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Compliance with Prompt Payment Legislation: The Initial Experiences of New Jersey Radiologists

¹ Department of Diagnostic Radiology, Morristown Memorial Hospital, 100 Madison Ave., Morristown, NJ 07960.
² Morris Imaging Associates, 66 Maple Ave., Morristown, NJ 07960.
³ Fairleigh Dickinson University, 285 Madison Ave., Madison, NJ 07940.
⁴ Health Services Research and Development Service, Department of Veteran Affairs, 1400 Eye Street, N.W., Ste. 700, Washington, DC 20005.
⁵ Brach, Eichler, Rosenberg, Silver, Bernstein, Hammer, & Gladstone, 101 Eisenhower Pkwy., Roseland, NJ 070681067.
⁶ Dominion Medical Management, 2702 N. Parham Rd., Ste. 300, Richmond, VA 23294.

Received October 17, 2001; accepted after revision January 22, 2002.

 
A. Fask received monetary compensation from the Radiological Society of New Jersey for statistical analysis.

Address correspondence to L. C. Swayne.

Abstract

Top Abstract Introduction Materials and Methods Results Discussion References

 
OBJECTIVE. Prompt payment has emerged as a dominant issue in managed care reform, with 47 states passing laws or regulations requiring prompt remuneration for medical services. The New Jersey Prompt-Pay Act, effective on December 28, 1999, requires payment within 30 days of electronic submission and within 40 days for nonelectronic submission. This study was undertaken to assess compliance with the New Jersey Prompt-Pay Act for radiology claims submitted 1 and 5 months after implementation (7-11 months after passage of the statute).

MATERIALS AND METHODS. A retrospective prompt payment analysis was undertaken of all claims submitted in February and June 2000 to six major payers by a common third-party billing company on behalf of 11 radiology practices of various sizes, settings, and locations in New Jersey. A total of 33,537 claims were assigned to one of six time periods on the basis of timeliness of payment: less than or equal to 30 days, 31-40 days, 41-50 days, 51-60 days, 61-90 days, and greater than 90 days or a separate unpaid category after 170 days had elapsed. A detailed analysis of 3156 claims from one practice was performed to estimate a clean claims submission rate.

RESULTS. The overall percentage of claims paid within 40 days was 70%. After 170 days, the overall percentage of paid claims was 93%. The annualized interest lost on delayed payments was $23,939 for the practice analyzed.

CONCLUSION. Prompt payment for radiology services remains an elusive goal in New Jersey, despite passage and implementation of prompt payment legislation.

Introduction

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As managed care reform has continued to evolve, prompt payment has achieved prominence in its own right [1,2,3,4,5,6,7,8,9,10,11]. The concept of prompt payment at the federal level is embodied in Medicare law 42 USC 1395u(c)(2)(B), which mandates that payment must be issued for at least 95% of all submitted clean claims within 30 calendar days of the date on which the claim is received. A clean claim is defined as a claim without defect or need for any required substantiating documentation that would otherwise prevent timely payment from being rendered within 30 days. If payment is not issued as required, interest must be paid for the period beginning on the day after the required payment date and ending on the date on which payment is made [12].

As of April 2002, 47 states (all except Idaho, Nebraska, South Carolina, and the District of Columbia) had enacted prompt payment laws [13,14]. The New Jersey Prompt-Pay Act became effective on December 28, 1999, 6 months after it was enacted. The law stipulates payment must be rendered within 30 days of electronic submission or within 40 days of nonelectronic submission. In the event of a claim dispute, payers must notify providers within the same time frames. Furthermore, late payments are to be accompanied by an overdue penalty calculated at the simple interest rate of 10% per annum [15,16].

The Medical Society of New Jersey recently published a baseline prompt-pay survey, derived from data collected between January 1, 1999, and June 30, 1999—before the institution of the New Jersey Prompt-Pay Act [18]. The findings, based on a sample size of 3693 responders, revealed significant payment delays, ranging from 32 to 60 days for the various payers. Furthermore, a practice's extensive experience with a particular health insurer only minimally improved turnaround time. Our case study of 11 radiology groups was undertaken to assess the experiences of radiology practices at 1 and 5 months after implementation of the New Jersey Prompt-Pay Act.

Materials and Methods

Top Abstract Introduction Materials and Methods Results Discussion References

 
A retrospective analysis for timeliness of payment was performed on all claims submitted in February and June 2000 to six major payers (71.5% of the New Jersey managed care market): Aetna, CIGNA, Horizon Blue Cross Blue Shield of New Jersey, Oxford, Prudential, and U. S. Healthcare [18]. A total of 33,537 claims were submitted by a common third-party billing company (Dominion Medical Management, Richmond, VA) on behalf of 93 radiologists in 11 radiology practices of various sizes, settings (hospital and private office), and geographic locations (northern and central) in New Jersey. A signed authorization to release claims information was obtained from each practice before the release of data, and all groups elected to participate. Patient names were excluded to protect patient confidentiality. Charge data from other groups were withheld from physician scrutiny in deference to antitrust considerations.

