Last Updated Sep 4, 2009 8:35 PM EDT
Of course, the rejection rates are not quite that bad if you consider how many claims are resubmitted because practices get tired of waiting for payment. Also, PacifiCare points out that like, other California HMOs, it delegates financial risk to medical groups and IPAs, and some of the claims it receives should actually be paid by those groups. Health Net, which had a reported denial rate of 30 percent, said that most of the rejected claims were ultimately paid by the groups and IPAs it contracts with.
Nevertheless, California Attorney General Jerry Brown has launched an investigation into the payment practices of the state's seven largest plans. (The seventh, Blue Shield of California, doesn't report its claims denial rates to the state.) The Department of Managed Health Care, meanwhile, is continuing its investigation of PacifiCare, which paid $3.5 million in fines last year for irregularities in claims payments and has been the subject of many complaints, according to the agency.
The department emphasized that most of the denied claims in its report did not affect patient care. "It's important to point out that a denied claim means that the patient received the medically necessary services, but the doctor or hospital was not paid for that care," Lynne Randolph, a spokeswoman for the Department of Managed Health Care, told The Los Angeles Times.
Well, all right. But if a physician keeps getting bilked by a particular health plan, it seems likely that, sooner or later, he will drop that plan. And that probably will cause his patient to switch to a provider who accepts that insurance. So a high denial rate is not good for doctor-patient relationships.
In addition, the constant round of claims submissions, denials, and resubmissions imposes a large and growing administrative burden on physician practices and hospitals-and not only in California. According to the AMA, this adds about $210 billion a year in unnecessary costs to the national healthcare system.
Some observers have accused the insurance industry of denying claims on purpose to increase profits, and the latest evidence from California will certainly give those critics new ammunition. But the report on California insurers is not a smoking gun, because it represents the sum of too many uncertainties. What is certain is that our dysfunctional system is wasting an awful lot of money on administration that should be going to provide needed care to more people.