ADDITIONAL AUDITING POLICY AND PROCEDURE HIGHLIGHTS

DURABLE MEDICAL EQUIPMENT (DME)

Unless the plan document states otherwise, rental of durable medical equipment is allowable up to the purchase price, if the equipment is covered by the underlying plan. We require the physician's prescription to establish medical necessity, prior to consideration of these expenses for reimbursement under the stop loss contract.

Purchase of DME is allowable if the covered equipment is needed long-term and it is cost effective to purchase the equipment, or under the conditions specifically indicated in the plan document.

It is expected that purchase prices for DME be negotiated.

INCREMENTAL NURSING CHARGES

Traditionally, hospital bills included general nursing care charges in the daily room and board charge for the room type (semi-private, ICU, etc.). As a result, plan provisions were written to allow reasonable and customary expenses for the type of room provided, without additional allowance for incremental nursing charges.

When incremental nursing is charged in addition to the room and board charge, we will rebundle incremental nursing charges into the room and board charge and allow up to the specified limit of the underlying plan. If a plan limits room and board to the average semi-private rate, allowance will be made for the room and board charge only. No additional allowance will be given for incremental nursing charges.

PATHOLOGY CONSULTATIONS AND HANDLING FEES

A handling fee or transfer fee is a charge for obtaining and/or conveying a specimen from the physician's office to a lab. Therefore, a physician can charge for a venipuncture to obtain the specimen or a handling fee to obtain and convey the specimen to an outside lab. Charges on the same bill for both venipuncture and handling would not be allowable.

If the physician is using an in-house lab and includes the pathology charge on his bill, the charge for obtaining and/or conveying the specimen (venipuncture or handling ) would be included in the charge for the particular test. Therefore, additional charges for venipuncture or handling fees would not be allowable.

In certain situations, charges for pathology consultations may be appropriate. For example, the attending physician might seek a pathologist's expert opinion on lab results of a patient with a catastrophic diagnosis or complex medical complaint. We cannot assume that any treatment was rendered to a patient simply because a physician requested the pathologist's advice. Therefore, a claim payment determination for a consultation charge cannot be made without a review of the pathologist's written report.

PROFESSIONAL COMPONENTS OF AUTOMATED LAB TESTS

Laboratory technology has advanced in recent years to a point where laboratory tests no longer require the expertise of a professional pathologist to interpret the results. Instead, laboratory equipment can interpret some tests and actually print the specimen's value as measured against standard norms (or laboratory norms) for that particular test. These are called automated tests.

Charges for the interpretation of these results by a professional pathologist (professional components) are not reimbursable under most plans and stop loss contracts. Plans generally provide benefits only if a service is performed. There is no professional component for automated tests. These results are automatically calculated - the norms, low or high values are also automatically calculated.

Please review the Pathology (laboratory) section of the Physicians' Current Procedural Terminology (CPT) for additional explanation. We will not allow any reimbursement for a professional component charge on an automated laboratory test.

REHABILITATION AND SKILLED NURSING FACILITIES (SNF)

Unless the plan document states otherwise, an extended care benefit covers both treatment provided in a SNF and treatment provided in a rehabilitation facility. Extended care services (including rehabilitation) provided in a special unit of a hospital are also considered under the SNF benefit of a plan.

The patient must require inpatient confinement for skilled care or rehabilitation services of at least four hours per day. The services must be medically necessary and prescribed by a physician; and the confinement must be precertified - if required by the plan - in order to be covered.

Private duty nursing is not covered under the extended care benefit.

REHABILITATION

Physical therapy, occupational therapy and speech pathology are covered rehabilitation services under an extended care benefit if the patient's condition warrants skilled therapy and there is expected improvement in the patient's condition with therapy.

Maintenance care is not covered.

SKILLED NURSING CARE

All medical services provided in a SNF or rehabilitation facility are covered under the extended care benefits of a plan. Services not listed as covered or those listed as excluded under the plan document will not be covered.

Custodial care is not covered.

We require:

• copies of the precertification or case management authorization (If precertification is not required by the plan);

• the physician's prescription and treatment plan;

• purchase prices for any DME;

• medical records to establish medical necessity and level of care;

• and any other documentation stated in the plan;

to determine reimbursement on extended care charges.

