Rep. Lynn A. Westmoreland, R-Ga., invited Frank B. Kelly, MD, to provide testimony to a subcommittee chaired by Rep. Charles A. Gonzalez, D-Texas.


Published 9/1/2007
Starr McCaffery

AAOS testimony on prompt payment draws House subcommittee support

Despite the enactment of prompt payment legislation in 47 states in recent years, orthopaedic surgeons continue to report that most accurate and valid health insurance claims remain unpaid for more than 90 days.

The American Association of Orthopaedic Surgeons (AAOS) strongly supports prompt payment of uncontested claims by government agencies, insurance companies, and managed care plans within a 30-day time period, and recently provided Congressional testimony on the adverse effects of payment delays and barriers to statutory enforcement.

On Aug. 1, Frank B. Kelly, MD, chair of the AAOS Communications Cabinet, provided insights and data on the prompt payment issue to the U.S. House of Representatives’ Committee on Small Business, Subcommittee on Regulations, Healthcare and Trade. The testimony was provided to sustain awareness of prompt payment as an ongoing issue and to highlight the limited efficacy and reach of relevant state laws, which are frequently preempted by federal statutes.

In a press release issued by the House Committee on Small Business following the hearing, Subcommittee Chair Rep. Charles A. Gonzalez, D-Texas, stated, “The existing system is clearly inadequate and is putting an undue strain on our nation’s health care providers.”

Surveys confirm problems
According to a 2001 survey conducted by the American Medical Association, prompt payment by insurers topped the list of members’ concerns, Dr. Kelly told subcommittee members. The results indicated that 38 percent of the physician practices surveyed said it took more than 45 days on average to be paid for a “clean claim;” in the worst cases, physicians reported delays of up to 365 days to collect payments from insurance companies or managed care providers.

He also cited a 2001 study by the Louisiana State Medical Society, which identified more than $7.3 million dollars in overdue payments to the state’s physicians.

The impact of legislation
Dr. Kelly also explained that current federal law limits enforcement of state laws governing payment for medical services. Although the U.S. Supreme Court has not ruled specifically on the applicability of state prompt-pay laws to self-funded insurance plans, a 2004 decision stated that most of these plans are governed by the Employee Retirement Income Security Act (ERISA) and are thereby exempt from state regulations.

“Approximately half of my patients, and more than 100 million individuals throughout the United States, are covered by self-funded insurance plans, which fall under ERISA,” said Dr. Kelly. “Despite the unyielding enforcement of the law by the Georgia Insurance Commissioner, thousands of claims are slipping through the cracks in this system.”

Dr. Kelly also described a Pennsylvania law that states a “licensed insurer or a managed care plan shall pay a clean claim submitted by a health care provider within 45 days.” Because the Pennsylvania Superior Court determined that physicians seeking to recover monies for unpaid claims do not have the right to file individual suits against insurers under the law, physicians have little recourse under the law. The alternative—a class-action claim—is costly and time consuming, and may further delay the proper payment of individual claims.

In addition, because most states lack laws that clearly stipulate what constitutes a clean claim, even payors such as managed care organizations (MCOs) that are subject to state regulation may be able to circumvent the legal requirements for prompt payment.

“Some MCOs will cite typographical errors and other minor problems with large and otherwise clean claims,” said Dr. Kelly.

A two-pronged solution
Although the AAOS supports efforts to address the issue of prompt payment at the state level through legislative and regulatory reforms, Dr. Kelly’s testimony outlined for Subcommittee members why legislative action at the federal level may be necessary to ensure a consistent and effective policy response to this problem. He also presented a two-pronged solution to the problem.

“First, laws and regulations detailing the elements of a clean claim must be implemented,” he said. “Second, a reasonable time period, such as 30 days, must be established for providers to be notified of a denial and the specific reasons for the denial.”

In its press release, the Committee acknowledged that some insurance companies have either ignored the requirements of prompt payment laws or argued that the lack of federal requirements protects them from state laws.

“When health providers feel that their practices are threatened because of delays in payment, there is a problem with the system,” said Rep. Gonzalez. “We must ensure that these small businesses are able to continue to serve the communities that depend on them.”

The House Subcommittee discussed remedies to the current system, including implementing uniform national standards and strengthening current state statutes.

“Although it is too late to see federal prompt pay legislation introduced this year, the chairman and ranking minority member indicated strong support for potential legislative action in future legislative sessions,” said Charlene MacDonald, AAOS manager of state legislative and regulatory affairs, following the hearing.

Dr. Kelly spoke to the committee as a guest of the ranking minority member, Rep. Lynn A. Westmoreland, R-Ga., and plans to continue working closely with the sub-committee to address the issue of prompt payment.

Starr McCaffery is a communications consultant working with the AAOS Washington office.