Remember that popular song titled “Time Is on My Side?” While it’s about a romantic relationship, it also could be relevant to the one between hospitals and the health plans or insurers (payors) that reimburse them for the medical services they provide health care consumers (patients). More and more, it’s the plans that are singing this tune much to the detriment of healthcare providers. But does it have to be this way?
When hospitals and payors negotiate contracts, the payor generally will try to reduce the time period that a hospital has to respond to or appeal a wrongful denial of its claims. Of course, if the hospital blows the short deadline (because it might be focused on saving lives), then the hospital will usually have no legal basis to recover payment from that payor. This means that instead of paying the claim, the payor gets to keep the money. Clearly this can be very profitable for health insurers and plans because by denying claims, it increases the chances that the hospital will not meet the shorter deadline for appealing those claims and getting paid.
Hospitals therefore need to be aware of the consequences of including extremely short time periods in their contracts for disputing wrongful actions by payors and these shortened periods do not just include the time to appeal the denial of a claim. It also includes the time to file arbitration or legal action (limitations period) after the payor has repeatedly denied claims. Contractual limitations periods are often as short as one or two years after the appeals have been exhausted or the payment dispute arises. On the other hand, the law allows limitations periods of up to four years. So if you do the math, the hospital may have less than half the time it otherwise would have for taking the same action. No wonder the insurers are singing, “Time is on my side” all the way to the bank while the provider is playing “Beat the Clock.”
These contractually shortened and reduced periods simply create one more unnecessary hurdle in the already arduous process of seeking fair and just reimbursement for medically necessary services. In some cases, the contractual limitations period expires while the hospital and health plan are still engaged in disputing the payment. In short, the health plan may simply be denying appeals as a matter of course, knowing full well the hospital is barred from any legal action against the plan once the clock runs out.
Of course, payors are not going to eliminate all contractual deadlines. The alternative then is to make sure that the obligations of the payors also have similar deadlines. You can limit the time, for example, that they hold on to a claim before payment or give notice of an overpayment.
One more thing that is important. Make sure the calculation of the time periods is the same for the hospital and the payor. Often plans will require hospitals to act within a certain number of “Calendar Days” while the plan is able to act within a certain number of “Working Days.” “Calendar Days” means every day counts. “Working Days” eliminates weekdays and holidays and thus provides a longer period of time.
Setting contractual time limits does have its advantages such as prompt payment requirements. Just make sure they work fairly and are mutually applicable..