Health insurance recoupment rising to claw back money from providers

It starts with the coding

After treating a patient, physicians will submit diagnosis-related group codes, which determine reimbursement rates based on severity and mortality risk, to an insurance company. In some cases, insurers will reclassify these codes to a different payment weight after being alerted by internal or third-party teams. Clawbacks typically occur when a claim is changed to a lower reimbursement weight, known as downcoding.

In some cases, downcoding occurs due to physician error. In others, insurers say it’s because of intentional misclassification.

“The majority of physician visits should be at level 1 and 2 because that’s what you do for regular checkups, and yet most physicians bill at 4 and 5 because you make more money at 4 and 5,” said Michael Bagel, director of public policy at the Alliance of Community Health Plans.

Many of the disputes happen with inpatient care. More complex cases, including patients with complications or comorbidities, tend to warrant greater scrutiny from payers.

Cape Fear Valley’s Fiser said sepsis diagnoses are one of the most common services targeted for overpayment review, sometimes triggering a partial clawback if there is a code change.

He said payers pull data from sepsis patients to determine the “clinical validity” of each case and potentially change the claim to a lower-cost sepsis code or reclassify it as pneumonia or endocarditis, which pull in less reimbursement.

Some providers say that much of the downcoding isn’t warranted. Changes can occur after a claim is approved, whether via prior authorization or regular submission.

“In some ways, [insurers] have this imperative to place us at triple jeopardy and it’s not only unfair, but it affects care, and it hurts patients,” said Chip Kahn, president and CEO of the Federation of American Hospitals.

Clawbacks can result in patients owing more money, but some healthcare organizations try to avoid contacting them when there is a dispute on an account.

“If you’re a big system, you can handle it in terms of all the paperwork and back and forth with the insurers, but with smaller hospitals or providers, this can be a tremendous problem because a lot of times you’ll just surrender,” Kahn said.

Blue Cross Blue Shield of Massachusetts reviews claims if they are within the allotted timeframe outlined in the contract, said Scott Magit, vice president of payment strategy and integrity. He said the company works with providers to reduce the time frame on processing claims to avoid further confusion or complications. BCBSMA has teams that use various technologies to address payment integrity, which include internal claims experts, certified coders, medical professionals, clinicians and third-party vendors.

Most of the insurance company’s 55 million claims a year are processed using real-time automation, but employees will reexamine some clinical chart documentation, potential instances of fraud and cross-claim billing scenarios, or when a provider submits multiple claims for one patient interaction, Magit said.

“As a health insurer, it’s our responsibility to ensure claims are paid accurately and we’re being good stewards of the premium dollar. This is an expectation of not only our provider partners, but also accounts, customers, and state and federal regulators,” he said.

Assessing the impact

Clawbacks are another possible impact on operating margins already squeezed by high labor costs and supply chain issues. However, the total effect can be tricky to calculate for individual providers.

Fiser said Cape Fear Valley tries to determine the overall financial cost, but the process of running reports on recoups is complicated, especially without supporting software and the resources to manage the software. He declined to provide an estimate.

The potential administrative burden resulting from clawbacks can also create problems.

Payers, especially commercial insurance companies, may have varying processes on recovering funds and don’t always send detailed notifications when doing so, said Krysten Blanchette, vice president of revenue cycle for Providence, Rhode Island-based Care New England. Administrative employees working for the healthcare providers are then tasked with finding out why a clawback occurred, and if it happens multiple times with the same type of claim, determining the larger issue responsible for it.

Tracking down claims is a largely manual process for providers that can take months, and many smaller organizations lack the resources to dedicate a team to clawbacks and their appeals, which can be resolved via arbitration or litigation. In some cases, the claims in question were submitted years ago.

“What happens is you’ll just randomly have an account that is two to three years old, and they just take [the money] back,” Blanchette said. “Sometimes there are going to be situations where Care New England is just at a full loss. We are not going to recoup that money because someone can’t get to it to look at it.”

Blanchette said it is also difficult to structure a team around clawbacks when they may not happen consistently.

At Cape Fear Valley, a credit balance group of five people handles all insurance requests, including clawback notifications, and can transition the case to the billing team if the dispute continues, Fiser said. Any influx of cases can be overwhelming for the small group, he added.

Need for change?

Providers say big payers sometimes claw back funds even if a dispute is ongoing, leaving them with no comparable recourse—they can’t take money from payers if they decide underpayment occurred.

“It’s sort of a unilateral decision that this money is owed, and oftentimes that’s not necessarily the case. … If they truly were owed this money, why were they paying out more of it on the front end? It seems more complex than just saying, ‘Well, that’s money we were owed,’ ” said Terry Cunningham, director of administrative simplification policy at the American Hospital Association. The association is calling for more oversight and transparency in the claims process, which could indirectly affect clawbacks.

A BCBSMA spokesperson said clawing back money in the middle of a dispute is not consistent with its standard practices.

Value-based contracts can be a solution to clawbacks, as their often-bundled upfront payments prior to care eliminate the need for additional claims review, ACHP’s Bagel said.

“You go in, the doctor says, ‘You need to get this. I’ll work to schedule with you.’ Well, while they’re getting you scheduled, we’re working with them making sure they’re providing the right service,” he said. “Because we’ve agreed to that upfront, there’s nothing to take back.”

Bagel noted the industry has a long way to go in truly embracing value-based care.

In the meantime, some health systems see ways to improve the process on their end.

Fiser said he contractually specifies the timeframe during which a payer reserves the right to claw back funds. He also said he thinks third-party companies should not be involved in recouping money to avoid adding complexity to the process.

Care New England’s Blanchette said she has found it helpful to build relationships with payers, creating a situation where the health system can advocate for itself on claims disputes.

“Those relationships with the payers are the only way you’re going to be successful. Otherwise, you’re not going to be able to present your case. You’re not going to be able to tell them it’s unfair to take back a three-year claim, where maybe they can take [the message] back to their senior leadership,” she said. “If you don’t advocate for yourself to the payers, you’re always going to be behind the eight ball on it.”