"Prompt Payment" Legislation

AB1455 and SB1177 were signed into law by Governor Davis and took effect January 1, 2001. Highlights of the bills:

• The Department of Managed Care must develop regulations to impose requirements on the internal dispute mechanisms that plans must make available to contracting and non-contracting providers for the purpose of resolving billing and claims disputes
• Health plans must inform providers of the procedures for processing and resolving disputes
• Health plans must pay claims within 45 days of receipt
• Annual interest of 15% for claims not paid within specified timeframes
• Fine imposed for interest owed that is not automatically \included in the payment from a health plan
• Plans are prohibited from engaging in "unfair payment patterns". The Department Director is allowed to impose penalties or take other action if a plan is found to be engaged in such behavior.

Non Payment Action Plan: "Any" Managed Care Plan

Try to resolve your payment issue with the health plan through its dispute resolution mechanism - a process that all plans are required to make accessible to both contracting and non-contracting providers. If you are unable to resolve the issue, report it to the Department of Managed Care through their office of Plan and Provider Relations.

• Toll Free provider line: (877) 525-1295
• Mailing Address:


California Department of Managed Care
980 Ninth Street, Suite 500
Sacramento, CA 95814-2725

Non Payment Action Plan: "Any" IPA

(The Department does not regulate medical groups, however, you may report problems with a medical group using the methods described above. For payment resolution, use the outline provided below.)

1. Send a formal written demand for payment to "Any" IPA (See Sample Letter #1. State law (Health and Safety Code § 1371) requires IPAs and Medical Groups to reimburse uncontested claims within 45 working days.

2. Send unpaid claims to the appropriate health plans (Cigna, Blue Shield, Blue Cross etc.) accompanied by a formal demand for payment (See sample Letter #2. State law (Health and Safety Code § 1371) states that health plans are ultimately responsible for payment even when they subcontract with IPAs and Medical Groups). Send a copy of your letters to:

William Kenefick, Acting Commissioner

Department of Corporations 980 Ninth Street, 5th Floor Sacramento, CA 95814

3. If you have outstanding Senior Claims, itemize them separately and include a statement in your letters to the IPA and to the health plans, that these are outstanding senior claims. As a condition of contracting with the health plans, CMS requires that plans pay 95% of clean claim within 60 days for contracted doctors and 30 days for non-contracted doctors. Send a copy of your letters to:

CMS Region IX Division of Health Plans and Providers

75 Hawthorne Street, Suite 401 San Francisco, CA 94105

4. If you are considering contract cancellation, be sure to follow the terms for cancellation as written in your contract. Please be aware that if the group has filed bankruptcy, federal bankruptcy law prohibits termination of the contract due the bankruptcy.

SAMPLE LETTER #1 DEMANDING PAYMENT OF CLAIM WITH INTEREST

(Brackets [ ] indicate optional language or language which must be filled in by the laboratory)

Dear [Plan Administration; IPA or other contracting entity or DHS]:

We have not yet received payment for services provided to [Patient] on [Date of Service] in the amount of [Claim Amount]. The claim was sent to [Name of Plan/IPA or other contracting entity] on [Date Claim Sent]. Under California law, health care service plans (and their contracting entities) are required to pay non-contested claims within 45 days, and other third-party payors (and their contracting entities) within 30 days. If the claim is contested or denied, the plan must provide such written notice within the 30 or 45-day period. (Contested claims must be paid within the same time periods, after further required information has been sent.) [Under California law, DHS must make payment for claims by a small business or nonprofit organization within 30 days after a claim is received, unless reasonable cause for nonpayment exists.]

Otherwise, interest accrues on late claims at 10% (see Health & Safety Code §1371; Insurance Code §10123.13) (0.25% per day; see Government Code §927.6). To date we have not received notice that this claim is being contested.

We are writing this letter to demand payment of the above-referenced claim in the amount of [Claim Amount] plus 10% interest (0.25% per day). If we do not receive payment in this amount by [Date], we will consider legal action. Thank you in advance for your anticipated cooperation.

Sincerely,

[Name of Laboratory]

SAMPLE LETTER #2 DEMANDING PLAN PAYMENT OF CLAIM WITH INTEREST WHERE IPA OR OTHER CONTRACTING ENTITY HAS FAILED TO MAKE PAYMENT

(Brackets [ ] indicate optional language or language which must be filled in by the physician)

Dear [Plan ]:

We have not yet received payment for services provided to [Patient] on [Date of Service] in the amount of [Claim Amount]. The claim was sent to [Name of Contracting Entity] on [Date Claim Sent]. Under California law, health care service plans (and their Contracting Entities) are required to pay non-contested claims within 45 days, and other third-party payors (and their Contracting Entities) within 30 days. If the claim is contested or denied, the plan must provide such written notice within the 30 or 45-day period. (Contested claims must be paid within the same time periods, after further required information has been sent.) Otherwise, interest accrues on late claims at 10% (see Health & Safety Code §1371; Insurance Code §10123.13)

Pursuant to Health & Safety Code §1371, health plans are ultimately responsible for payment of physicians' claims for services provided under the contract to your enrollees whether or not you delegate this obligation to a contracting entity, such as a medical group or IPA. Under these circumstances, it is your obligation to ensure that we are made whole with respect to our outstanding claims and paid on a timely basis for all future claims. While we are sympathetic with [IPA or other contracting entity]'s cash problems, we can no longer absorb these losses.

We have demonstrated extraordinary patience in responding to [contracting entities] claimed problems, however, we depend on prompt payment n order to maintain own practices and continue to serve health plan enrollees. We urge you to take appropriate steps, including intervention with [contracting entity] and direct payment to us, to rectify the problem.

We are writing this letter to demand payment of the above-referenced claim in the amount of [Claim Amount] plus 10% interest (0.25% per day). If we do not receive payment in this amount by [Date], we will consider legal action. Thank you in advance for your anticipated cooperation.

Sincerely,

[Name of Laboratory]

cc:

• Department of Managed Care
• Department of Managed Health CareCalifornia HMO Help Center980 Ninth Street, Suite 500Sacramento, CA 95814-2725