SURGERY

We expect that appropriate and consistent guidelines will be followed when determining reasonable and customary (R&C) allowances for surgeries. Before the application of any R&C guidelines, the group plan provisions and limitations must be reviewed. If the Plan specifically addresses surgical allowances, the Plan will prevail. If not, we will reimburse surgical claims based upon the following industry-accepted philosophy.

MULTIPLE, BILATERAL AND SPECIAL SURGERIES

All multiple surgery claims must be accompanied by an operative report to receive maximum reimbursement. Surgeries will be carefully reviewed for unbundling and fragmentation.

• When multiple procedures are performed at the same operative session through separate incisions, each major procedure will be reimbursed at 100% of R&C.

• When multiple procedures are performed at the same operative session through the same incision, the primary procedure will be reimbursed at 100% of R&C and the remaining procedures will be allowed at 50% of R&C.

• Bilateral procedures will be reimbursed at 150% or 200% of R&C, based upon the standard used at the TPA.

• No reimbursement will be allowed for incidental procedures; i.e., lysis of adhesions.

• Supplies and materials will be reimbursed if listed separately.

MULTIPLE SURGEONS

Claims for assistant surgeons, co-surgeons and surgical teams will be reviewed for medical necessity before reimbursement. An operative report is required for each surgeon, as minimum documentation for our review.

Assistant surgeons who are licensed M.D.s will be reimbursed at the rate stated in the plan document, or at the rate consistently applied by the TPA for assistant surgeon's charges; not to exceed 25% of the R&C for the surgery.

Surgical assistants who are licensed providers, but not M.D.s, will only be allowed if defined in the plan document as covered providers; at the rate consistently applied by the TPA for surgical assistant's charges, not to exceed 15% of the R&C for the surgery. State licensure must allow these providers to perform surgery.

PPO SURGERIES

The same multiple surgery/surgeon guidelines applicable to indemnity claims will be used to determine allowances on claims repriced by a PPO. The PPO repriced amount will replace the R&C allowance in the reimbursement calculations.

All R&C calculations will be based on MDR's usual and customary data tables at the 85th percentile. Supporting documentation should be submitted to justify R&C allowances in excess of this standard.

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PRE-CERTIFICATION

Plans vary widely in pre-certification requirements and penalties. Most plans do not require pre-certification of outpatient procedures other than surgeries, although we strongly recommend this requirement.

Some plans have pre-certification requirements, but no penalties for noncompliance.

Some plans have penalties for failure to contact the UR Company only. In other words, whether or not the confinement is determined to be medically necessary, as long as the UR Company was contacted a penalty is not applied.

The majority of plans require medical necessity determination of the confinement or a penalty is applied. However, rarely do these plans require continued stay review subject to a penalty.

We would recommend that plans be amended to include strong UR requirements and penalties for noncompliance.

OUTPATIENT PRE-CERTIFICATION - SELECTED PROCEDURES

If the plan document mandates pre-certification for outpatient procedures, but does not provide a list of outpatient procedures requiring review; we will use the following - IN ADDITION TO ALL OUTPATIENT SURGERIES:

• Arthroscopy
• Breast Biopsy
• Cardiac Catheterization
• Carpal Tunnel Release - surgery on nerve at wrist

• Endoscopic Procedures of the Digestive, Respiratory & Urinary Systems
• Herniorrhaphy
• Laparoscopy

• Lithotripsy
• MRI/CT Scan/Bone Scan
• Physical Therapy
• Varicose Vein Stripping and Ligation

EXPERIMENTAL/INVESTIGATIONAL TREATMENT

Definitions and exclusions for experimental/investigational services are subject to a wide variety of interpretations, especially for those plans with a “one-sentence” exclusion of experimental treatment. If a plan’s intent is to exclude these services, the definition of the excluded treatment should include a reference to “off-label” drug treatment (drugs or treatment not specifically approved by the FDA for the claimant’s diagnosis) and experimental protocols (treatment in clinical trials or research studies).

The allowance of treatment “in accordance with generally accepted medical standards” or other similar wording is too subjective and only creates additional interpretation issues if not accompanied by additional explanation as indicated above.

THE STOP LOSS CONTRACT

The American National Insurance Company stop loss contract specifically excludes experimental/investigational treatment, including the use of drugs not FDA-approved for the specific diagnosis or condition being treated (off-label drug treatment).

