Hospitals in New Jersey say they are not always being properly paid by health insurance companies for caring for coronavirus patients, despite state and federal requirements that health plans must cover a wide range of costs related to COVID-19 testing.
Thirty acute care facilities reported more than 1,000 claims related to coronavirus patients were denied by various health insurance companies between March and the end of June, according to the New Jersey Hospital Association. In half the cases, the company questioned the medical necessity of the treatment, the association, a trade organization representing the 71 acute care hospitals, nursing homes and other facilities hospitals, said.
One hospital alone also reported nearly 1,500 denials related to testing services, regardless of the requirements these services be covered, the association said. More than half of these denials involved an invalid payment code, the hospital told the association, and others were connected to patients who tested negative for COVID-19.
“These are the types of things we are seeing throughout the state,” NJHA vice president Neil Eicher told a panel of state lawmakers Thursday. Representatives of the insurance industry insist they have not seen a widespread pattern of denials in New Jersey, however.
NJHA did not identify the hospital involved and its member survey did not compile details on the individual claims denied, but it noted general reasons for the denials and the insurance companies involved. Of these unpaid treatment claims, nearly one in five involved a lack of prior authorization and almost 10% were attributed to administrative issue.
Concerned about growing trend
But NJHA is concerned that the incidents reported by its members will grow into a trend. The organization is backing legislation — based on an executive order in New York state and similar to mandates in Massachusetts and Georgia — that for the duration of the public health emergency would essentially pause government and insurance company audits of health insurance claims, which can result in reduced payments; the bill would also restrict certain denials outright during this period. The federal Centers for Medicare and Medicaid Services suspended claims audits in March to relieve pressure on hospitals and other providers, NJHA noted.
The legislation (A-4005) — sponsored by Assembly members Angelica Jimenez (D-Bergen), Ralph Caputo (D-Essex) and Herb Conaway (D-Burlington), a doctor who heads the health committee — was unanimously approved Thursday by members of the Assembly Financial Institutions and Insurance Committee; a Senate version has yet to be scheduled for a hearing. The Medical Society of New Jersey and a number of other provider organizations also backed the measure.
The NJHA believes the legislation is particularly important now, given the financial struggles hospitals are facing with unexpected expenses and lost revenue related to elective procedures, which were suspended for months. Eicher said the state’s acute care facilities were losing $1 billion a month at the peak of the pandemic, resulting in operating margins of negative 30% — down from positive 4% in January. Many hospitals are slated to receive millions in federal relief funds, however.
Audits also take a toll on staff, Eicher explained, since the process requires significant time from administrative and sometimes clinical personnel. Many facilities have furloughed administrative staff to save money, however, and clinicians are busy elsewhere, he noted. “You’re taking them away from treating patients,” Eicher told the committee.
In mid-April, more than 8,000 patients were hospitalized with COVID-19 in New Jersey. By Friday, the number had declined to just over 900. Nearly 175,000 state residents have been diagnosed with the virus, including more than 13,500 who have died.
‘A bridge too far’ for insurance companies
But Wardell Sanders, president and CEO of the New Jersey Association of Health Plans, said that while these clearly were challenging times for hospitals, the bill as introduced was “a bridge too far.” While amendments to the measure addressed some concerns raised by insurance companies he represents, the group remains opposed to the legislation.
Plus, while some hospitals were overwhelmed in April with a crush of coronavirus patients, that tide has ebbed and they are now more likely to be able to support an audit process, Sanders noted. Postponing this process doesn’t necessarily eliminate the impact it has on staff, he said.
In addition, Sanders said five insurance companies that oversee health plans for most of the state’s 1.7 million Medicaid members are, in fact, acting as stewards of taxpayer money; New Jersey spends more than $4 billion annually in state funds alone on Medicaid. “We have to make sure those dollars are properly spent,” Sanders told the assembly committee. “Like any other business, we need to make sure the bill is right.”
The state Department of Human Services, which oversees Medicaid, suspended prior authorization requirements for hospitalization — which calls for an insurance company clinician to sign off in advance — in late March to ensure patients didn’t face additional barriers to care. That order was reversed in mid-May and prior authorization was reinstated, but — as drafted — the legislation would conflict with the state’s latest position, Sanders said.
As amended, the bill would suspend for at least three months claims audits performed by the DHS, the Department of Banking and Insurance (which regulates commercial insurance plans) and health plans themselves, dating back to March 9, when Gov. Phil Murphy declared a public health emergency. The requirement would remain in place throughout the public health emergency, although there is an exemption for “reasonable indication of willful fraud, abuse, or excessive or egregious billing practices.”
In addition, the legislation would prohibit insurance companies from denying certain claims — including those linked to a health care provider flagged by the state for a licensing or credential problem — and bar them from not paying retroactive claims for concerns related to coding, level of care or medical necessity, among other factors. It would also prohibit the denial of payment for emergency department and inpatient services related to the coronavirus, except when willful fraud, abuse or overbilling is indicated.
Sanders said among the denials that would be prohibited under the bill are claims filed by Medicaid providers flagged by the state for licensing or credential violations; the list of names of these “disqualified providers” currently stretches nearly 150 pages.
The legislation could also ban denials of claims flagged automatically by insurance software for inconsistencies, like prostate cancer treatments for a female patient, or a breast cancer diagnosis in a 12-year-old girl, he warned. The bill “would require all these claims just to be paid,” Sanders said.