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Appeal for Downcoding & Bundling Denials

What You Should Know about Filing Your Health Benefits Claim

New Federal Claim Regulation, effective January 1, 2003, is the best and the most powerful protection for improper medical necessity denials:

Plan must disclose all the "secrets" under new definitions of relevant documents with better disclosure obligations, no more medical necessity secrets, UCR fee schedules & Bundling/Downcoding are no longer confidential. [Page 70252 & 70271, CFR § 2560.503-1(m)(8)  (DOL FAQ B-5, C17)]

Bundling And Down Coding, How To Fight Against Our Nation’s No. 1, The Most Important And Popular, Medical Claim Partial Denials?

© Jin Zhou,  ERISAclaim.com

Managed-Care Bundling And Down Coding Denial & Crisis? What Does an Unanimous US Supreme Court Say?

On June 21, 2004, an unanimous US Supreme Court ruled that claim processing (bundling and down-coding as partial benefits determination & denials, DOL FAQ C12)  and denials of benefits under the employer-sponsored health plans, ERISA-regulated benefit plans, for both self-insured and fully-insured (through purchase of insurance) health plans, are completely governed by federal law ERISA, that supersedes and invalidates state laws.

ERISAclaim.com: "employer-sponsored group health plans" = "ERISA-regulated benefit plans", both self-insured and fully-insured (through purchase of insurance) health plans, (ERISA - Title 29, Chapter 18.  Sec. 1002.)

           I.     Bundling & Down Coding Claim Partial Denials Are Identified As The Number One And The Most Important And Popular Managed Care Hassles By AMA (PSA) Through Nationwide State Medical Associations And Medical Specialty Societies

II.              Solutions by AMA?

After extensive explanations of corrective coding initiative and exercising CPT editorial muscles and conclusion of national survey of downcoding and bundling as the most important and popular claim partial denials, AMA offered, through its web site and a free guide, the following solutions (on page 9 of AMA free guide):

1. To appeal the claim denials and document all communications with insurer, referenced on “squeaky wheel theory” without practical instructions;
2. To notify state, county and national medical societies and associations for advocacy strategies;
3. To complete online AMA Health Plan Complaint Form.

“If a claim is filed correctly and the health insurer inappropriately bundles or downcodes, the physician should attempt to appeal the claim, by putting in writing a clinical justification for the appeal. The practice should document all communication with the insurer. While appealing claims obviously adds another administrative burden to the practice, there is a large element of truth in the “squeaky wheel” theory: an individual physician who is persistent, has good documentation, and is logically persuasive stands a better chance at succeeding than a physician who does nothing.3

The physician also should notify the relevant state and county medical associations and the relevant national medical specialty society. Those entities can then determine how widespread the problem is, and, if it is widespread, work with the AMA to develop an advocacy strategy. Finally, physicians should complete the AMA Health Plan Complaint Form, which can be accessed at www.ama-assn.org/go/psa. That information will be used to determine prevalence of these practices.” (© 2002, American Medical Association)

Apparently and practically, bundling and down coding partial claim denials remain to be the most popular and important healthcare claim partial denials in the U.S..

Healthcare providers nationwide are left without sufficient understanding and effective appeal solutions in accordance with governing laws and regulations for bundling and downcoding partial claim denials.

After years  of frustration and struggling without practical solutions from national medical societies, state governments and federal government as well as state and federal courts, 950,000 physicians nationwide filed unprecedented lawsuits in class actions against more than 19 health insurers and managed-care organizations in federal court and state courts throughout the country.

Contrary to the popular understanding and healthcare expert's assertion that ERISA doesn't provide for managed care "bundling and downcoding" partial denial protections as state law does, ERISA  statutorily prescribes the regulatory appeal process for "bundling and downcoding" partial denial violations.

United States Supreme Court unanimously ordered on May 27, 2003 in BLACK & DECKER DISABILITY PLAN v. NORD that DOL FAQ (Benefit Claims Procedure Regulation), available on DOL web site, is the view of the Supreme Court and must be followed:

"It is the Secretary of Labor’s view that ERISA is best served by “preserv[ing] the greatest flexibility possible for . . . operating claims processing systems consistent with the prudent administration of a plan.” Department of Labor, Employee Benefits Security Administration, http://www.dol.gov/ebsa/faqs/faq_claims_proc_reg.html, Question B–4 (as visited May 6, 2003) (available in Clerk of Court’s case file). Deference is due that view." (Bold and underline added) Black & Decker Disability Plan v. Nord , U.S. Supreme Court, Decided 05/27/2003

      ERISA claim regulation compliance and enforcement will largely fix "bundling and downcoding" violations and crisis in U.S. healthcare delivery system.

