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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 Brach, Eichler, Rosenberg, Silver, Bernstein, Hammer, & Gladstone, 101
Eisenhower Pkwy., Roseland, NJ 07068-1067.
5 Dominion Medical Management, 4405 Cox Rd., Ste. 170, Glen Allen, VA
23060.
6 Research Department, American College of Radiology, 1891 Preston White Dr.,
Reston, VA 20191.
7 Department of Diagnostic Radiology, Yale University, New Haven, CT.
Received November 27, 2002;
accepted after revision January 18, 2004.
A. Fask received monetary compensation from the Radiological Society of New
Jersey for statistical analysis.
Abstract
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MATERIALS AND METHODS. We analyzed all claims (48,217) submitted in February, June, and October 2000 to six major payers by a common third-party billing company on behalf of 11 radiology practices in New Jersey. Claims were categorized as unpaid (unpaid > 170 days after submission), paid timely (within 40 days of submission, the criterion of the New Jersey Prompt-Pay Act, effective December 28, 1999), or paid late (40–170 days after submission). A detailed analysis of 5,638 claims from the practice of two of the authors was used to estimate a "clean claims" (claims without defect or need for substantiation) submission rate.
RESULTS. The revenue loss from unpaid claims was approximately $156,000, which was 28 times the loss of interest that should, according to law, have been paid on the delayed paid claims. Of the unpaid claims, the payers never disputed 68%, involving approximately $106,000.
CONCLUSION. The financial consequences of unpaid claims far exceed those associated with late payment, even omitting all unpaid claims that were disputed by payers. Legislation coupled with active enforcement should address this large problem of unpaid claims, which is many times larger than the already legislatively targeted problem of late payment.
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87% of physicians accept some form of managed care
[1]) are an unanticipated
financial burden in addition to the unreimbursed care physicians have
traditionally rendered to the less fortunate in accordance with ethical
guidelines of the American Medical Association
[2,
3]. During our earlier research on delayed payment [4], we noted that monetary losses associated with even a small number of unpaid claims have the potential to exceed the monetary loss from the time value of payment delays, although delayed payments have been the driving force that has led to the enactment of prompt payment legislation in 47 states. Our current study was undertaken to assess the financial impact of unpaid radiologists' claims for medical services rendered to insured patients after implementation of the New Jersey Prompt-Pay Act [5, 6] and to compare that loss with the loss from delayed payment. We also augment our previous work on delayed payment by inclusion of data from an additional period and recomputation of statistics on delayed payment.
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A computer program was written to translate claims data (patient identification number, date of service, CPT-4 code, description, charge amount, date of claim submission, payment date if applicable, payment amount, and days from submission to payment) into a database (Statistical Analysis System, version 6.12; SAS) for subsequent analysis. All groups filed claims both electronically and by mail: 40 (61%) of the 66 possible provider–payer combinations were filed electronically and 26 (39%) were filed by mail.
The New Jersey law, enacted in mid 1999 and effective as of December 28,
1999, stipulates payment within 30 days for electronically submitted claims
and within 40 days for others
[5,
6]. We considered an account
late if it was paid more than 40 days after claim submission. Claims were
considered unpaid if payment was not received within 170 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
excluded. The number and percentage of claims paid in a timely fashion (
40 days), paid late (> 40 days, 170 days), and unpaid (> 170 days)
were tabulated for each payer and on an overall basis.
A detailed analysis of all disputed (some of which were ultimately paid) or unpaid claims among the 5,638 claims submitted in February and October from the practice of two of the authors was undertaken to estimate a "clean" claims submission rate. Per the Medicare definition, a "clean" claim was defined as one without defect or need for any substantiating documentation that might prevent timely payment [1]. Disputed claims were subdivided by consensus into payer fault (payer vendor problems, falsely disputed claims), provider fault (missing demographic or charge data, incorrect CPT-4 or ICD-9 codes, 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:
Financial implications of late and unpaid claims were calculated as follows: The total dollar amount for claims paid late and the average time to payment were tallied for each payer. An overdue penalty for late claims was calculated at the simple interest rate of 10% per annum that is stipulated in the New Jersey law, beginning 41 days after claim submission [5, 6]. Because the contractual allowance for unpaid claims—the focus of this article—was unknown, this value was estimated using the dollars paid per claim for each payer's late claims multiplied by the frequency of unpaid claims for that payer.
