2009 Managed Care Law: A Win for Physicians and Hospitals

On July 29, 2009, Governor Paterson signed into law a comprehensive new managed care law that further reigns in health plans (HMOs and insurance companies) in their dealings with New York health care facilities and physicians. In an era where reimbursement is continually dwindling for health care providers, the passage of statutory relief is most welcome.

Set forth below is a summary of some of the notable points addressed in the law.

Health Plans to Pay More Promptly

The new managed care law amends the 45-day claim payment requirement of New York’s current Prompt Pay Law. Effective January 1, 2010, health plans are required to pay electronically submitted claims of physicians and hospitals within 30 days of claim submission. Health plans can continue to pay paper or faxed claims within 45 days.

Extension of Time for Claim Submission

Under the new law, health plans must pay claims of physicians and other licensed health care providers provided the claim is submitted within 120 days following the date of service. Commonly, today, health plans mandate such claim submission within 60 or 90 days. This 120-day time frame can be extended by the parties in the managed care participation agreement if the parties mutually agree to do so. Additionally, if a provider can demonstrate that a claim was submitted more than 120 days after the service date as a result of an “unusual occurrence”, the health plan will be required to pay a minimum of 75% of the provider’s claim to the extent that the provider has a “pattern or practice of timely” submission. The parties are free to negotiate a reduction of less than 25% in the managed care participation agreement.

Hospital Protection from Retro-Audits

As of January 1, 2010, a health plan has only two years to seek recoupment or challenge a hospital’s claim for payment, except in cases of fraud and abuse or duplicate payments. Hospitals have been pushing for protection on health plan retrospective audits since 2007 when New York law codified such protection for physicians. Health plans also must provide 30 days’ advanced written notice of any demand for repayment and the reasons for the demand.

Provisional Credentialing

In the past, physician practices have been frustrated waiting for a health plan to credential a new member of the practice. Under the new law, if the health plan fails to act on the credentialing application within 90 days, a physician will be deemed “provisionally credentialed” after joining a group where all of the practitioners are participating with a plan and the physician is a newly practicing physician or has relocated from another state. The group practice must make certain written representations to the health plan to take advantage of the provisional credentialing status.

The health plans also need to generally process credentialing applications within 90 days.

Hospital’s Now Have the Right to Directly Appeal Concurrent Adverse Determinations

Since the enactment of New York’s External Appeal Law, hospitals have been frustrated by the law’s prohibition on a hospital’s direct right to challenge a health plan’s concurrent adverse determination. The original External Appeal Law only granted a hospital a right to directly challenge a retrospective adverse determination. Under the new law, hospitals can challenge health plan concurrent adverse determinations in their own right.

Par/Non-Par Payment Reductions

The new law prohibits the discounting of payments to a participating hospital solely on the basis that the admitting physician or physician rendering care is non-participating with the health plan. Conversely, a health plan can not deny payment to a participating physician if the treatment is performed at a non-participating hospital.

Notice of Reimbursement Changes to Managed Care Contract

Health Plans no longer will be able to unilaterally institute silent changes to the reimbursement structure of managed care contracts with physicians. Under the new law, an insurance company can not unilaterally implement an adverse reimbursement change to a managed care contract with a physician without 90 days’ written notice. The physician then will have the right to notify the managed care company that the physician wants to terminate the contract upon the effective date of the reimbursement change. For purposes of the new law “Adverse Reimbursement Change” means a change that could reasonably be expected to have a material adverse impact on the aggregate level of payment to the physician under the contract.

Claudia A. Hinrichsen is a Partner in the firm of Abrams, Fensterman, Fensterman, Eisman, Greenberg, Formato & Einiger, LLP. The firm's health care attorney have extensive experience in representing health care providers in all facets of health law.