Claims data included date of service, CPT-4 code [19], description, charge amount, date of claim submission, payment date, payment amount, and days from submission to payment. Four radiology practices did not separately track two managed care companies, and a fifth practice did not separately track one payer, thus data for nine of 66 possible provider and payer combinations were unavailable. All groups filed claims both electronically and by mail: 40 (61%) of the 66 possible provider and payer combinations were filed electronically and 26 (39%) were filed by mail. For the purpose of this analysis, a payment was considered late if it was received more than 40 days after claim submission. An account was considered paid even if only partial payment was received from the payer. Encounters with capitated (prepaid) patients were not included in this study. Claims were followed until either payment was received or 170 days had elapsed from the end of February and June 2000 respectively, at which time the claim was considered unpaid.

Each claim was assigned to one of six categories on the basis of timeliness of payment (< 30 days, 31-40 days, 41-50 days, 51-60 days, 61-90 days, and > 90 days) or to a separate "unpaid" category. The cumulative percentage of claims paid in each time period, the average number of days to payment, and the number and percentage of unpaid claims were tabulated for each payer and on an overall basis.

A detailed analysis of all 3156 claims submitted in February from one practice was undertaken to determine a clean claims submission rate. Disputed claims (some of which were ultimately paid) were subdivided into payer fault (payer vendor problems, falsely disputed claims), provider fault (missing demographic or charge data, incorrect CPT-4 or ICD-9 codes [20], or lack of precertification), and no fault (unmet deductible, incorrect insurance carrier, payer was secondary insurance carrier). Overall and payer-specific clean claims percentages were calculated for each payer using the following formula: Percentage of clean claims = [1 — (number of provider fault claims + number of no fault claims)] ÷ (total number of claims for each payer) x 100.

Financial implications for late and unpaid claims were calculated using allowable charges from the 11 radiology providers. The total dollar amount for claims paid late was tallied for each payer. An overdue penalty for late claims was calculated at the simple interest rate of 10% per annum, commencing 41 days after claim submission.

A descriptive statistical analysis was performed using software (Statistical Analysis System version 6.12; SAS, Cary, NC). All percentages and averages were rounded to whole numbers. The New Jersey Prompt-Pay Act stipulates 100% on-time payment for undisputed claims. To compensate for disputed claims, the percentage of paid claims for each of the six payers, individually and as a group, was tested for timeliness of payment (within 40 days) against a 90% benchmark. This benchmark assumes a disputed claim rate of 10%. A two-tailed difference of proportions test was used to determine whether the proportion of paid claims for each payer was significantly different from the benchmark of 0.90 (90%). Because of a multiple comparison problem, the standard threshold for statistical significance (0.05) was reduced to accommodate the number of comparisons (six payers). On the basis of this adjustment, we used a slightly more conservative threshold of p less than 0.01. To test for significant differences among payers in their on-time payment rates, we used the chisquare test for independence. Differences among payers in the average number of days before payment was received were tested with one-way analysis of variance using a generalized linear model technique. The statistical significance threshold of p less than 0.01 was also applied to chi-square and one-way analysis of variance statistical tests.

Although these statistical tests provide a convenient method for evaluating the significance of differences between the benchmark and actual payer performance, it is important to note that the large number of claims included in out study increases the likelihood that even small differences will be statistically significant. For this reason, much of the presentation will focus on descriptive statistics rather than significance tests.

Results

Top Abstract Introduction Materials and Methods Results Discussion References

 
The payment history of the six payers from the two claim submission periods is shown in Figure 1. The overall percentage of claims paid within 40 days was 70% in February and 69% in June. Table 1 shows the cumulative payment rate of each payer at six time points. Payment within 40 days ranged from 87% for Oxford in the June claim period to 8% for CIGNA, in both the February and June claim periods. The overall percentage of unpaid claims after 170 days was 7%, which ranged from 3% for Oxford in June to 11% for CIGNA in February. For all payers, the on-time payment rates of 70% in February and 69% in June were significantly less than the 90% benchmark. Significant differences were also found among the payers in their on-time payment rates.

View larger version (18K): [in this window] [in a new window] [as a PowerPoint slide]   Fig. 1. —Bar graph shows overall cumulative prompt payment history from two claims submission periods in 2000, February (white) and June (black). Only 70% of claims were paid in 40 days or less; payment delays extended beyond 90 days from claim submission.

Table 2 presents the average time to payment for paid claims. We found statistically significant variations among the payers in the average number of days to payment for both months studied. As an example, the overall average time to payment was 33 days in June but individually ranged from 24 days for Prudential and U. S. Healthcare to 76 days for CIGNA.

The results of the detailed claims history analysis of 3156 claims submitted in February from one practice are presented in Table 3. Overall, 7% of all claims were disputed by the payers. On the basis of a strict interpretation of the New Jersey Prompt-Pay Act, the remaining 93% should have been paid within 30 days for electronic claims and 40 days for mailed claims. In contrast to the expected rate of 93%, 57% of the claims filed by this provider were paid within 40 days. The clean claims filing rate was 96% and ranged from 84% (Oxford claims) to 99% (Aetna and Prudential claims). Of the 1345 claims that were not paid within 40 days, 233 (17%) had been disputed by the payers. The provider fault category registered the fewest number of disputed claims (43/233), versus no fault (85/233) and payer difficulties (105/233) categories. Ultimately, 167 (72%) of the 233 disputed claims were paid late, and 66 were never paid. Thus, most of the claims paid late (849 [84%] of 1016 claims) and unpaid claims (263 [80%] of 329 claims) were not disputed by the payers.