A descriptive statistical analysis was performed using software (Statistical Analysis System). All percentages and averages were rounded to whole numbers. A correlation coefficient was calculated between the percentage of unpaid claims and the percentage of claims paid late. The claims histories for each of the six payers, individually and as a group, were tested for timeliness of payment against a relatively lenient 90%-on-time payment standard using the normal approximation to the binomial and a conservative threshold of p less than 0.01.
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Table 2 shows the combined on-time, late, and unpaid percentages of claims for the six payers, as well as the total number of claims and, for paid claims, the average time to payment and standard deviation thereof. The overall percentage of claims paid in a timely fashion by the six payers was 72%, and the overall average time to payment was 31 days. The results showed not one of the payers in the study paid claims in compliance with the New Jersey Prompt-Pay Act [5, 6] (p < 0.0001).
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The results of the detailed claims history analysis of 5,638 claims submitted in February and October from the authors' own practice are shown in Table 3. The overall clean claims filing rate was 97%. The provider-fault category registered the fewest number of disputed claims (63/368) versus no fault (116/368) and payer difficulties (189/368). False payer disputes accounted for only 1% of all claims. Ultimately, 201 (55%) of the 368 disputed claims were paid late and 167 were never paid. Most of both late payment (88%, 1,440/1,641) and nonpayment (68%, 361/528) occurred without any notification rather than as the result of a dispute.
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The financial totals of late and unpaid claims for the 11 radiology providers during the three claims submission periods are shown in Table 4. The total dollar amount for the claims paid late (n = 10,658) was $583,999, and the average time to payment for claims paid after 40 days was 75.4 days. The overdue penalty for late claims was $5,664 based, per the New Jersey laws, on a simple interest rate of 10% per annum beginning 41 days after claim submission and continuing until payment was rendered. Providers are likely to accrue significant additional billing costs in tracking 10,658 claims paid late. For the 2,808 unpaid claims, the average amount payable, estimated as described, was approximately $55.50, making the total unpaid liability approximately $156,000, which is far greater than the loss incurred from delayed payment.
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The magnitude of the financial loss from unpaid claims on a national level can be estimated as follows: We found managed care payers failed to pay 6% of claims. The total payments to physician practices in the United States were $314 billion in 2001 (latest data available) [8]. At 6% of that amount, the loss from unpaid claims would be almost $20 billion.
As public concern with delinquent managed care payment grew, lawmakers enacted laws and regulations that were promulgated in 47 states (all states except Idaho, Nebraska, South Carolina, and the District of Columbia) to ensure timely remuneration of medical services [9, 10]. State and local medical societies, with the assistance of the American Medical Association's Advocacy Resource Center, have conducted more than 45 prompt payment studies, which have consistently shown payment delays [10]. This study of the Radiological Society of New Jersey is the largest reported to date, with 48,217 claims from three claim submission periods.
Our results show that providers may suffer important losses from unpaid claims even if payers are in substantial compliance with prompt payment provisions. Indeed, our study shows the loss from unpaid claims is likely to be many times greater than the loss from delayed payment. Continued provider complaints about delays and outright denials of payment [2–4, 9, 11–14] have led some states, such as New Jersey, to successively tighten their requirements [5, 6]. Some states have begun to penalize managed care companies for payment problems, resulting in the imposition of fines in a number of states, including California, Florida, Georgia, Maryland, New Jersey, New York, and Ohio [10]. Enforcement options are often limited, and fines either have been infrequently levied or are too small (only $33 million in fines has been levied for prompt payment violations since 1997 [15]) to have a significant impact on payers. As a last resort, a few providers have filed lawsuits against unresponsive payers. Although the number of provider-driven lawsuits against the managed care industry is unknown, suits have been filed in California, Connecticut, Florida, Georgia, Illinois, New York, and New Jersey [10, 16]. Despite the drawbacks associated with pursuing a legal remedy (the process is expensive and time-consuming and potentially subjects the litigant to increased scrutiny and possible reprisals), experts warn legal challenges and legislative activity will intensify unless the payer industry takes steps to rectify well-known problems [17].
