Have you ever been in a negotiation with a health plan for a network participation contract and had the impression that the plan knew all the rates that you had agreed to in confidential negotiations with other health plans? Allow me to reassure you: you are not being paranoid. It is quite likely that the plan you are negotiating with knows exactly what rates and terms you have agreed to in your contracts with other health plans that were supposed to be competing for your services. How can this be? Aren’t these negotiations and contracts supposed to be confidential? Isn’t this confidentiality essential to the conduct of a fair, market driven, contract negotiation for participation of providers in a health plan’s network?
The answer to both of these questions is certainly “yes,” but that has not stopped plans from compiling data that gives them a huge and unfair advantage in these negotiations. Where do plans get this data? From the Coordination of Benefits (COB) process, which requires providers to take the EOB from one plan and forward it to another plan when the patient has dual coverage. These EOBs clearly indicate the contractually allowable amount for the services rendered when the provider is in-network. Dual coverage is when a patient is covered by more than one plan (for example, at work and through a spouse’s plan), and coordination of benefits enables the patient to obtain coverage for the services rendered from both plans. This coverage must be ‘coordinated’ so that the provider or enrollee is not overpaid as a result. Most states have regulations or legislation providing for COB, and these rules generally state that the exchange of data is to be used solely for the purposes of coordinating the benefits for a specific claim when the patient has dual coverage. Going beyond the scope of these rules, plans have compiled and used this claims data to reverse engineer the discounted contract rates and terms that their competitors have negotiated with you and other providers, and handed this rate information over the firewall to their contract negotiators.
I first became aware of the existence of these databases in 2009 during a negotiation with a large health plan. The negotiator let it slip that his company had a database derived from COB claims that revealed the contract rates between the medical group that I was representing and every other health plan the group contracted with. He followed this slip with “but don’t tell anyone I told you this”. He insisted that we agree to the lowest rates that the group had negotiated with a competing plan. I promptly took this information to the California Medical Association and the American Medical Association. This had to be some sort of violation of fair business practices, or anti-trust law. Attorneys for both organizations agreed, and having heard these complaints from other providers in NY and elsewhere, they decided to lodge a formal complaint, and drafted a co-authored letter to the California Department of Insurance.
This letter stated, in part, that use of COB claims in this way “implicates anti-trust violations not only under the Unfair Insurance Practices Act but also under state antitrust and unfair competition laws.” Though the California DOI concluded that this misuse of the COB process could be actionable, the DOI decided it may not have jurisdiction over this complaint, and recommended that it be forwarded to the CA Attorney General’s office. This was done in late 2009, but after many months, and a lot of hemming and hawing, the AG’s office declined to either investigate or otherwise pursue this complaint, citing in part, limited resources. Subsequently, the AMA referred this complaint to the Federal Department of Justice early in 2011. Since then, there have been several discussions with DOJ staff, but as yet the Department has taken no action in response to this complaint, though the issue of ‘inadequate department resources’ has again been raised.
Although it may not be necessary to show injury to consumer welfare in order to establish the requisite injury to support an antitrust monopsony claim against health insures; it seems that we need to do more to convince regulators that the abuse of confidential COB data to push down provider market rates can directly impact network adequacy and result in loss of patient access to care. A race to the bottom in provider contracting rates is NOT in consumers’ best interests, but I suspect that anything that appears to hold down costs, even if it pushes the best physicians and hospitals out of the market, or squeezes down on the length of an average office visit, is a good thing in the eyes of those regulating the health insurance industry.
I recently received a copy of an email, sent to a colleague, which confirmed my prior experience with the abuse of the COB process. In this email, which I have redacted to preserve the ‘confidentiality of the negotiation’ (note the heavy use of sarcasm here), the plan representative said: “Our COB data shows (our health plan) is significantly disadvantaged in (this area) and (that area). For example, XYZ health plan in (this area) is reimbursing (your medical group) approximately____% of our national rate compared to ___% that our health plan has been paying you for the past two years. In (that area), our health plan is significantly disadvantaged with competitors such as AAA health plan who is paying (your provider group) ___% less, BBB health plan who is paying ___% less, and CCC health plan who is paying ___% less than what we have been reimbursing (your medical group) for the last two years.”
I don’t know how others providers might feel, but I find this communication very disturbing. Coordination of Benefits is an industry wide process, and I suspect that health plan abuse of COB claims data to manipulate the market is widespread, affecting small and large medical groups, hospitals, and a host of other contracted providers all across the nation. Perhaps if more providers express their concern about the impact of these COB-derived databases, revealing what are supposed to be confidentially negotiated contract rates; the DOJ or some state insurance regulator will take action to prevent this abuse. In the meantime, when providers are negotiating with a health plan for contracting rates and terms, at least now they will know what they’re up against.
Myles Riner is an emergency physician who blogs at The Fickle Finger.
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