III.            Class Actions by 950,000 Physicians and U.S. Supreme Court Ruling in PACIFICARE HEALTH SYSTEMS, INC. v. BOOK

After gaining preliminary victory on class certification for healthcare providers and losing class certification for patients tract claim, health insurers and managed-care organizations appealed to the United States Supreme Court.  Health insurers and managed-care organizations argued that healthcare providers’ claims must complete arbitration in accordance with managed-care contract signed by providers before proceeding to federal court, and U.S. Supreme Court agreed with health insurers and managed-care organizations in PACIFICARE HEALTH SYSTEMS, INC. v. BOOK.  Although Aetna has settled with healthcare providers, most insurers and managed-care organizations have refused to settle or to  admit wrongdoings, and managed-care bundling and downcoding partial claim denial continued as business usual without any sign of slowing down.

After U.S. Supreme Court ruling in PACIFICARE HEALTH SYSTEMS, INC. v. BOOK , health insurers and managed-care organizations survived last threat from physicians and medical associations nationwide.

Therefore "squeaky wheel" appeals with documenting communication with insurers and threatening to sue by our associations have lost its most practical and financial results, especially after national campaign of "Patient's Bill of Rights" died so miserably that after seven years of national campaign with countless political contributions and legislations, "Patient's Bill Of Rights" disappeared on every medical association’s agendas and web site.

ERISAclaim.com - 950,000 MD's Settled With Aetna & Cigna on ERISA

IV.            About 80% of Care Claims Governed under ERISA and New Federal/ERISA Claim Regulations

In the United States, about 80% of healthcare claims are ultimately governed by ERISA, Employee Retirement Income Security Act of 1974, the Federal Law and Regulations governing and regulating most healthcare claims sponsored by employers in private sectors.  New ERISA claim regulation went into effect January 01, 2003 for all ERISA plans and provided most extensive clarification and protections for patients and physicians against inappropriate bundling and downcoding partial denials.  Unfortunately healthcare providers have failed to understand this most powerful statutory and regulatory protections.

V.              Bundling And Down Coding Partial Denials, ERISA or PPO/Provider Contract Dispute?  A Mixed Coverage and Provider Contract Dispute.  DOL FAQ, A8 & C12

As clearly and correctly illustrated by AMA in its "Free Guide" about bundling and downcoding from coding prospect, bundling and down coding partial denials were never explained or understood from legal aspects as to its governing statutes and regulations as well as remedies, as the grounds for appeal solutions for physicians.  Therefore AMA has failed in its free guide to provide any effective and practical solutions in appealing bundling and downcoding partial claim denials.

In general, healthcare provider’s managed care contract (PPO and POS) authorized for percentage discount per medical procedure (CPT code) only after patients benefit/coverage claim settled or moot.  For example, if benefits claim is not covered under the policy due to the policy exclusion and Medical necessities, and insurances/plan payers have no obligations for any payments, provider contract with managed-care organization or Payor cannot be triggered.  If provider is not the participating provider and has no contract with particular managed-care network and Payor, such a discount contract does not exist.  If Patient's benefit claim is approved completely or partially, without any dispute, the Payor is obligated for undisputed payments to the patient, then provider's contract for that particular managed-care network or plan is triggered, provider will accept a partial and discounted payment as payment in full without pursuing the patient/plan member for discounted and the remaining payments.

It is unlikely that any provider contract with managed-care organization has authorized for bundling and downcoding denials unconditionally as a form of discount for participating managed-care network.

Therefore, Patient's claim for benefits under ERISA plan, without regard to participating provider's contract with managed-care network, is a claim under ERISA, an ERISA question and issue, under the Federal Law. After   such question and issue are settled without any dispute, the percentage per procedure discount question and issue are triggered, then that PPO question and issue will be a provider's dispute with the managed-care network, ultimately with plan's Payor in accordance with provider's contract with managed-care organization and the networks, governed by each individual state law.

Without this basic understanding of distinction between ERISA and provider contract dispute, providers will be misguided in pursuing any statutory remedies as to federal law or state law, federal court or state court, for jurisdictions and remedies, this is fatal tragedy for most healthcare providers and medical associations in fighting managed-care claim denials and delays.

U. S. Department of Labor (DOL), explains the distinction between ERISA and PPO discount in its regulatory enforcement Frequent Asked Questions publications in clarifying New Federal claim regulations.