Several limitations and biases of this study, some of which were deliberately favorable to the managed care industry, are worth noting. An account was considered paid even if only partial payment was received from the payer. Despite the fact that claims for 61% of the 66 possible provider–payer combinations were filed electronically (and by law should have been paid within 30 days), we defined timely payment as within 40 days. Although a potential investigator bias existed in the designation of responsibility for disputed claims in the analysis of such claims, we believe this was of little consequence because classification was usually straightforward.
Unpaid claims were defined on the basis of not receiving payment within 170 days; a legitimate question is whether some of these claims were eventually paid. To cast light on this question, we conducted a further analysis in the authors' practice. In this practice, which had a disproportionate number of claims with CIGNA, the one payer for which a nonnegligible amount of payment after 170 days might represent a long tail of an extremely drawn-out payment process (see Table 2), a 2-year follow-up showed that 54% of one period's unpaid claims were eventually paid. For other practices, the percentage probably was smaller; as Figure 2 shows, overall few claims were paid after approximately 130 days, to say nothing of 170 days. Even under the extreme assumptions that all disputed unpaid claims should not have been paid and that for all practices 54% of unpaid claims were eventually paid, the improper loss from unpaid claims is several times the loss from delays in payment. Moreover, the cost of pursuing claims for prolonged periods and interacting multiple times with the payer (tracking, numerous billing notices, conversations with and letters to the payer, and so forth) may make the practice's net income from claims paid after 170 days well less than the payment, because the average amount due per claim was approximately $55.
Another limitation of this study is that the determination of a clean claims rate, in deference to antitrust considerations, was based on the claims history of only one group, the authors'. This issue is unlikely to be a substantive one because the third-party billing company followed uniform procedures for all practices. Furthermore, most of both claims paid late (88%) and unpaid claims (68%) occurred without any dispute from the payers. Thus, contrary to managed care organization assertions [14], the submission of unclean claims is not the primary determinant of slow payment or failure to pay.
Controversy exists as to whether state law applies to claims under self-funded Employee Retirement Income Security Act (ERISA) health benefit plans [10, 18]. A recent legal analysis commissioned by the American Medical Association concluded [10]:
While there is no case law directly relating to ERISA preemption of state prompt payment laws, there exists strong legal grounds for asserting a state's rights to regulate timely payment of claims against ERISA plans and the entities including intermediaries, with which they contract to pay claims on their behalf for the provision of health care services.
We estimate that self-funded ERISA coverage applies to approximately 15% of the insured in New Jersey, but it is unclear how this percentage is spread within our claims data [19, 20]. It is improbable, however, that payers with multiple insured entities would selectively target ERISA claims for delayed payment or nonpayment.
Our results reflect the payment experiences of approximately 15% of radiologists practicing in New Jersey. Any variations in the experiences of other radiology practices in different areas of the state are likely to be the result of differences in relative amounts of paper versus electronic filings and nonrandom issues, such as time of analysis or a different mix of insurers.
In summary, we found that the financial losses from the small percentage of claims that were unpaid far exceeded the losses providers sustain from a delay in payments, which has been the prime impetus driving the prompt payment issue [2, 3, 9, 11, 12]. Also, we added another set of claims to our previous study of delayed payment [4] and found delayed payment was still widespread despite a law penalizing it. The nature of radiology as a high-volume, referral practice with a broad exposure to managed care and interaction with numerous primary care physicians, medical subspecialists, and surgeons, suggests the potential applicability of our study to medicine as a whole [21]. Therefore, future prompt payment studies should closely monitor unpaid claims as well as late payment, and future action will likely need to couple specific legislation targeting unpaid claims with increased enforcement to be effective in remedying the payment problems that physicians, hospitals, and other care providers face.
Acknowledgments
The Technology Assessment Studies Assistance Program of the American
College of Radiology assisted this research by providing the services of
Jonathan Sunshine.
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17B:30–26)
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