Physician/Provider

Information & Advice for Physicians and Providers

Additional Prompt Payment/Clean Claims Information

The emergency rules, as well as the proposed rules, can be accessed on TDI´s web site at www.tdi.state.tx.us/rules/parules.html

On July 4, TDI proposed for public comment new and amended rules to implement SB 418, which apply to health maintenance organizations and insurance carriers that write preferred provider benefit plans. Commissioner Jose Montemayor conducted a public hearing about the rules on August 7th. While the department intends to adopt final rules in the near future, it decided to adopt emergency rules to cover the period between the law´s effective date and final rule adoption. The emergency rules will be withdrawn when final rules go into effect.

Among other things, the emergency rules add definitions of terms, including the term "billed charges," which is defined as the charges for medical or health care services included on a claim submitted by a physician or provider. That definition provides that billed charges must comply with all applicable requirements of law, including the requirement that a provider may not submit a bill for treatment that it knows was not provided or was improper, unreasonable, or medically or clinically unnecessary.

The rules also clarify the calculation of penalties on late and underpaid claims and specify that an insurance carrier´s ability to recover fraudulently billed payments is not affected.

With regard to the verification process, the emergency rules provide that an HMO or carrier must respond to a request for verification without delay but in no case longer than five days, with not later than one hour to respond to requests for verification in a life-threatening situation and not later than 24 hours for concurrent hospitalizations.

The rules also set forth 13 informational items that must be supplied by a physician or provider requesting verification, and give the carrier one day to request any necessary additional information. The rules contain other provisions that implement SB 418, including elements of a clean claim; deadlines and procedures for claims filing, processing and auditing, and recovery of overpayments; late payment penalties; disclosure of claims processing information; and reporting requirements.

In addition to the foregoing, the emergency rules contain two provisions that were not contained in the original proposal: requirements for patient ID cards issued by HMOs and preferred provider benefit plans, and a waiver of the rules´ requirements for services and benefits provided under the the Medicaid and Children´s Health Insurance Program, as requested by the Texas Department of Health and Human Services. These provisions will also be proposed for public comment prior to their permanent adoption.

• Submission of Clean Claims
• Utilization Review Agents
• Physician and Provider Contracts
• Preferred Provider Plans

Senate Bill 418 and the associated rules apply to contracted physicians and providers in HMOs and preferred provider benefit plans. Some of the proposed rules (prompt payment and verification) also apply to non-contracted physicians and providers who provide emergency care or care on referral when services aren´t reasonably available within the HMO´s or preferred provider benefit plan´s network. The law became effective on June 17, 2003. The rules are proposed to become effective on September 4, 2003. Because SB 418 applies to contracts between carriers and physicians and providers entered into or renewed on or after the 60th day after the statute´s effective date (which is August 16), it allows the commissioner to adopt rules on an emergency basis. If necessary to promote consistency of implementation, TDI staff may recommend that the commissioner adopt emergency rules in a separate proceeding to cover the period between August 16th and the date these proposed rules go into effect.

Note: This document uses the terms "physician," "provider," and "preferred provider" throughout. HMOs and preferred provider benefit plans are referred to collectively as "carriers."

THE FOLLOWING IS A SUMMARY OF THE PROPOSED RULES. IN THE EVENT OF ANY PERCEIVED CONFLICT BETWEEN THE SUMMARY AND THE PROPOSED RULES, THE TEXT OF THE PROPOSED RULES CONTROLS. ONLY TIMELY AND APPROPRIATELY SUBMITTED COMMENTS ON THE ACTUAL TEXT OF THE PROPOSED RULES WILL BE CONSIDERED IN THE FINAL ADOPTION ORDER. THE RULES AS FINALLY ADOPTED MAY DIFFER FROM THE PROPOSED RULES.

Claims Submission Deadline

Physicians and providers must file claims within 95 days of the date the health care service was provided. Unless failure to timely file is due to a catastrophic event, physicians and providers who do not submit claims within the 95-day timeframe forfeit the right to payment. Carriers and physicians and providers can agree to longer (but not shorter) deadlines by contract.

What is a Clean Claim?

