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Making Insurers Pay
How to Dispute Payment Practices

When it comes to insurance company reimbursement practices, every physician has a story.

One neurologist examined a stroke patient for cognitive problems and performed neurobehavioral testing the same day. He dutifully appended a modifier to the evaluation and management (E/M) code, explaining that the consultation was a “significant, separately identifiable E/M service by the same physician on the same day of the procedure.” Nevertheless, the insurance company “bundled” the two procedures and reimbursed the doctor for the testing only.

Another neurologist did a neurological examination on a patient who described recent onset of debilitating headaches. On the insurance claim he assigned a CPT code for the highest level of care, but the insurance company automatically “downcoded” the claim to a lesser level of care and reduced reimbursement. The neurologist might not have noticed this difference without comparing the actual reimbursement with what was stated in the fee schedule of his contract with the insurance company.

As for late payments, they are a fact of life for physicians. Even with prompt payment laws in almost every state requiring insurance companies to pay “clean” claims within 30 days, payments continue to be delayed. Insurance companies routinely ask for more documentation of the case, for example, thereby delaying payment.

So what can neurologists and other physicians do to protect themselves against these tactics? Filing a lawsuit is one option.


An Alabama physician sued Humana, Cigna, and several other HMOs in 1999 to stop these practices. The Texas and California Medical Associations, the Medical Association of Georgia, the Denton County (Texas) Medical Association, and at least 20 other individual physicians followed his example. So many suits were filed that in 2000, several were transferred to the United States District Court for the Southern District of Florida and consolidated into a class action case that one judge described as “almost all doctors versus almost all major health maintenance organizations.”

Judge Federico Moreno presided over the case, which accused 10 insurance companies of engaging in fraud and extortion in a scheme to wrongfully deny payment to physicians in violation of the Racketeer Influenced and Corrupt Organizations Act — RICO — the same law used against organized crime. The case, which involved somewhere between 800,000 and one million physicians, was the largest class action suit ever filed in the US.

This hasn't stopped unfair billing practices, however. Insurance companies claim downcoding protects them against physicians who upgrade codes. But it also subjects all physicians to lower reimbursements and the cost of supplying additional documentation.


Over the years, Judge Moreno has achieved settlements with most of the insurance companies named in the 1999 suit. For example, Aetna and Cigna settled for more than $1 billion. Health Net agreed to pay $40 million to physicians plus $20 in legal fees, and agreed to invest $80 million to improve its reimbursement system.

Yet, the money won't make much difference to the physicians involved. As a review of the case in the New England Journal of Medicine pointed out, “Aetna's $100 million repayment fund…comes out to approximately $142 per physician” (2005;352:855–857). Far more important, according to the authors of that article, will be “the changes to billing practices brought about by the litigation,” which are likely to induce the insurance companies “to turn to other means of effecting cost savings, such as raising deductibles or lowering fee schedules, and will develop other tactics for ensuring physicians' accuracy in billing, even if these approaches require additional paperwork and administrative support.”

A physician who feels entitled to larger reimbursements from an insurance company can file a lawsuit on his or her behalf, but the process is time-consuming and costly.

“The physician, if successful, would be awarded a much greater percentage of their denied reimbursement, plus costs. Interest is sometimes also available,” said James W. Marks, an attorney with the Chicago law firm McDonald Hopkins, who concentrates his practice on helping physicians maximize reimbursements. “His or her costs would include filing fees and the cost of an attorney. Some lawyers might be willing to handle a case for a contingent fee, but unless the amount a physician or a physicians' organization seeks is significant — hundreds of thousands of dollars — it is unlikely that a lawyer would take it on. As for punitive damages, that's hard to get. You have to show actual fraud.”


Physicians have other options, according to Marks, “but they're not great.”

First, physicians who detect a pattern of lower reimbursements from an insurance company should inform the state medical association, which could pursue a class action lawsuit, said Marks. “The problem is, even if the class action is successful, the physician is not going to get that much, maybe 10 cents on the dollar. It might deter the insurance company from doing it again, however.”

Physicians also can report the problem to the state insurance commission. “In some states, the insurance commission has assessed fines against payers,” Marks said.

Probably the simplest and most effective strategy, he said, is to deal directly with the insurance company. “Physicians should routinely appeal any downcoding and/or other improper billing practices. If you don't appeal, you lose the right to contest payment. All provider agreements have review provisions, and it's surprising the degree to which you can get additional moneys by following those procedures. Physicians need to understand their appeal rights. They should aggressively pursue them.”

A strong office staff can offer invaluable protection to a physician against insurance company attempts to withhold reimbursements, according to Mary H. McDermott, MBA, director of Billing Quality Assurance at the Clinical Practice Association at Johns Hopkins University. “For the bundling issue, it's important that the staff be educated about the proper use of codes so they can question inappropriate bundling denials,” she said. “For the downcoding issue, it's imperative that the staff know the fee schedule of the procedures, and that someone in the office review on a routine basis payments from each payer to ensure that the expected payment was received.”

Electronic filing may also help. “Frequently the payer will pay a reduced amount but not note the CPT code change on the EOB, so it does not appear to be downcoding,” McDermott said. “Practices may miss this if they are not diligent about reviewing payments, and automating this function should be a priority. Erroneous payments of even a few dollars here and there add up.”


Late payments are a “scourge,” McDermott said. “If a payer frequently pays late for no apparent reason, the practice should consider whether continuing to accept that insurance is worthwhile. Having the ability to file claims and receive payments electronically can alleviate this problem, as the payer can't say the claim was not received.”

Some physicians are reluctant to be aggressive because an insurance company can drop a physician from its “preferred provider” list, which can be devastating if the company provides insurance for most patients in an area. And the time and energy needed to dispute reimbursements causes some doctors simply to give up and accept lower payments.

Still, challenging insurance companies is crucial, according to James Rohack, MD, a member of the AMA's Board of Trustees. “These practices have a common goal and result: to increase the health plan payer's profits by lowering or denying payment to physicians,” Rohack said in testimony before the Health Insurance and Managed Care Committee of the National Association of Insurance Carriers in 2005. “Often, there is no rhyme or reason to these selective payer code edits. The AMA believes that the shroud of secrecy covering the entire health care payment process must be lifted.”

As the lawsuits against insurance companies have demonstrated, collective action by physicians can disrupt the most deeply entrenched practices.

“I think on an individual basis, physicians probably don't have much leverage,” said Teresa Devine of the Texas Medical Association, “but as a group, physicians have demonstrated there is strength in numbers.”


Many neurologists have long accepted delayed and downcoded payments as a fact of life. Opportunities to retrieve reimbursement do exist, however, including the option to sue.

For compliance dispute forms developed by medical societies of California, North Carolina, Connecticut, Texas, Georgia, and New York, against Aetna, Cigna, Health Net, Humana Inc., WellPoint/Anthem, visit:

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