By Christopher Guadagnino, Ph.D.

PA State Senator Tim Murphy

Published July 1998

Earlier coverage of the legislation

• Managing managed care

• Work groups mull managed care regulation

• React to this article in the Discussion Forum.

Pennsylvania’s newly-enacted SB 91, The Quality Health Care Accountability and Protection Act, commonly called a managed care "bill of rights," has received almost universal public praise for its long-awaited consumer and physician protections against abusive practices by HMOs.

The law contains much that is praiseworthy, but a closer look reveals important limitations and omissions of which physicians should be aware.

The measure, which takes effect January 1, 1999, combines issues from previous bills introduced by Sen. Tim Murphy (R-Allegheny) and Rep. Pat Vance (R-Cumberland):

• Allows physicians to dispute coverage denials by managed care insurers and requires that physicians be reimbursed promptly.

• Prohibits managed care insurers from offering physicians financial incentives to encourage less costly treatments.

• Bans gag clauses from managed care insurer contracts with physicians.

• Prohibits managed care insurers from deselecting from their panels physicians who voice objections over services covered by the insurer.

• Allows physicians expelled from an managed care insurer’s network to be retained by their patients for 60 days or more.

• Allows patient access to ob/gyns without primary care physician referrals.

• Allows standing referrals to specialists for chronically ill patients.

• Codifies a prudent layperson standard for emergency room coverage by managed care insurers.

• Requires a managed care insurer to disclose its definition of "medical necessity" used to determine covered services.

• Establishes both internal and external grievance procedures for physicians and patients to appeal managed care insurer coverage denials.

• Requires medical records confidentiality.

• Expands age and income eligibility criteria for Pennsylvania’s Children’s Health Insurance Program (CHIP).

Several key issues stand out as important to physicians. Two key issues represent provisions that were omitted from the bill’s final version. Other provisions hold the promise of more accountable patient care in some respects, but may fail to fulfill that promise in others.

Medical Necessity

Without a definition of medical necessity in the bill, each managed care company can continue to set its own guidelines, with the approval of the state Department of Health (DOH), guiding insurance coverage decisions for medical services.

Such a definition was lobbied for by the Primary Care Consortium, made up of the Pennsylvania Academy of Family Physicians, the Pennsylvania Chapter of the American Academy of Pediatrics and the Pennsylvania Society of Internal Medicine (PSIM). The Consortium, which says it represents 13,000 member physicians who largely practice primary care medicine, wrote letters to the Pennsylvania Senate and House of Representatives, as well as to the PMS, urging that the HMO bill adopt the definition of medical necessity mentioned in an earlier version of the HMO bill that had passed in the House. The definition was later endorsed by the PMS.

That definition of medical necessity was the one used by the state HealthChoices program for its Medicaid managed care contracts: "Clinical determinations to establish a service or benefit which will or is reasonably expected to: (1) prevent the onset of an illness, condition or disability; (2) reduce or ameliorate the physical, mental, behavioral or developmental effects of an illness, condition, injury or disability; or (3) assist the individual to achieve or maintain maximum functional capacity in performing daily activities, taking into account both the functional capacity of the individual and those functional capacities appropriate for individuals of the same age."

The third part of the definition is particularly significant as it is not usually part of definitions used by private HMOs, notes David Gates, Esq., staff attorney for the Pennsylvania Health Law Project. Without that component of the definition an HMO can decline covering an entire class of treatments, such as speech therapy for children with developmental speech conditions, notes Gates.

A medical necessity definition was one of several roadblock issues that would have delayed the bill’s approval until a later session, says PMS Director of Regulatory Affairs and Specialty Legislation Don McCoy, who believes it was better to have the bill now and build on the legislation, than to wait another year for a bill at all. The bill does, however, now require managed care companies to disclose their medical necessity definitions, which is likely to induce greater accountability and diligence on the part of the DOH to approve them, notes McCoy. The PMS will see how the DOH implements its approval authority before determining its next steps on the issue, says McCoy.

Primary Care Provider

The Primary Care Consortium also urged the state House and Senate, as well as the PMS, to include in the bill an amendment defining primary care physician as defined in existing Department of Health regulations. "The definition of ‘primary care’ reflects the comprehensive first contact and continuing care our members provide that is not limited by problem origin or diagnosis," read the Consortium’s letter to the state legislators.

The law ultimately assigned an open-ended definition of primary care provider: "one who supervises, coordinates, prescribes, or otherwise provides or proposes health care services, initiates referrals for specialist care, and maintains continuity of care, within their scope of practice."

The less restrictive definition of primary care provider can lead to increased use of non-physicians by managed care companies to deliver health care, says PSIM President Robert Sklaroff, M.D. The forfeiture of regulatory oversight that a tighter definition would provide leaves open the potential for abuses by insurers of the scope-of-practice limitations placed on nurse practitioners and other non-physicians by existing legislation, which sunsets next year, notes Sklaroff, who points to the controversial phone nurse triage system being implemented in western Pennsylvania by Highmark Blue Cross Blue Shield. The scope-of-practice issue now will have to be taken up in the Pennsylvania General Assembly’s next session.

The PMS did not include in its letter to state legislators an endorsement of a primary care physician definition. McCoy says such a provision would have been a deal-breaker for the insurers, as would a provision for "any willing provider," which would require insurers to accept all physicians on their panels.