The law and rules provide for two types of claim submissions - non-electronic submissions (claims submitted by mail, hand-delivery, or fax), and those submitted electronically. For non-electronic submissions, a claim is considered "clean" if it contains all the required data elements set forth in the rules and, if applicable, the amount paid by the primary plan or other valid coverages. Claims submitted electronically are considered clean if they are submitted using the ASC X12N 837 format and are in compliance with federal Health Insurance Portability and Accountability Act (HIPAA) requirements related to electronic health care claims, including applicable implementation guidelines, companion guides, and trading partner agreements.

Clean Claim Elements

The data elements required for a claim to be considered clean are standardized by rule. For non-electronic claims, the law and rules primarily rely on data elements collected on standardized forms developed by the Centers for Medicare and Medicaid Services (CMS) - the CMS 1500 and UB-92. Required data elements are listed in Section 21.2803 of the proposed rule.

Carriers may not require physicians or providers to submit data elements other than those stipulated in the rule. Nor may carriers require attachments to establish a clean claim. Claims submitted electronically must be compliant with HIPAA.

Once a Claim is Filed

The law and rules establish various deadlines for carriers to act following submission of a claim. Carriers must take action on the claim within 45 days of receipt of a non-electronically submitted claim, within 30 days of receipt of a claim submitted electronically, and within 21 days of receipt of an affirmatively adjudicated electronically submitted pharmacy claim.

Prior to expiration of the statutory (21 days, 30 days, or 45 days) deadline, the carrier must either

• pay the entire contracted amount of a clean claim
• deny the entire claim and notify the physician or provider why the claim will not be paid
• pay part of the claim and deny or audit the remainder and pay 100 percent of the applicable contracted rate for the audited portion and notify the physician or provider
• notify the physician or provider that the claim is being audited and pay 100 percent of the applicable contracted rate
• notify the physician or provider that the claim is deficient.

Requests for Additional Information

The carrier may make one request to the treating physician or provider for additional information to process a claim. The request must be made within 30 days of the date the claim was received. The carrier must be specific about the additional information requested and may only request information that is in the patient´s medical or billing records and that is relevant to the resolution of the claim. If a carrier requests additional information, the carrier´s deadline for the carrier to act on the claim is suspended until the additional information, or a response that the physician or provider does not have the information, is received. Once the carrier has received the requested information, it must act within 15 days of receipt of the information or by the statutory deadline, whichever is later.

A carrier may also request additional information from a third party. If a carrier requests information from a third party, it must notify the physician or provider of the request. The carrier´s deadline is not suspended for requests for information from third parties.

If the Carrier Audits a Claim

Carriers that opt to audit a claim must pay 100 percent of the applicable contracted rate and notify the physician or provider of the audit in writing within the statutory (21-, 30-, or 45-day) deadline. The explanation of payment to the physician or provider must clearly indicate that the claim is being audited. A carrier that audits a claim may request additional information within the audit period. The carrier must notify the physician or provider that the additional information must be provided within 45 days, and may recover the amount paid if the physician or provider fails to respond within the time limit. Audits must be completed within 180 days of the date the claim was received.

Physicians and providers may appeal the results of audits. Appeals of audits must be made within 30 days.

Coordination of Benefits

Carriers may not require physicians or providers to investigate coordination of benefits with other coverages. Physicians and providers are required, however, to maintain information about a patient´s other coverages. In instances where multiple coverages apply, the physician or provider must file a claim with the secondary payor within 95 days of receipt of the determination of the primary payor. If a carrier that is a secondary payor overpays a claim, the carrier must recover the overpayment from the carrier that is a primary payor. However, if the primary payor has already paid the claim, the secondary payor may recover overpayment directly from the physician or provider.

Submitting Duplicate Claims

A duplicate claim is any claim for payment for the same health care service provided to a particular individual on a particular date of service that was included in a previously submitted claim. Physicians and providers may not submit duplicate claims before the expiration of the statutory (21-, 30-, or 45-day) payment deadline. A duplicate claim does not include corrected claims or additional information provided to satisfy a carrier´s request. Physicians and providers are required to indicate on the claim form whether the claim is a duplicate claim or a corrected claim.