In our two claim submission periods, the total dollar amount for the claims paid late (7919) was $428,316. The average time to payment for claims paid after 40 days was 74 days. On the basis of these data, the annual overdue penalty for late claims would be $23,939 if we use a simple interest rate of 10% per annum commencing 41 days after claim submission and ending when payment was rendered. This cost does not include additional billing expenses incurred from tracking an annualized 47,514 late claims.

Discussion

Top Abstract Introduction Materials and Methods Results Discussion References

 
The Radiological Society of New Jersey prompt payer audit, the first completed by a specialty society and the largest reported to date (33,537 claims), found significant delays in payment to medical providers consistent with prior published studies [4, 8, 21]. Only approximately 70% of all claims were paid within 40 days. In addition, the percentage of claims paid in a timely fashion for each of the six payers, individually and as a group, was significantly lower than the more lenient 90% benchmark. Although the managed care industry has argued that payment delays are often the result of unclean claims submissions, we failed to find support for this argument either in our retrospective analysis of a subset of claims (96% clean submission rate) or in the percentage of claims disputed by the payers (7% of all claims) [6,7,8, 22]. Our results clearly show that most claims either paid late or not paid during the time frame of this study occurred without any explanation, rather than as the result of a dispute [8, 23].

Our study confirms and extends the prior baseline survey [17] of the Medical Society of New Jersey by providing additional follow-up data 1 and 5 months after implementation (7-11 months after passage) of the New Jersey Prompt-Pay Act. The nonpayment rates in this study at 30 days (37%) and 60 days (20%) are very similar to the nonpayment rates in the Ohio study of 42% at 24 days and 20% at 60 days [21]. Our average time to payment of 32 days was lower than the marks of 69 days reported by the Georgia Hospital Association [4] and 77 days average observed by the Hospital and Health System Association of Pennsylvania [8].

Despite the intentions of lawmakers, prompt payment laws or regulations, which as of April 2002 had been enacted in 47 states, have not yet had a significant impact on the economics of health care in the United States [22]. Providers continue to complain that payment is significantly delayed or outright denied [1,2,3,4,5,6,7,8,9,10,11]. Our data, showing persistent payment delays 1 and 5 months after implementation and 7-11 months after passage of the New Jersey-Prompt Pay Act, substantiate these observations and suggest that prompt payment audits in conjunction with active enforcement may be required to encourage compliance [22].

Our results may not be generalizable to other radiology practices in New Jersey. Rather, the claims payment data should be viewed as snapshots of the experiences of approximately 15% of diagnostic radiologists practicing in the state. Any errors in our estimates are more likely to come from nonrandom issues such as investigator bias, time period of analysis, and the extent and interpretation of claims covered under the Employee Retirement Income Security Act (ERISA) than from sampling error. To provide some accommodation for these potentialities, given the early stage of implementation of the New Jersey legislation, we used measures and bench-marks that, if biased, tended to favor payers over providers.

Several limitations and biases exist in our study. Although most claims (61% of the 66 possible provider and payer combinations) were filed electronically (and by law should have been paid within 30 days), we defined timely payment as less than or equal to 40 days. In addition, a conservative 90% compliance benchmark was used to compensate for a disputed claim rate of 10%. This 10% disputed claim rate is greater than the 7% rate found for a practice (Table 3) that experienced one of the lowest on-time payment rates (57% of claims paid at 40 days compared with 70% for all practices).

The New Jersey Prompt-Pay Act stipulates that late payments are to be accompanied by a 10% interest penalty. Compliance with this requirement was not studied in our audit, but it was noted anecdotally to be infrequent. An account was considered paid if only partial payment was received from the payer.

Furthermore, the determination of a clean claims rate was based solely on the claims history of one provider group (in deference to antitrust considerations). This weakness is partially mitigated by using the same third-party billing company, with uniform claims submission procedures, for all practices.

Finally, state law is often not applicable to self-funded ERISA claims [24]. We estimated that self-funded ERISA coverage pertains to about 15% of the insured in New Jersey, but we do not know how this percentage is reflected in our claims data [25, 26]. It is unlikely, however, that payers with a wide range of insured entities would single out ERISA claims individually for delayed payment.

On the basis of our preliminary research in New Jersey, we conclude that, regardless of the reason for noncompliance, the reality for medical providers is that they will likely continue to experience payment delays even after the implementation of prompt payment legislation.

Acknowledgments
 
We gratefully acknowledge the assistance of Chris Hogan for advice and comment on the manuscript revision. The American College of Radiology's Technology Assessment Studies Assistance Program assisted this research by providing the services of Chris Hogan and coauthor Philip E. Crewson.

References

Top Abstract Introduction Materials and Methods Results Discussion References

 

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