Ask the Experts: Out-of-Network Payments

What are some successful strategies for increasing the amount of charges paid by out-of-network insurance carriers?

Answer 1: In my opinion, if the product—an HMO, for example—of an insurance carrier has a contract with your provider with regard to members covered by that HMO, your provider must accept payments from the HMO (and the patient if there is a portion for which the patient is responsible) according to the terms of the contract with your provider for that product.

If there is no contract with your provider for a given HMO, then the member is responsible for paying full charges. However, if the HMO determines it will pay the provider instead of its member, which often happens, it often will pay full charges. If the HMO pays less than full charges, though, the patient is responsible for the remaining balance.

Some types of providers, such as independent hospital based physician providers, including the specialties of pathology, radiology, anesthesia, hospitalist, and emergency, may try to avoid signing up with certain HMOs in an effort to receive payments of full charges.

Some hospitals and other providers will also try to avoid signing contracts with carriers and their products if the carriers have a very small market share. In some such situations, a hospital might make a token offer to a small carrier, like a discount of a few percentage points from charges, and sign such a contract.

The more carriers with small market share in a given provider’s geographic area, the stronger the negotiating position of the provider, especially if the provider has a strong market position. The fewer number of carriers, the more difficult it is for a provider to negotiate favorable rates, especially for providers with small market shares.

It is no wonder that both providers and carriers are becoming larger by merging with their former competitors. The greater the size of an organization, the stronger the negotiating position.

Note that some carriers will hire outside specialists to attempt to negotiate a reduction of charges for cases with large dollar amounts where no contract exists with a given provider. The specialists will try to negotiate a special deal “on-the-spot” for immediate payment of a given case. In my experience, it is best to avoid such deals and pursue full payment of the amount that is owed if there is a contract, or pursue full payment of charges if there is no contract. In any case, it is best to be prepared for such attempts.

If a patient is stuck with a large bill, or even a relatively small bill that is difficult to pay, the provider should have a well-trained counselor available to discuss options for payment, including the application of free care in accordance with the provider’s free care policy. This is very important, can be very favorable for the patient, and should be in accordance with the provider’s mission.

This question was answered by: Robert J. Ellertsen, FHFMA, former hospital CFO with more than 35 years of experience in healthcare finance, and a member of HFMA’s Massachusetts-Rhode Island Chapter.

Answer 2: Often, payers with no contract (silent PPOs) may attempt to use “white space management” techniques to claim membership in a network to which they are not entitled. My late colleague Bill Phillips and I had an article in hfm magazine on this topic.

The bottom line is to hold out for 100 percent of billed charges. In negotiating, that’s called “anchoring high.”

In California, however, state law mandates that patients with no contract are entitled to prevailing contract rates. I’ve never agreed with this decision of the California Supreme Court. I believe it violates the quid pro quo of managed care contracts: discounts are offered to induce a “channeling effect” (a flow of patients to the hospital).

This question was answered by: David Hammer, FHFMA, CHFP, principal at Healthcare Performance Management Consultants, Gainesville, Fla., and a member of HFMA’s Florida Chapter.

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