Overpayments

A carrier must request refunds for overpayments to physicians and providers within 180 days of the physician or provider´s receipt of the payment. If the carrier does not make the request for refund within the 180-day deadline, the carrier forfeits the refund of the overpayment. A physician or provider has 45 days to appeal a notice of overpayment. A carrier may recover an overpayment if all appeal rights have been exhausted and the physician or provider has not made arrangements to refund the overpayment to the carrier on or before the 45th day from the date of receipt of the notice of overpayment.

Late Payment Penalties

Carriers are subject to penalties for late payment of claims to contracted physicians and providers based on the number of days the payment is late:

• If the carrier pays a clean claim between one and 45 days late, it must pay the full contracted rate of the services provided plus either 50 percent of the difference between the billed charges and the applicable contracted rate or $100,000, whichever is less
• If the carrier pays a clean claim between 46 and 90 days late, it must pay the full contracted rate of the services provided plus either 100 percent of the difference between the billed charges and the applicable contracted rate or $200,000, whichever is less
• If the carrier pays a clean claim 91 or more days late, it must pay the full contracted rate of the services provided plus either 100 percent of the difference between the billed charges and the applicable contracted rate or $200,000, whichever is less, plus 18 percent annual interest on the penalty amount, accruing from the date payment was originally due and through the date of actual payment.

Carriers are also subject to penalties for late underpayment of clean claims:

• If the carrier underpays a clean claim between one and 45 days late, it must pay the full contracted rate of the services provided plus either 50 percent of the underpaid amount or $100,000, whichever is less
• If the carrier underpays a clean claim between 46 and 90 days late, it must pay the full contracted rate of the services provided plus either 100 percent of the underpaid amount or $200,000, whichever is less
• If the carrier underpays a clean claim 91 or more days late, it must pay the full contracted rate of the services provided plus either 100 percent of the underpaid amount or $200,000, whichever is less, plus 18 percent annual interest on the penalty amount, accruing from the date payment was originally due and through the date of actual payment.
• The underpaid amount, for the purposes of calculating the penalty payment, is calculated on the ratio of the amount underpaid on the contracted rate to the contracted rate as applied to the billed charges.

The rule provides an example of how penalties for underpayments are calculated.

A physician or provider must notify the carrier within 180 days of receipt of an underpayment to obtain a penalty payment. If the notice is given after the 180th day and the carrier pays the balance within 45 days of receipt of the underpayment notice, no penalty accrues.

Penalties are not assessed for late payments or underpayments if the failure to timely pay was the result of a catastrophic event that interrupted the carrier´s operations for more than two consecutive business days and the carrier filed proper notice with TDI. In such a case, the statutory claims payment period is suspended only for the period of time that the carrier´s operations were interrupted.

The carrier must provide the physician or provider with an explanation of payment that clearly notes any penalties paid.

Extension of Deadlines because of a Catastrophic Event

The statutory claims submission and payment deadlines are suspended because of catastrophic events under the following conditions:

• Within five days of the event, the carrier, physician, or provider must notify TDI that it is unable to meet its statutory deadlines because of a catastrophic event that interrupted its normal business operations for at least two consecutive business days.
• Within 10 days of returning to normal operations, the carrier, physician, or provider must provide TDI with a sworn affidavit specifying the specific nature of the event and the length of time normal operations were suspended.

The statutory claims payment period is suspended only for the period of time that the carrier´s operations were interrupted.

Administrative Penalties

In addition to other penalties under the Insurance Code, TDI may assess administrative penalties against carriers that have more than a 2 percent noncompliance rate for either claims submitted by health care institutions or for claims submitted by non-institutional physicians and providers, as determined on a quarterly basis. Carriers that have more than a 2 percent noncompliance rate on either type of claim may be assessed penalties of up to $1,000 per day for each claim not in full compliance with the prompt pay law and rules.

Claims Payment Processing Information

A contract between a carrier and a preferred provider must require that carriers must provide claims payment information within 30 days of receipt of a request from a physician or provider. The information provided by the carrier must include payment methodologies and bundling processes. Bundling processes must be consistent with nationally recognized and generally accepted bundling edits and logic. The information provided about the bundling software must include the publisher´s name, product name, and version used by the carrier.

