Balance Billing and Preferred Provider Organizations

BALANCE BILLING AND PREFERRED PROVIDER ORGANIZATIONS

The following summation was provided to FSP by Jeff Scott, FMA General Counsel

Prior to 2016, the laws that regulated balance billing with regard to enrollees of health maintenance organizations (HMOs) did not apply to preferred provider organizations (PPOs).  The basic rule in section 641.3154, Florida Statutes - If an HMO is liable for services rendered to a subscriber by a provider, regardless of whether a contract exists between the organization and the provider, the organization is liable for payment of fees to the provider and the subscriber is not liable for payment of fees to the provider – applied only in the HMO context.  Physicians who did not participate in their patient’s PPO were free to balance bill the patient when the insurance company did not pay the physician’s full charge.

After a multi-year effort by consumer groups, insurance companies, the state consumer advocate’s office, and a number of legislative leaders, the Florida legislature passed HB 221, which the Governor signed into law on April 14, 2016.  This legislation, which goes into effect on July 1, 2016, provides that the PPO patient’s insurance company is solely liable for paying a nonparticipating physician’s fees (the patient can only be billed for applicable copayments, coinsurance, and deductibles) under the following circumstances:

1. For the provision of covered emergency services provided to an insured in accordance with the coverage terms of the health insurance policy; and
2.  For the provision of covered nonemergency services provided in a facility that has a contract with the PPO and provided when the insured does not have the ability and opportunity to choose a participating provider at the facility who is available to treat the insured.

In these two instances, the patient is only responsible for paying any applicable copayment, coinsurance, or deductible.  The insurance company is responsible for paying the full amount otherwise due the physician, and must pay for services as specified in section 641.513(5).  This statute provides that reimbursement for services shall be the lesser of:

(a) The provider's charges;

(b) The usual and customary provider charges for similar services in the community where the services were provided; or

(c) The charge mutually agreed to by the health maintenance organization and the provider within 60 days of the submittal of the claim.

As with most new pieces of legislation, there are a number of questions that will wind up being resolved by the regulatory agencies or by the courts.  An unanswered question is who determines what the “usual and customary provider charge” is and what method is to be used to make such determination.  During negotiations on HB 221, the FMA sought first to require insurance companies to pay the full provider charge.  After this approach was rejected by the legislature, the FMA next attempted to define “usual and customary” in a clearly objective way, not subject to interpretation by insurance companies.  The preferred approach was to tie the amount of required reimbursement to a set percentile of the FairHealth Database.  The legislature rejected this approach as well, and finally accepted compromise language that set reimbursement according to the ambiguous provisions of the HMO balance billing law.  The key here is that the legislature also rejected language that would have set the reimbursement amount at the physician’s usual and customary payment, or the amount deemed reasonable by the insurance company.  While the exact method of defining the “usual and customary charge” was not specified, it is clear that it is to be based on the physician’s charges – not amounts paid by Medicaid, Medicare, other governmental payors, or pursuant to commercial participating provider agreements.  

In practice, the physician will submit his/her bill for out-of-network services to the patients PPO plan.  The insurance company will either: (1) determine that the billed amount reasonably represents the “usual and customary charge” for the particular service provided, and will pay the charge; or (2) will determine that the usual and customary charge is an amount lower than the billed charge, and will pay the lower amount.

In the instance where the physician believes that the insurance company has unfairly paid an amount less that the true usual and customary charge, the physician can attempt to negotiate a higher amount with the insurance company, can file a lawsuit in county or circuit court (depending on the amount at issue – circuit court jurisdiction is generally reserved for disputes in excess of $15,000), or can submit the matter to the “statewide provider and health plan claim dispute resolution program.”

While anecdotal evidence suggests that physicians have eschewed the dispute resolution organization process in the past, changes were made to the statute in HB 221 that will hopefully make the process more physician friendly:

1.  The resolution organization must review and consider all documentation submitted by both the health plan and the provider;
2. The resolution organization must make findings of fact in its recommendation;
3. The resolution organization must conduct an evidentiary hearing upon request of either party (costs to be equally shared);
4. The resolution organization may not communicate ex parte with either party;
5. The resolution organization’s written recommendation must include how the organization calculated the amount due (which must be calculated under the provisions of s. 641.513(5)) and include any evidence relied upon; and
6. AHCA’s final order is subject to judicial review pursuant to s. 120.68.

The FMA will work to ensure that AHCA requires the dispute resolution organization to calculate the amount due based on the plain wording of the applicable statute – that is, based on the usual and customary charge, not the usual and customary amount paid by the insurance companies to contracted providers.  Any physician who believes that they have received an amount less than the usual and customary charge is encouraged to contact the FMA legal department at legal@flmedical.org. 

Other Points to Note:

• The prohibition on billing the patient does not apply to the provision of “noncovered” services.  Physicians are free to bill patients for the full amount of any service that is not covered by the patient’s insurance company.
•   A PPO plan must cover certain “emergency services” –  “medical screening, examination, and evaluation by a physician . . . to determine if an emergency medical condition exists, and if it does, the care, treatment, or surgery for a covered service by a physician necessary to relieve or eliminate the emergency medical condition within the service capability of the hospital.”  The PPO plan will always be solely responsible for the full payment (with the exception of copayments, coinsurance and deductibles) of all emergency services.
•   For nonemergency services, the prohibition on balance billing the patient applies only when services are provided by a nonparticipating provider in a contracted facility (defined as a hospital, ambulatory surgical center, or urgent care center) and only when the patient does not have the ability and opportunity to choose a participating provider available to treat the patient.  If the patient chooses the services of a nonparticipating provider knowing that a participating provider is present and available, the balance billing ban does not apply.  If the noncontracted services are provided in a facility that does not have a contract with the patient’s PPO plan, the balance billing ban does not apply.
•   The ban on balance billing does not apply to noncontracted services provided outside of a hospital, ambulatory surgical center, or urgent care center.  If you provide noncontracted services to a PPO patient in your office, you can balance bill the patient, even if the services are provided as a follow up to emergency services provided in a hospital.
•   SB 221 provides that it is grounds for discipline to fail to comply with s. 627.64194 (balance bill a PPO patient when prohibited) or s. 641.513.  Such failure, however, must be willful and done with such frequency as to indicate a general business practice. 
•   If there is a dispute with the PPO plan over the proper usual and customary charge, the noncontracted physician can elect to resolve the dispute in a court of competent jurisdiction, or through the dispute resolution process mentioned above.  This dispute resolution process is voluntary.  A physician need not go through this process prior to filing a lawsuit.
•   A noncontracted facility providing emergency services to a PPO patient may not balance bill the patient for any amount not covered by the patient’s PPO plan.

Credit to Jeff Scott, FMA General Counsel

This article is presented for educational purposes only and should not be taken as a substitute for legal advice, which should be obtained from personal legal counsel.  Nevertheless, the FMA hopes that the information provided here and in its other publications continues to assist physicians in answering many of their most common legal questions allowing them to treat patients, instead of addressing legal concerns.

Last Update:  June 2016