BILL ANALYSIS

C.S.H.B. 4183

By: Smithee

Insurance

Committee Report (Substituted)

BACKGROUND AND PURPOSE

Preferred provider organizations (PPOs) and hospitals regularly enter into agreements whereby the hospital, or facility, agrees to provide medical care or health care to participants or beneficiaries of a health plan in accordance with agreed reimbursement rates.  An employer that self-funds its health plan contracts with a PPO to gain access to the facility at an agreed reimbursement rate.  Typically, the self-funded employer will use the services of a third-party administrator that processes and pays the claims from the facility.

The agreement between the PPO and the facility, in addition to having an arranged discount rate, requires that the claims for payment be made in a certain time frame, usually 45 days.  If the claim isn’t paid within that time period, the discounted rate is forfeited and the facility will demand the full billed charges, which often are double the discounted amount.

Some facilities in Texas have begun aggressively filing lawsuits against third-party administrators, third-party payors, and PPOs, alleging that claims have not been paid within the time period provided in the contract between the PPO and the preferred provider facility.  These lawsuits have been time consuming and expensive for all parties because full billed charges often double the size of the claim. 

The third-party administrator has a fiduciary duty under federal law to the employer and its health plan as well as to all other plan participants to only pay claims that are actually owed. Overpayment also uses up the plan participant's lifetime maximum coverage limit, thus proper payment of the correct amount helps protect the consumer as well.

To meet its duty, the third-party administrator or payor often needs to request an itemized statement of the charges and sometimes additional medical information to determine if the claim is accurate. Unfortunately, current law provides that if the third-party payor requests information in order to verify the claim, the facility has 30 days to respond, compared to 10 days if the identical request comes from a consumer.  And, more critically, those 30 days are counted against the 45 day time frame, making it very difficult for an administrator to meet the contractual prompt pay provision, especially if the claim is very large. Attempts to negotiate contractual solutions to this problem have been unsuccessful.

An additional problem for all third-party payors is that there is no time limit, other than a general statute of limitations, on the facility for alleging that the claim was paid late.  As a result, facilities have been going back as far as five years to bring claims, well after the health plan has closed the claim.  Finally, there is no effective framework for either a third-party payor or facility to handle overpayments and underpayments between the payor and facility.

C.S.H.B. 4183 requires a facility to provide an itemized statement to a third-party payor for bills that exceed $10,000 and authorizes a third-party payor to request statements for bills in lesser amounts.  The bill also establishes provisions for a claim for payment from a preferred provider and the overpayment to and reimbursement from such a provider.

RULEMAKING AUTHORITY

It is the committee's opinion that this bill does not expressly grant any additional rulemaking authority to a state officer, department, agency, or institution.

ANALYSIS

C.S.H.B. 4183 amends the Health and Safety Code to authorize a licensed ambulatory surgical center, birthing center, or hospital, under a provision requiring such a facility to provide a consumer with an itemized statement of bill charges upon request, to provide that statement as an electronic copy.  The bill clarifies that a facility is required to provide an itemized statement of the billed charges to a third-party payor who is actually or potentially responsible for paying all or part of the billed charges for providing services to a patient if the billed charges exceed $10,000 and removes the specification that the third-party payor also must have received a claim for payment of those services.  The bill removes the requirement that, to be entitled to receive a statement, the third-party payor must request the statement from the facility and must have received a claim for payment, and that the request must be made not later than one year after the date on which the third-party payor received the claim for payment.  The bill clarifies that the facility is required to provide the statement to the third-party payor with the facility's claim for payment, rather than requiring the facility to provide the statement to the third-party payor not later than the 30th day after the date on which the third-party payor requests the statement.

C.S.H.B. 4183 authorizes a third-party payor to request an itemized statement for billed charges of $10,000 or less.  The bill authorizes a third-party payor to request additional information, including medical records and operative reports, relating to a claim that has been submitted for payment to the third-party payor.  The bill requires the facility to provide the requested itemized statement or additional information as soon as practicable.  The bill prohibits the days between the date a third-party payor requests the itemized statement or additional information from the facility and the date the third-party payor receives the itemized statement or information from being counted in a payment period established by statute or under contract.  The bill authorizes the facility to provide the third-party payor with an electronic copy of an itemized statement.   The bill entitles a third-party payor to, rather than authorizing a third-party payor to request, an itemized statement of only the billed charges for which payment is claimed or to which any deduction or copayment applies if the third-party payor receives a claim for payment of part of the billed charges, rather than of part of the billed services.  The bill requires a third-party payor who requests an itemized statement or additional information to have evidence sufficient to prove the date the third-party payor made the request, which may include a certified mail receipt or an electronic date stamp.  The bill establishes that unless rebutted by sufficient evidence provided by a facility, the date the third-party payor receives the itemized statement or additional information, as shown in the third-party payor's records, is presumed to be the date of receipt for the purposes of these provisions.