Patient Disputes ≠ Provider Disputes, (DOL FAQ A8); Provider/MCO Contract (PPO/HMO) Disputes are not Triggered until Patient ERISA Disputes With the ERISA Plan Are 100% Resolved or Moot (DOL FAQ C12) (PASCACK VALLEY HOSPITAL, INC. v  LOCAL 464A UFCW WELFARE REIMBURSEMENT PLAN (3rd Cir. 11/01/2004)

DOL, FAQ, A8 clarifies HMO or PPO Discount v. ERISA Claim Denial:  the Provider's HMO or PPO contractual dispute will have no effect on a claimant’s ERISA right to ERISA benefits under an ERISA plan and the Provider's HMO or PPO contractual dispute is not triggered or has no effect on the medical claim UNTIL a claimant’s ERISA right to ERISA benefits under an ERISA plan is resolved or moot.

DOL also clarifies the definition of benefits claim denial, simply put, any payments less than 100% claimed is considered benefits denial:

Therefore, if it is coverage/benefits denial, any payment less than 100% claimed, practically and namely, bundling and down coding, completely or partially, should be considered as benefits denial, coverage denial, an ERISA dispute or issue.  However in a practical world of managed-care environment, things could be very tricky and straight-line managed-care practice hardly exists, in most bundling and down coding partial denials, the explanation of benefits/EOB, denial notice, will inform healthcare providers and the patients that:

"As a participating provider, you agreed and not allowed to balance bill our member/your patient of this amounts, or patient not responsible for this amount" for bundling and down coding denials.

"Thank you for choosing participating provider, you're not responsible for this amount".

This is called "anti-balance billing instruction", that makes bundling and down coding partial denial as a provider contract dispute, covered under PPO contract, governed under state law.

If a provider appeals, the response from the plan will be that "your doctor agreed to this discount", and if the provider challenges that's not discount but bundling and down coding, the plan/managed care organization will ask that patient to call, the provider is not their member, if a patient calls, instruction from the plan would be to have provider call.  If a provider seeks for help from the provider relationship department of managed-care organization, the response would most likely be that this is an billing and coding and coverage issue, the provider should take it up to Customer Service Department of the payor insurance company, which in turn will insist in having patient to call.

If the dispute involves "BlueCard program" from Blue Cross Blue Shield plans and networks, this circus will go from local Blue plan, remote Blue plan, home Blue plan, patient, self-insured plan sponsor, providers, and insurance brokers, and in the end, no one is responsible, because the home Blue plan looks at EOB that states the bundling down coding is a PPO discount when it actually was benefits/coverage partial denial, and it shifts appeals or dispute to provider’s local Blue for PPO dispute resolution, but local Blue considers bundling and down coding as benefits/coverage denial and claims for no responsibility and obligations, the patient and providers could be bounced back and forth from different Blue plans in different states, state Department of Insurance in different states, state court in different states, back and forth from local state court through federal court and all the way to the U.S. Supreme Court (PACIFICARE HEALTH SYSTEMS, INC. v. BOOK) without clear resolutions.

A court battle circus could also go like this:  if a patient sues for the benefits, the plan will assert provider PPO discount, if a provider sues, the plan will defend bundling and down coding as benefits dispute or benefit limitation, if both patient and provider sue, the plan or managed care organization will assert wrong defendant status because almost all claim denials were performed by nonfiduciary TPA, or ASO (Administrated Service Only) subcontractors; If the Provider sues the managed-care organization in the state court, the plan or managed-care organization will assert ERISA preemption by moving the lawsuit to federal court for ERISA jurisdiction on the ground of ERISA benefits denial, once in federal court the plan could move to dismiss the case for failure to state a claim under ERISA or failure to complete arbitration by providers to assert and revive provider contract dispute, such as in PACIFICARE HEALTH SYSTEMS, INC. v. BOOK in U. S. Supreme Court.

How do we stop this managed-care hassle circus in this country?

VI.            Bundling And Down Coding Partial Denials With Anti-Balance Billing Instructions, Participating Or Nonparticipating Providers?

The practical complicity of this problem is that lack of understanding of distinction between ERISA benefits partial denial and provider contract percentage discount per procedure dispute.

The payor and managed-care organization in making bundling and down coding partial denials will change positions back and forth in between ERISA and PPO denials, and most importantly ERISA plan fiduciary and non-fiduciary TPAs, countless middlemen, and healthcare providers never understood and followed ERISA claim regulations.

