An Audit With No Appeal

by Ron E. Peck, Esq.

Many of the third party administrators (TPAs) and self-funded benefit plans (Plans) The Phia Group services have encountered a reoccurring issue.  In a nutshell, providers that are in-network either audit claims themselves or hire an outside firm to audit the claims.  These claims are often old (sometimes a few years have passed since they were paid), and they were paid by the applicable benefit plan utilizing (deducting) the PPO network discount from the total billed charges.

The audit identifies claims that were paid more than the PPO-contractual number of days (usually 30), after they were (in the providers' opinion and based on their interpretation of the PPO contract) submitted for payment; and thus, the claims were not "promptly" paid.  As a result, years after these claims were "paid late," the provider wants to recoup the PPO discount amount from the Plan.

We often hear about the following:  The PPO contract requires payment within 30 days of receipt of a clean claim for a covered service.  An in-network hospital treats a plan participant (for this example, let's say he suffered injuries in a car accident) and submits claims (that it believes per the PPO contract, are clean claims for covered services) on a certain date.

For this example, let's say the total charges are $100,000.00, and the PPO discount is 20%.  The provider expects payment of $80,000.00 within 30 days.  The TPA and Plan delay processing until they obtain an accident report / police report, to ensure that no exclusion applies (such as an illegal act or alcohol exclusion).  It takes 2 weeks (14 days) to get the report. The TPA and Plan pay $80,000.00 (the $100,000 charge minus the 20% PPO discount) within 30 days of receiving the report, but 44 days after the claims were first submitted.  Neither the Plan nor TPA hear any complaint.

The provider retains an auditor in 2013.  The auditor identifies the claim described above, and notifies the provider that the 20% discount was applied despite the claim being paid late; (not within 30 days).  The auditor on behalf of the provider notifies the TPA that it must pay the provider the discount amount (20% = $20,000.00) immediately, or they will file suit to recoup it.  Often they seek to add interest, for the years that passed as well; (adding insult to injury).

Unfortunately, the knee-jerk response from the TPA is usually the same.  They state that per the Plan Document and ERISA, "appeals" need to be filed within a certain time, and this demand for money arrived well after that deadline.  The auditor and provider respond, saying that the Plan Document and ERISA are irrelevant.  They are accusing the Plan and/or TPA of breach of contract.  The statute of limitations applicable to a breach of contract applies here; not the deadline to file an appeal.  Such a statute of limitations is often many years long. 

The provider argues that the contract language is very clear regarding how much needs to be paid, and when it needs to be paid.  The contract, they say, speaks for itself and can be enforced without looking at the Plan Document or ERISA.

This type of "appeal" is a big issue for many clients right now, and another reason they are looking at alternatives to PPOs.  Regardless, dealing with such an issue involves (1) analyzing the language of the applicable PPO contract, (2) having a clear and concise explanation of why the delay or reduced payment took place, and (3) a willingness to negotiate with the provider, to avoid litigation.  This last requirement is important, as many Courts (particularly State Courts, which would oversee a breach of contract claim), lack the understanding of self-funding necessary to analyze the network arrangement in light of the Plan Document.  Many judges will only consider the PPO contract, in a vacuum, and enforce the terms of said contract without regard for the Plan, the Plan Document, or the "reasons" why the Plan breached the PPO contract.

Department of the Month -Information Technology

Too often, organizations forget to recognize their Information Technology department who act as the silent warriors of a company. Most of us don't care how something works, but rather that it does.

At The Phia Group, our dedicated team of IT specialists quietly ensure that we are able to successful serve our clients on a daily basis. As the need for new technology increases as does our reliance on IT.

As our subrogation clients can attest to, our recovery numbers often meet and exceed expectations. It is our proprietary Phia System that drives this function of our company. As much as we'd like to think it runs all by iteself, it is the good work of our technology team that makes it all possible.

With the changes looming in our industry The Phia Group is constantly adding new services and features to answer the call of the industry we serve. As we create new services and provide more in depth cost containment schemes, we must look to them to provide the support we require in order to deliver exceptional products and service.

So this month we'd like to tip our hats to The Phia Group's Information Tecnology Department who go about thier day so quietly but have such loud performance.