Alternatively, the restrictive definition urged by the Primary Care Consortium would not likely appeal to all medical specialties. McCoy acknowledges the difficulty that the PMS had on the issue, given that its constituency includes a broad spectrum of medical specialties.

From a patient standpoint, the loss of a primary care physician definition in the law may not be significant, notes Gates. Many patients, particularly low-income patients, are likely to view the ability to use a nurse practitioner as a plus, since they have forged longer-term relationships with them than is possible in the few minutes per visit they might get to spend "with a sea of faces of interns and residents," says Gates.

Emergency Services

The bill sets forth a definition of emergency service as "Any health care service provided to an enrollee after the sudden onset of a medical condition that manifests itself by acute symptoms of sufficient severity or severe pain, such that a prudent layperson, who possesses an average knowledge of health and medicine, could reasonably expect the absence of immediate medical attention to result in: (1) placing the health of the enrollee, or, with respect to a pregnant woman, the health of the woman or her unborn child, in serious jeopardy; (2) serious impairment to bodily functions; or (3) serious disfunction of any bodily organ or part."

The bill prohibits managed care plans from requiring patients to obtain prior authorization from their health plan before seeking emergency care, notes Laurance Gavin, M.D., FACEP, president of the Pennsylvania Chapter, American College of Emergency Physicians (PaACEP), who applauds the provision.

But a potential loophole in the bill exists that managed care companies could use to deny payment for an emergency medical service: "When processing a reimbursement claim for emergency services, a managed care plan shall consider both the presenting symptoms and the services provided."

PaACEP tried to get that latter language changed, as it could be used by insurers to circumvent the prudent layperson standard, says PaACEP Executive Director David Blunk. "The bill’s codification of emergency services gives us more leverage," says Blunk, who notes that the bad section will have to be dealt with in the bill’s enforcement regulations to be drafted by the state departments of Health and Insurance.

In the meantime, says Blunk, PaACEP is telling its members to document accurately and appropriately and to monitor patient complaints about possible claims denials. Blunk hopes that patient education and public pressure can be used to embarrass insurers to abide by the prudent layperson standard.

Grievance Process

The bill sets up a three-tiered appeals process, the first two involving an insurer-selected utilization review panel and the third involving a panel of reviewers to be randomly selected by the DOH. Time limits are set forth for each stage of the appeal, and cases in which a patient’s health may be in jeopardy must be expedited within 48 hours.

The PMS points out that the utilization reviewers are all certified and overseen by the DOH, and that insurers can no longer simply issue coverage denials by algorithm. Instead, notes McCoy, denials must be made by physicians, and the qualifications of reviewers increase through the process, i.e., denials of specialty treatment must be considered by board certified clinicians who are expert in that specialty.

Critics of the bill’s appeals mechanisms see a number of defects. Going through the appeals process and getting a case into court would probably take 210 days, calculates Charles I. Artz, Esq., general counsel for the Pennsylvania Academy of Family Physicians.

The bill creates a rebuttable presumption against the medical necessity of a physician’s treatment and in favor of the utilization review’s decision if the decision is appealed to court. With no objective definition of medical necessity, says Artz, there is no way of knowing what a physician or patient must prove to overcome that presumption. The Primary Care Consortium had advocated a "trial de novo" standard whereby neither side of the case would enjoy the presumption that their view is correct.

The PMS did not endorse the de novo standard. McCoy maintains that, if the bill’s grievance process works as intended, few cases will get to that level.

Finally, the bill essentially allows insurers to hand-pick utilization review panelists who, although accredited for such purposes, may market themselves to insurers by their denial track records, says Artz. Should an appeal be filed with the third tier of the review process, says Artz, the bill requires the DOH to select external review panelists within 48 hours, something he thinks is unrealistic for the understaffed Department. If the DOH does not respond within two days, the bill authorizes the insurer to appoint panelists, which Artz says would take away the independence of the external appeal.

Direct Ob/Gyn Access

The bill’s allowance of patient access to ob/gyns without primary care physician referrals is a boon to a large segment of the patient population. But the bill does not dissociate the utilization and referral behavior of the ob/gyn from the patient’s primary care physician. Physicians should be diligent to clarify that issue in their managed care contracts, says Artz, so as not to be penalized for the utilization and referral behavior of another physician.

Other Issues

The PMS points to other important provisions that were not part of the bill, such as mental health parity and extension of the bill to a broader range of insurers, including point-of-service, basic indemnity and fee-for-service plans. As currently drafted, the bill covers 40 percent to 45 percent of Pennsylvania’s insured population, McCoy estimates.

Another provision that is a boon to physicians, says McCoy, requires all licensed insurers and managed care plans to reimburse clean claims, those with adequate documentation and no improprieties, within 45 days of receipt. That provision does apply to all health insurers, notes McCoy, except automobile and worker’s comp, which have 30-day requirements.

There are other plusses in the bill for physicians: granting authority to the DOH to establish credentialing standards to be used by managed care plans, deselection prohibitions if a physician has many patients with expensive medical conditions, required written notice with clear rationale why a physician’s managed care contract was not renewed and expanded prohibition of gag clauses.