The important and basic understanding of distinction of insurance policy coverage/ERISA benefits partial denial, such as bundling and down coding, and provider managed-care contract percentage per procedure dispute, as distinctively governed by federal law and state laws.

Bundling and down coding without anti-balance billing instructions is an ERISA benefits dispute, as illustrated by DOL FAQ A8 & C 12, while bundling and down coding with anti-balance billing instructions will be allegedly the provider contract dispute, at least according to EOB.

Bundling and down coding with anti-balance billing instructions when provider is not participating with applicable managed-care network is an ERISA issue, instead of provider contract dispute as there was no provider contract applicable to bundling and down coding partial denial ever existed.

Bundling and down coding with anti-balance billing instructions when provider is participating with applicable managed-care network could be tricky and ambiguous, therefore careful evaluation of EOB and timely appeals to the claim fiduciaries to clarify and finalize the denial decision will simplify appeal process and produce fair results.

VII.         The How To Appeal Bundling And Down Coding In Accordance With New ERISA Claim Regulation And U. S. Supreme Court Ruling In PACIFICARE HEALTH SYSTEMS, INC. v. BOOK

1. Provider must have basic understanding of ERISA claim regulation;

2. Provider must obtain sufficient and valid authorization from the patient to become an authorized representative in accordance with ERISA come regulation in order to appeal any denials and the delays [DOL FAQ B2, B3];

3. Provider shall follow correct coding initiative and prevailing industry billing guidelines as illustrated by AMA Free Guide to Bundling And Down Coding;

4. Appeal bundling and down-coding based on "National Correct Coding Initiative Edits" by understanding and using "mutually exclusive" and "mutually inclusive" coding edits.

5. Appeals by Provider should be filed timely to be appropriate named claim fiduciary and  be based only on official denial notice/EOB for reasons of denials instead of phone talks [Page 70252 & 70271, CFR § 2560.503-1 (h)];

6. Provider’s appeal should be filed in accordance with plans claim procedure with evidence of "an authorized representative" and challenge ERISA benefits denial and PPO/provider contract discount dispute at the same time [DOL FAQ B2, B3];

7. Provider’s appeal for bundling and down coding with anti-balance billing instructions should always request from the managed-care organization and the plan payer for the specific reference and provisions in provider contract applicable to bundling and down coding agreement;

8. Provider's appeal should request from the managed-care network for immediate arbitration if bundling and down coding denial was based on provider contract;

9. Provider's appeal should always request from the plan fiduciary for complete copy of Summary Plan Description (SPD) and relevant plan documents based on which the bundling and down coding decisions were made as provided by new federal claim regulations. [Page 70252 & 70271, CFR § 2560.503-1(m)(8)  (DOL FAQ B-5, C17)]

10. Provider's appeal should complete at least two levels of appeals to the plan fiduciary;

11. "Forty states required individuals to first exhaust their health policy’s internal appeals and grievance process before seeking external review." (GAO, September 2003, Page 46)  The health policy’s internal appeals and grievance process = ERISA appeals 80% of the time.

12. Provider's appeal must be submitted by certified letters with return receipt requested each and every time, to appeal PPO discount (Bundling & Downcoding,B/D) & ERISA benefits denials at the same time to ensure winnings in both state and federal court! (ERISA § 2560.503-1(l), PACIFICARE HEALTH SYSTEMS, INC. v. BOOK)

    Both Aetna and CIGNA have agreed to settle the class-action lawsuits by 950,000 physicians and agreed to process appeals in accordance with ERISA claim regulations for both ERISA claims and non-ERISA claims, and to establish external review boards for Billing and Coding Disputes, Medical Necessity Disputes and Policy Coverage Disputes, in compliance with state external review laws, however external reviews will not be available until internal appeals/ERISA appeals are completely exhausted.

    All other 8 major insurance companies named in class-action lawsuits have refused to settle, even if federal court would rule for physicians, the Aetna and CIGNA settlements will be "as good as it could get" from the rest of insurers and MCO's as evidenced in Aetna and CIGNA settlements with physicians.

    Unless physicians understand and complete ERISA internal appeals, all of those "a love fest" and "victories" from class-action settlements would mean a fantasy of "a love fest"  to any physicians.

For more specific information, please contact us or check out our appeal systems and seminars.

© Jin Zhou,  ERISAclaim.com

Dr. Jin Zhou is available for special presentations and consulting to any interesting parties on the subject of Appeal for Downcoding & Bundling Denials and U.S. health-care crisis turnaround.

He can be reached at (630)-736-2974 by phone or by email at  ERISAclaim@aol.com