The contract must also require carriers to provide 90 days written notice regarding changes to the claims payment information. Carriers may not apply changes retroactively to claims payment procedures.

Physicians and providers may only use the claims payment information in their practice management, billing activities and other business operations, and in their communications with governmental agencies that regulate health care and insurance.

A physician or provider may terminate their contract with a carrier within 30 days after receiving the claims payment information from the carrier. The carrier cannot penalize the physician or provider who chooses to terminate a contract. If a physician or provider terminates a contract, then the plan´s enrollees/insureds must receive reasonable advance notification of the termination.

Utilization Review - Preauthorization and Verification

Preauthorization

A preauthorization is a determination by the carrier that the services are medically necessary and appropriate.

Upon request, a carrier must provide a list of services within 10 days of receipt of the request from a physician or provider that will allow the physician or provider to determine which services require preauthorization and information concerning the preauthorization process. Deadlines for responding to requests for preauthorization are as follows:

• For post-stabilization treatment and life-threatening conditions, the carrier´s response must be given within the time appropriate to the circumstances, but not more than one hour.
• For concurrent hospitalization care, the carrier´s response must be given in 24 hours.
• For all other services, the carrier´s response must be given within three days from the date of the request for preauthorization.

If a preauthorization is issued, a carrier may not deny or reduce payment of the claim for reasons of medical necessity or appropriateness unless the preferred provider materially misrepresented the proposed services or substantially failed to perform the preauthorized services.

A carrier must provide a notice of adverse determination to the provider, the enrollee or person acting on the enrollee´s behalf. The enrollee, or person acting on the enrollee´s behalf, has the right to appeal an adverse determination.

Verification

Verification is a guarantee of payment for health care or medical care services if the services are rendered within the required timeframe to the patient for whom the services are proposed. A verification may include a preauthorization.

A request for verification must contain:

• patient name
• patient ID number
• patient address
• patient date of birth
• name of enrollee or subscriber
• enrollee or subscriber ID number
• enrollee or subscriber date of birth
• patient relationship to enrollee or subscriber
• initial diagnosis
• procedure code(s)
• name and address of hospital or facility, if applicable
• proposed date of service
• name of employer, if applicable
• group number, if applicable
• name and contact information of any other carrier, if known, including the other carrier´s name, address and telephone number, name of enrollee, plan or ID number, group number (if applicable), and group name (if applicable)
• name of preferred provider providing the proposed services
• preferred provider´s federal tax ID number
• place of service.

The physician or provider may request verification via telephone, in writing, or any other means agreed to by the physician, provider, and carrier.

If a physician or provider requests verification, a carrier may make one request for additional information within three days of receipt of the request.

A carrier must issue either a verification or a declination without delay, but not later than 15 days after receipt of the request. For requests for verification regarding concurrent hospitalization, post-stabilization care, or a life-threatening condition, the carrier must respond without delay, but not later than 72 hours after receipt of the request. A declination is not the equivalent of a denial of the claim.

A carrier may deliver the determination in writing, or via telephone followed by a written response within three days. In both cases, the carrier´s written response must include:

• enrollee name
• enrollee ID number
• requesting provider´s name
• hospital or other facility name, if applicable
• a specific description, including relevant procedure codes, of the services that are verified or declined
• if the services are verified, the effective period for the verification, which shall not be less than 30 days from the date of verification
• if the services are verified, any applicable deductibles, copayments, or coinsurance for which the enrollee is responsible
• if the verification is declined, the specific reason for the declination
• if the request involved services for which preauthorization is required, a decision as to whether the proposed services are medically necessary and appropriate, as required in §19.1723 of this title (regarding Preauthorization) and
• a statement that the proposed services are being verified or declined pursuant to Title 28 Texas Administrative Code §19.1724.

A verification must be valid for at least 30 days.

Carriers must maintain a call center with qualified staff during specified hours to receive requests for preauthorization and verification. During off-hours, carriers must have a recording/answering system for these calls, and return calls within

• 24 hours for preauthorization
• two days for verification.

Reporting Requirements

Carriers are required to submit quarterly and annual reports on their claims processing activities, catastrophic events, and verifications to TDI.

For more information contact: ConsumerProtection@tdi.state.tx.us