The Sacramento Bee
by Bobby Caivana Calvan
November 30, 2010

California's seven largest HMOs must pay nearly $5 million in fines because of unfair payment practices after an 18-month state investigation revealed widespread underpayments, valued in the tens of millions of dollars, for medical care provided by doctors and hospitals.

State auditors estimate that one in every five claims was the subject of dispute because of underpayment and other mistakes by the HMOs. Collecting payment often turned into a time-consuming ordeal for medical providers who serve the 22 million Californians enrolled in health maintenance organizations.

"Our clear and consistent message is that California's hospitals and physicians must be paid fairly and on time," said Cindy Ehnes, director of the California Department of Managed Health Care, which levied the fines on the state's largest HMOs.

"Providers are struggling to stay afloat, as small businesses, in a very difficult business environment. Improper payment of provider claims runs the risk that our health care delivery system could grind to a halt," Ehnes said at at a news conference held at a Los Angeles hospital.

Anthem Blue Cross is being fined $900,000; Blue Shield of California, $900,000; PacifiCare, $800,000; Health Net, $750,000; Kaiser Foundation Health Plan, $750,000; Cigna, $450,000; and Aetna, $300,000.

The companies are also required to review claims, going back as far as three years, to resolve amounts still owed to doctors and hospitals because of mistakes in payment coding, reimbursement rates and other problems.

Health plans must also submit a plan that would cut payment errors.

"While plans strive to ensure they meet their commitments to the customer, they also recognize the importance of their partnership with the medical community," the president of the California Association of Health Plans, Patrick Johnston, said Monday.

Johnston said that insurers would "work collaboratively with the state and providers to meet the full extent of regulatory requirements and improve performance."

Since 2004, when the agency established a provider complaint unit, it has collected more than $22 million in additional payments to providers because of claims violations.

Ehnes called the problem a "persistent issue" and acknowledged that the agency had not fully understood the extent of problems until the audits were analyzed.

According to the audits, none of the seven insurers met the threshold for accuracy – falling well below the 95 percent accuracy rate mandated by state law. On average, the accuracy rate was about 80 percent.

The audits not only found widespread payment inaccuracies, but also found that insurers weren't always following state-mandated procedures to resolve disputes. That put the onus on medical providers to continue fighting insurers for payment, or enlisting the help of state regulators or lawyers.

Dr. James Hinsdale, president of the California Medical Association, urged state regulators to "remain vigilant and force insurers to follow the law so that doctors can focus on patient care."

The CMA, however, called the fines "chump change that amounts to little more than a slap on the wrist for highly profitable health plans that systematically deny legitimate claims and routinely block, delay or limit physician reimbursements as one tactic to boost their bottom lines."

The audits were launched last year as the agency put in place new consumer protections that sought to extricate patients from emergency room billing disputes between insurers and medical care providers.