Unique Needs of Labs Make Shorter Filing Deadlines Punitive

It is no coincidence that payors are in a rush to reduce timely filing deadlines and tighten claims submission rules. With the roll out of the Affordable Care Act, payors are under pressure to reduce expenses and apparently some believe administrative obstacles are a good way to accomplish that. To kick the effort off, section 6404 of the Affordable Care Act reduced the maximum period for submission of all Medicare fee-for-service claims to no more than 12 months, or 1 calendar year, after the date of service from a prior submission period of 15-27 months (depending on the date of service). Despite this reduction, however, Medicare continues to acknowledge administrative exceptions to the 12 month limit.

Cigna recently announced reductions of filing deadlines from 180 days to 90 days, while Illinois Medicaid reduced their filing deadline from 12 months to 180 days effective July 1, 2012 and Nebraska Medicaid followed suit with an effective date of January 1, 2013.

While electronic claims transaction standards have allowed providers to file and receive acknowledgement on the majority of their electronic claims within days, there are a number of issues in the lab industry that make a reduction in filing deadlines detrimental. First, since laboratories do not see the patient the majority of the time, they are dependent on the ordering physician to provide adequate billing and medical information for the lab to generate a clean claim. 40% of orders received by a lab have missing or incorrect information, requiring lab staff to contact either the patient or the ordering physician to obtain additional information in order to file a clean claim. The process of corresponding with either the patient or the physician, both of whom have little or no incentive to assist, to obtain additional information required to file a claim can be a very lengthy process.

To add insult to injury, in the laboratory industry, a payor may not be billed until the services are performed and with some minor exceptions, the “date of service” submitted to the payor must be the date the specimen was drawn rather than when the service was reported. For some esoteric tests it can take 6-8 weeks to perform the test and report results, which means the claim may be 60 days old before the provider is even able to submit. It would seem particularly burdensome to saddle a lab, who neither has access to the source of information necessary to generate a clean claim or the ability to generate a claim on the date the service is requested, with short filing deadlines that it may be unable to meet through no fault of its own while providing services in good faith.

According to a recent California court decision, an insurer may not refuse to process a claim due solely to lack of timely filing except in case of a grossly negligent, willful, or fraudulent breach of duty as provided by Section 3275 of the Civil Code. Refer to Valley View Home of Beaumont, Inc. v. Department of Health Services (1983m 146 Cal. App 3 d 161 m 194 Cal. Rptr. 96 and California Civil Code 3275). Forfeitures are not favored, hence a contract, and conditions in a contract that make time of the essence, will be construed to avoid forfeitures and the court has excused compliance or given equitable relief against such enforcement (O’Morrow v. Borad (1946) 27 Cal.2d 794; Breitman v. Gattman (1948) 88 Cal App.2d 124). According to the California Physician’s Legal Handbook, even though the Valley View court case involved the California Department of Health Services (Medi-Cal), the courts are likely to conclude a private health plan has even less justification for attempting to enforce technical billing requirements unfairly.
Additionally, there are a number of Texas court decisions according to which, an insurer may not refuse to process a claim due solely to lack of timely filing unless the insurer can prove that it was substantially prejudiced by the late filing. Please see Trevino v. Allstate Ins. Co., 651 S.W.2d 8 (Tex. App. 1983) and Shelton v. Nationwide Mut. Ins. Co., 570 S.W.2d 419 (Tex. Civ. App. 1978). According to Ostrager & Newman’s Handbook on Insurance Coverage Disputes (9th Edition), several cases have ruled that an insurer may be prejudiced by its inability to contemporaneously investigate the claim, interview witnesses or make an early settlement of the claim.
Some states have established laws mandating filing deadlines of no less than 120 days. Many payors that recognize providers should not forfeit monies for services performed in good faith as a result of arbitrary administrative guidelines have set more reasonable filing timelines. Medicare, Medicare Advantage plans and most state Medicaid programs have 12 month filing deadlines. In the case of laboratory providers, which do not have direct access to patient information, lack of timely filing would not appear to constitute equitable forfeiture, nor does a late filing within a one year time frame prejudice the payor. Additionally, if there is no legal “consideration” for a unilateral change to provider contracts, the provisions could arguably be deemed unenforceable. Providers should be pro-active in discussing these issues with payors when necessary.