C.S.H.B. 4183 clarifies that provisions regarding consumer access to health care information may not be waived, voided, or nullified by a contract or an agreement between a facility and a third-party payor, in addition to a contract between a facility and a consumer.  The bill requires a preferred provider that directly or through its agent or assignee asserts that a claim for payment of a medical or health care service or supply provided to a consumer, including a claim for payment of the amount due for a disallowed discount on the service or supply provided, has not been timely or accurately paid, to provide written notification of the nonpayment or inaccuracy to the third-party payor not later than the first anniversary of the earlier of the date the preferred provider received payment from the payor or the date that payment was due.  The bill establishes that a preferred provider or agent failing to provide the notification before that date is barred from asserting the claim of nonpayment or inaccuracy.  The bill establishes that the required notice of nonpayment or inaccuracy does not affect a statute of limitations applicable to a claim.  The bill requires a preferred provider on request of a third-party payor, if a patient is admitted to a preferred provider for more than 30 days, to provide an interim statement of the facility's billed charges to the third-party payor not later than the 10th day after the date the payor submits the request.

C.S.H.B. 4183 authorizes a third-party payor to recover an overpayment to a preferred provider if not later than the 180th day after the date the provider receives the payment, the third-party payor provides written notice of the overpayment to the provider that includes the basis and specific reasons for the request for recovery of funds, and the provider does not make arrangements for repayment of the requested funds on or before the 45th day after the date the provider receives the notice.  The bill establishes that a third-party payor that fails to provide notice of overpayment by the deadline on the 180th day is barred from recovering an overpayment on that claim.  The bill requires the third-party payor, if a preferred provider disagrees with a request for recovery of an overpayment, to allow the provider an opportunity to appeal and prohibits the third-party payor from attempting to recover the overpayment until all appeal rights are exhausted.  The bill requires a preferred provider that fails to make a reimbursement required by provisions of the bill to pay, in addition to the reimbursement, a late penalty in an amount equal to 10 percent of the amount of the required reimbursement.

C.S.H.B. 4183 establishes that provisions regarding the billing of facility services and supplies are applicable to a person with whom a preferred provider contracts to submit or collect a claim or payment, or with whom a third-party payor contracts to process or pay a claim for payment by a preferred provider.  The bill establishes that if provisions regarding consumer access to health care information and provisions regarding preferred provider benefit plans apply to the same person, conduct, or circumstance the provisions regarding preferred provider benefit plans control.  The bill defines "preferred provider."

EFFECTIVE DATE

September 1, 2009.

COMPARISON OF ORIGINAL AND SUBSTITUTE

C.S.H.B. 4183 differs from the original by requiring a facility to provide an itemized statement to a third-party payor for billed charges that exceed an amount of $10,000, rather than $20,000 as in the original, and authorizing a payor to request such a statement for bills in lesser amounts.  The substitute removes a provision in the original authorizing a third-party payor to request additional information after that third-party payor has received an itemized statement, and adds a provision not in the original specifying that such a third-party payor may request additional information relating to a claim that has been submitted for payment to the third-party payor.  The substitute removes a provision in the original authorizing the third-party payor and the facility to agree to allow the itemized statement and the additional information to be requested simultaneously to facilitate investigation and payment of billed charges.

C.S.H.B. 4183 differs from the original by requiring a preferred provider asserting that a claim for payment has not been timely or accurately paid to provide written notification of the nonpayment or inaccuracy to the third-party payor not later than the first anniversary of the earlier of the date the provider received payment from the payor or the date that payment was due, rather than the 180th day after the earlier of those dates, as in the original, and makes conforming changes.  The substitute adds a provision not in the original establishing that that required notice does not affect a statute of limitations applicable to a claim.  The substitute differs from the original by requiring the preferred provider on request of a third-party payor, if a patient is admitted to a provider for more than 30 days, rather than 15 days as in the original, to provide an interim statement of the facility's billed charges to the payor by the specified deadline.

C.S.H.B. 4183 removes a provision in the original requiring the preferred provider to reimburse the third-party payor for any payment amount exceeding the amount owed the provider for an eligible charge not later than the 45th day after the date the provider receives written notice of overpayment and request for reimbursement from the third-party payor or the provider determines it has received an overpayment.  The substitute adds provisions not in the original authorizing a third-party payor to recover an overpayment to a provider under certain conditions, barring a payor from recovering an overpayment if failing to provide notice before the deadline specified, and requiring the payor to allow the provider opportunity to appeal.  The substitute removes provisions in the original relating to the collection of billed charges by others.  The substitute adds provisions not in the original setting forth the applicability of provisions regarding billing of facility services and supplies to entities contracting with a preferred provider or third-party payor, and establishing that, if provisions regarding consumer access to health care information and provisions regarding preferred provider benefit plans apply to the same person, conduct, or circumstance, the provisions regarding preferred provider benefit plans control.

C.S.H.B. 4183 makes technical corrections and nonsubstantive changes.