran that series warning providers about the new, sophisticated claims analytics tools I dubbed Denial Engines, I turned up some scary evidence about Medicare's demonstration Recovery Audit Contractor (RAC) program (see Medicare No Longer Money in the Bank among other posts listed in the Denial Engines category to the right).

I spent a lot of my free time (in both senses of the word) digging up the dirt on this payer technology (not that it's necessarily dirty -- which is part of the danger)  and the RAC approach, by which Medicare hires auditors to pore over previous years' settlements looking for "overpayments" -- then rewards them with a bounty for every dollar they retroactively deduct from providers current year remittances.

So, did the provider vendors come rushing to me to learn how to foil these tools?  Did provider organizations lavish me with plane tickets and speaker fees to come share the news and help them devise strategies to withstand the threat?  Um, no.  But apparently, they did call their lawyers.

And now it looks like some of those attorneys may be earning their fees (which, by the way, tend to be much higher than my standard hourly rate).

Medicare Pilots Another Denial Engine Project

I missed this when it came out in December, but I found it on Michael Alpolskis' excellent MedicareUpdate Blog: CMS Publishes Notice of Computer Matching Program to Detect Fraud, Waste & Abuse

I've added Michael to my oh-so-exclusive Health IT Blogroll -- he also covered the NPI Contingency.

Very Hot Off the Press

Two days after the WSJ covered the "New Arms Race" of denial management, the NY Times went even further: tracing the logical path from the struggle over denial to the absurdity of US financing healthcare overall.

I found the column re-printed in the Dallas Morning News. 

A New Arms Race in Healthcare?

The Wall Street Journal delivered me a valentine last week: 40 column inches validating my previous research and reportage on the product category I dubbed the "Denial Engine."  Of course, WSJ's Vanessa Fuhrmans opted for the more tactful label "Denial Management Software," but her article makes it quite clear that most of the "management" is currently taking place on the payer side of the great reimbursement divide.

The denial-management industry's rise shows how much of medical spending is consumed by propping up and doing battle over an arcane patchwork of claims systems. Roughly 30% of physicians' claims are denied the first time around. Sales of physician-billing and practice-management technology grew 25% to more than $7.5 billion last year....

(With due respect to the WSJ's book of style-and-subscriber-relations, I'll stand by my engine.)

The F Word Hides a Billion Dollar Market

Ten months after I first started warning you about Denial Engines -- the new crop of software tools designed to use sophisticated edits to adjust and deny claims, ensuring an ongoing source of revenue retention for the payers who employ them -- USA Today has posted two stories about the new Anti-Fraud Detection software category.

It must be great to get paid to report on this stuff, because the reporter, Julie Appleby, sure had time to get some choice quotes.

A single patient had apparently undergone a diagnostic rectal-probe procedure 118 times in a year — at 21 medical facilities. "It's unlikely that could have occurred," says Kim Brandt, director of program integrity at the Centers for Medicare and Medicaid Services. "This person would not have been able to sit on a plane."

I'm so freaking jealous!  Great job, Julie.  But I still think you missed the slice of the story that I reported on -- that Anti-Fraud can be a fig leaf for downcoding legitimate claims.

UnitedHealth vs. HCA - The Power of Denial?

Not to distract anybody from their NPI concerns, but did anyone notice the spat going on in south Florida between UnitedHealthcare and hospital giant HCA?  Earlier this month, the Palm Beach Post warned of a contract dispute that was turning into a public relations war over the soon-to-expire contract.  Yesterday, the paper reported that the two failed to reach an agreement by the deadline, affecting 10 hospitals and about 700,000 covered patients.

Earlier this year, you may remember my series on an emerging technology I dubbed Denial Engines.  Could this contract dispute have been fueled by the output of these new payer analytical tools?  I'd put the likelihood at better-than-average.

Medicare No Longer Money in the Bank

How much did you earn from Medicare last year?  Or should I say, how much did you think you had earned?

RAC, Medicare's new cost recovery initiative, is rolling out in Florida, New York and California, with other states almost certain to follow.  RAC stands for "Recovery Audit Contractor" and it refers to a firm that is hired to recover money from providers for claims that have long been settled.  How?  They'll use historical data and more sophisticated editing techniques to find "duplicate" charges, coding errors and procedures of questionable necessity.  That should sound familiar to anyone that's been keeping up with my warnings about Denial Engine technology.  If there was any doubt that these tools would take hold, Medicare has eliminated it by carving out a lucrative market for them in the federal budget.

Denial Engines: 4 Cylinder and V8

Looks like I was right about Denial Engine technology taking off.  Even as I was posting my thoughts about the DE's penetrating the TPA market, Bloodhound was announcing a deal with Acclamation Systems, a company that offers a virtual treasure chest of toys for third party administrators and small-to-mid-size plans.  Several of the other offerings in their list employ DE technology, including Bloodhound's and those of Ingenix.

The ASP model works well for the undertechnical smaller plans, but what about the big guys?  Um, if you're a provider, I've got some bad news....

Gorillas and Boas of Denial

My previous posts on Denial Engines have generated a goodly amount of interest and some degree of incredulity, which might be characterized as the "They wouldn't dare!" response, or perhaps, Denial Engine Denial Syndrome.  A system that payers could use to squeeze dollars out of providers' revenue stream based on ever-higher orders of edits?  There would be an uproar!  Providers would revolt.  Patients would protest!  Employers would take their business elsewhere!!!

Unfortunately, I not only doubt these concerns will be enough to hold off this new technology, I think the Denial Engine business proposition is so compelling that their widespread deployment may be a foregone conclusion.  Let me take it point by point.

Emdeon may shed PMS, keep Denial Engine

Emdeon issued a press release today that indicates it may shed its troubled practice management business, but assures investors it will retain its promising ViPS division.  Unlike the other tools we've dubbed "Denial Engines," ViPS focuses on fraud prevention rather than external edits. 

But fraud, like so many terms, is in the eye of the beholder.  After all, who can object to preventing fraud?

Providers: Beware the Engines of Denial

Earlier this month, I included the following item in my 2006 HIT List:

The Rise of the Denial Engine
There is a new category of software out there that is going to shift the balance of power, such as it is, between providers and payers. It’s a sophisticated claims analysis tool that lets payers add edits that are an order of magnitude more sophisticated than now exist. What’s more, they’re applied at the front end of the process. “What’s that? You conducted expensive process B without first taking simple blood test A? Sorry, according to the AMA, that’s against the rules.” While some provider billing systems already incorporate Correct Coding Initiative and Local Medical Review Policy edits, these new payer tools make their business case by demonstrating additional payer savings by going far deeper, across the whole range of claims. They sell for a pretty penny, and they justify that price tag by adding whole-percentage-point increases to denials and recoveries. How long will it take for these to penetrate the market? Less time than you might think.

I want to talk a little more about these Denial Engines because of three critical factors:

1. These new tools use rules-based logic and data repositories that go much further than payers' previous editing approaches.  The current generation of provider billing systems and claims scrubbing services weren't built to catch them.
2. They're extremely effective and can prove it with strong metrics, which makes them an easy sell.
3. Worst of all? They're ethical. Which is to say, they can provide the reasons for the denials, and often those reasons point to irrefutable third-party sources.

If there's good news here, it's that this creates a real opportunity for provider vendors (esp. application developers and provider-friendly clearinghouses) to differentiate themselves from their wrap-it/ship-it competitors.  A "free" clearinghouse might be less of a bargain if you discover that it leads you (directly or indirectly) into the mouth of a denial engine.