Many physicians have come to the conclusion that some insurance contracts aren’t worth having. More and more physician specialties have opted out of participating provider contracts or have chosen not to participate in the first place. Reimbursement is the primary reason for not participating. The amount allowed for various CPT codes simply is not enough. On top of that, there is the “MPPR” – Multiple Procedure Payment Reduction. This ominous concept was crafted by the Centers for Medicare & Medicaid Services (CMS).
The MPPR functions to reduce the allowable amount of multiple medical procedures that are performed during the same session by the same provider. Insurance carriers, such as United Healthcare have modeled their reimbursement on this CMS policy, and implemented their own versions of the MPPR. Often, in-network reimbursement is not commensurate with the education, skill, and value that the physician delivers.
Under a provider agreement with the insurance carrier, the physician is bound by its terms, including nuances such as the MPPR. The provider agreement requires the physician to accept pre-negotiated payments for specified services as payment in full. When a contract exists with the insurer, the physician is referred to as a “participating provider.” One legal definition of a participating provider is “[o]ne who agrees in writing to render health care services to or for persons covered by a contract or contracts issued by a health service corporation in return for which the health service corporation agrees to make payment directly to the participating provider.” Physicians who are not contracted with a particular insurance carrier are referred to as “non-participating” physicians. Unlike participating providers, these non-participating physicians do not agree to accept the insurer’s reimbursement (and approved amounts) as payment in full. Out-of-network providers are subject to a different reimbursement structure.
Out-of-network reimbursement is usually higher than in-network allowable. Absent a law or regulation, the non-participating physician can bill the patient for the difference between the amount charged and the insurance carrier’s out-of-network reimbursement amount. Reimbursement for out-of-network services may be on a “usual, customary, and reasonable” (UCR) basis. UCR generally means the prevailing rate that is standard or most common for a particular medical service rendered in a particular geographic area. UCR typically exceeds the negotiated amount in the participating provider agreement. However, out-of-network reimbursement is not always pegged to the UCR standard. Many physicians mistakenly believe that the out-of-network benefit is paid at the UCR rate. Even under ERISA, there is no requirement for an insurer to reimburse out-of-network services at UCR rates. Out-of-network reimbursement can be linked to Medicare’s rates, or less. Because there is no contract, patients are responsible for paying any balance left unsatisfied after the insurer’s payment. Out-of-network claims can be more costly to the insurance carrier and to the patient.
As a mechanism to encourage participation, insurance carriers issue payments directly to its participating providers on behalf of the patients who receive covered services. Many insurance carriers do not extend this same courtesy to non-participating physicians. Rather than pay the non-participating physician directly, some insurance carriers issue payment for services rendered by the physician directly to the patient. The reimbursement check is made payable to the patient, not to the physician. Physicians may wonder how this happens, considering that all the right authorization and verification steps are performed in the physician’s office. The physician practice’s patient financial policy or other intake paperwork invariably contains an assignment of benefits. An assignment of benefits is an agreement whereby the patient requests that his or her insurance carrier issue payment directly to the provider. Most physicians have the expectation that, regardless of participation status, the insurance check will be sent to their office. To the surprise of many physicians who have not provided services on an out-of-network basis, the assignment is unlikely to be honored.
Unbeknownst to many physicians, the patient’s subscriber agreement with the insurance carrier may contain anti-assignment language. An anti-assignment clause will generally render the patient’s assignment of benefits to the physician null and void. This clause gives the insurance carrier the discretionary right to not accept the patient’s assignment of benefits. In other words, the anti-assignment clause allows the insurer to issue payment directly to the patient. For the clause to be effective, the insurance agreement with the plan subscriber must contain specific and express language “[m]anifesting an intention to prohibit the power of assignment…” To meet that standard, courts have held that the anti-assignment clause generally must state that patient’s assignment “(i) shall be ‘void’ or ‘invalid,’ or (ii) that the assignee shall acquire no rights or the non-assigning party shall not recognize any such assignment.” These contractual anti-assignment clauses are generally enforceable.
In many instances, the patient and the physician alike are unaware that the insurer’s payment of the benefit will be sent to the patient. Patients are typically not knowledgeable about whether their insurance plan contains an anti-assignment clause. Even if they are informed, the significance of this is seldom realized. It is generally only through routine claims follow up, that the physician’s billing staff discovers that the check they have been waiting for has been sent to the patient. The staff member verifying and authorizing the patient’s benefits is not informed of this at the time of contact with the insurance carrier. “By the way, we’ll be sending the surgery payment to the patient,” is not something the staff member is likely to hear. And, as many physicians have discovered, it is not always easy to get insurance payments from patients who have cashed, and possibly, spent the insurance reimbursement check.
