Physician Payment and Reimbursement

Ensuring Proper Payments for Substance Abuse Services

June 5, 2017 11:12 am

Most health plans only recognize a portion of patient claims for substance abuse treatment as “usual and customary.”

The revenue cycle process for substance abuse treatment providers can be complicated as industry regulations continue to change. Particular payment challenges apply to private out-of-network providers.

Many private treatment facilities choose to go out of network with commercial health plans to maximize payment rates and to have the option to balance bill patients. However, it has become challenging for out-of-network providers to collect these billed charges. Most health plans now only recognize a portion of patient claims, as “usual and customary” or “reasonable and customary” or as defined by “Medicare allowable rates,” which are significantly lower than billed charges.

As health plans reduce the usual and customary rates for substance abuse treatment, problems have arisen, including litigation as well as patient inquiries and complaints. Some health plans benchmark their allowed rates based on data provided by FAIR Health, a not-for-profit corporation that uses geographic health plan claim data to determine the usual and customary payment ranges. These rates may be significantly lower than substance abuse treatment providers’ billed amounts.

In addition, some health plan policies do not give providers the option to balance bill patients for unpaid amounts up to the billed charges, but rather for coinsurances and deductibles up to the “allowed” rates. If patients are not able to fulfill their financial responsibilities, providers must write off patient balances as bad debt.

With these challenges in mind, the following are methods providers can use to increase payments.

Contract negotiation. Negotiate contracts with managed care organizations—companies that are contracted by healthcare providers and payers to reduce costs for members—to obtain predetermined payment rates. In most cases, providers agree not to balance bill patients as a requirement of these agreements. Negotiating a global rate not only increases payment rates, but also helps finance teams more accurately forecast accounts receivables and budgeting. Some smaller health plans will also propose or agree on a single case agreement in which a set, predetermined per diem or per-treatment rate is reimbursed for a specific patient.

Eligibility verification. Place more emphasis on verification processes. Out-of-network providers should inquire about payment rates for each policy verified. Knowing what to expect in terms or payment rates will assist in sound financial decision making. The following are strategies used to increase accuracy of verification processes:

  • Provide procedure and diagnoses codes and inquire about related payment or allowed rates as well as authorization requirements.
  • Verify licensing and accreditation requirements for specific providers or facilities, as some policies not only require state licenses, but also accreditation from organizations such as the Joint Commission or the Commission on Accreditation of Rehabilitation Facilities.
  • Verify additional policy limitations such as lifetime, day, or dollar maximums or exclusions such as court-ordered treatment or methadone clinics.

Historical payment data. Keep updated spreadsheets on historical payment rates for payers in specific areas. These will serve as substantiated data in the event of appeals on allowed rates. Submit an appeal to the health plan explaining the issue (e.g., low allowed rate) and why the payments should be adjusted. Use historical data gathered as support.

Precertification. Obtain precertification for services that require it. Remember, some health plans have different precertification requirements. For example, some health plans do not require precertification for partial hospitalizations and/or intensive outpatient services. They consider these to be outpatient services. However, when billing as a facility on a UB-04 form, most health plans consider these to be higher care levels and require precertification. Making these distinctions will greatly reduce claim denials or penalties. In some cases, medical records must be sent to health plans for review, which will result in increases in collection turnaround times.

Overall, it is essential to keep abreast of changes in the industry and to understand how they affect providers’ revenue cycle processes. This will enable greater revenue cycle team adaptability and responsiveness, leading to increases in revenue and profitability.


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