The practice of issuing payments to the patient has negatively impacted the cash flow of some practices. Chasing patients for payment has also consumed valuable practice resources. But, which is the lesser of two evils? Accepting insufficient in-network rates or chasing payments received by the patient? Fortunately, not every patient pockets the money. But enough of them do. While this practice is frequently a detriment to the physician, it allegedly has the opposite effect for insurers. Issuing the physician’s payment directly to the patient has been purported to occupy an important function in reining in the costs of health care. It has been rationalized that an insurer’s ability to control costs and provide affordable health care coverage is directly related to the number of medical providers participating in its program. One insurer was quoted on the practice of issuing payment directly to patients. “This discretion is crucial to the [insurer’s] ability to maintain a viable provider network, as the provider’s right to receive direct payment represents an important incentive for hospitals to become [the insurer’s] network members.” Paying patients directly may provide an impetus for non-participating physicians to enter into participation agreements. Whether such “participation inducement” actually accomplishes its intended purpose is debatable.
In 2010, New Jersey weighed in on the insurer’s practice by passing a statute governing such payments issued to patients:
“With respect to a carrier which offers a managed care plan that provides for both in-network and out-of-network benefits, in the event that the covered person assigns, through an assignment of benefits, his right to receive reimbursement for medically necessary health care services to an out-of-network health care provider, the carrier shall remit payment for the reimbursement directly to the health care provider in the form of a check payable to the health care provider, or in the alternative, to the health care provider and the covered person as joint payees, with a signature line for each of the payees.”  [emphasis added]
Other states have taken similar measures by enacting mandatory assignment of benefit laws. A mandatory assignment of benefit law requires insurers to send payments directly to out-of-network providers if the patient has an assignment agreement with that provider. Alabama, Alaska, Connecticut, Georgia and Texas are among the handful of states which have some enactment of a mandatory assignment of benefit statute.  Texas, for example, provides that “[a]n insurer may not deliver, renew, or issue for delivery in this state a health insurance policy that prohibits or restricts a covered person from making a written assignment of benefits to a physician or other health care provider who provides health care services to the person.” Proponents of these statutes have argued that there are benefits beyond just making it easier for the provider to receive payment. It could potentially lead to a decrease in the litigation between out-of-network providers and insurance carriers. It could also lessen the administrative burdens associated with managing out-of-network claims on both sides. Access to care may be limited as well. Some providers who are keen to the insurance carrier’s practice of issuing checks to the patient require up-front payment, prior to receiving any service. This may either discourage the patient from receiving service or delay necessary services, or, place a burden on the patient to fund the service in advance. 
Physicians who contemplate accepting patients on an out-of-network basis should be aware of the potential obstacles. The physician should determine whether the state in which he or she practices has a mandatory assignment of benefits statute. It would be beneficial to educate the out-of-network patients by informing them that the physician’s payment for services rendered may be sent to them. Clearly express that the practice requires the patient to promptly endorse the check over to the physician. By knowing the potential challenges to out-of-network reimbursement, the practice can better manage its risk and its expectations. And, thus lessens the probability of chasing payment.
Franklin J. Rooks Jr., PT, MBA, Esq. is a physical therapist and practicing attorney in Philadelphia, Pennsylvania. Prior to his practice of law, Frank was a founding partner of PRO Physical Therapy, a Wilmington, Delaware based operator of physical therapy clinics (now ATI Physical Therapy). Frank can be contacted at firstname.lastname@example.org
 See http://www.cms.gov/Regulations-and-Guidance/Guidance/Transmittals/downloads/R995OTN.pdf ( MPPR for certain diagnostic imaging procedures).
 See Krauss v. Oxford Health Plans, 418 F.Supp. 2d 416, 426 (S.D. N.Y 2005). With respect to insurance plans governed under ERISA, Congress did not specifically state that coverage was “subject to” UCR limits. Id.
 See Owen v. CNA Ins./Continental Ins. Co., 771 A.2d 1208, 1214 (N.J. 2001).
 See Group Health Ins. of N.J v. Howell, 193 A.2d 103 (N.J. 1963).
 See The Renfrew Center v. Blue Cross and Blue Shield of Central New York, 1997 WL 204309 at *4 (N.D. N.Y.).
 N.J.S.A. 26:2S-6.1c.
 McKinnis, Elliot, The Case for Mandatory Assignment of Benefits Laws, 8 Ind. Health L. Rev. 171, 173 (2011).
 Tex. Ins. Code Ann. § 1204.053.
 Supra, at note 11.