Regardless of plan document language, the definition below will be used to make a stop loss reimbursement decision.

DEFINITION

Experimental or investigational is defined as a drug, device, service, supply, test, or medical treatment or procedure if, at the time it is to be used or furnished:

The Regimens have not received final approval from the U.S. Food and Drug Administration (FDA) for the lawful marketing of the regimens for the specific injury or illness to be treated; or

The Regimens have not received the approval or endorsement of the American Medical Association (AMA) for the specific injury or illness to be treated; or

The Regimens have not received the approval or endorsement of the National Institutes of Health (NIH) or its affiliated institutes for the specific injury or illness to be treated; or

The Regimens are to be used or studied in proposed or ongoing clinical research or clinical trials as evidenced by an Informed Consent or treating facility's protocol; or are part of a proposed or ongoing Phase I, II, or III clinical trial; or are the subject of proposed or ongoing research or studies to determine their dosage, safety, toxicity, efficacy, or their efficacy as compared to other means of treatment or diagnosis; or

The opinion of medical or scientific experts (as reflected in published reports or articles in medical and scientific literature; or the written protocol(s) used by the treating facility or other facilities studying substantially the same or similar drugs, devices, services, supplies, tests, treatments or procedures; or the Informed Consent used by the treating facility or other facilities studying substantially the same or similar drugs, devices, services, supplies, tests, treatments or procedures) indicates that further studies, research, or clinical trials of the Regimens are necessary to determine their dosage, safety, toxicity, efficacy, or their efficacy as compared to other means of treatment or diagnosis; or

The Regimens have not been proven effective for the specific injury or illness as of the date the treatment is provided.

CLAIM APPEALS

Appeals to stop loss claim reimbursement decisions usually result from differences of opinion between the TPA (or group) and AU Claims on interpretation of the plan document or stop loss contract language.

Please contact your claims auditor whenever you have a question or wish to appeal a reimbursement decision. If your auditor is unable to modify or reverse the original decision based upon the additional information you provide, the issue will be referred to our claims supervisor.

If the supervisor's review of the issue concludes that our original decision was valid, the issue will be brought to the attention of senior management for final resolution.

The final decision of senior management will be communicated to the TPA, in writing, by the claims manager.

The TPA or group has 90 days from receipt of our original determination to appeal a claim decision.

ADMINISTRATIVE FEES

As a general rule, administrative charges and fees are not reimbursable under our stop loss contracts. For example, Alliance Underwriters does not cover savings fees for primary PPOs, unless approved and rated accordingly during the underwriting process. In addition, claims administrative expenses are not allowed under the aggregate contract. However, there are several situations in which these fees would be covered in Specific claims.

DISCOUNT NEGOTIATIONS

It is expected that all hospital bills exceeding $25,000 or those that appear to be excessive have some cost savings procedure implemented.

In the absence of a primary PPO, discount negotiations are usually the most successful in reducing costs on out-of-network hospital claims.

The TPA has the option to directly negotiate discounts or refer the claim to an outside firm for negotiation. We strongly encourage our TPAs to use ValuNet, a subsidiary of Alliance Underwriters, for access to contractual discounts in these situations. Please refer to the ValuNet section of this packet for additional information on this service.

Regardless of the vendor used to obtain a discount on a "retail" claim, the re-pricing fee, not to exceed 25% of savings, is reimbursable under the stop loss contract, for claims exceeding the Specific deductible. No fees are reimbursable for unsuccessful discount negotiation attempts.

HOSPITAL AUDITS

Although we prefer that other methods of cost containment be used in lieu of hospital audits, if no discounts are available for an inpatient hospital bill, please refer the claim to HBA (Click here for more info).

LCM FEES

Large case management fees, which are reasonable and accompanied by detailed reports and documented billable time, are reimbursable expenses in a Specific stop loss claim.

United Resource Network (URN)

Alliance Underwriters will reimburse fees for the URN transplant network directly to URN should a patient meet the hospital criteria and a transplant occurs, if the patient continues to be an eligible plan participant and exceeds the Specific deductible of the stop loss contract.

If the employer should pay URN directly, we will credit the access fees toward satisfaction of the Specific deductible, or reimburse the employer group should the claimant exceed the Specific deductible.

Alliance Underwriters is aware that in order to access URN for discounts on transplant services, the client is required to pay the access fee up front. In an effort to encourage use of the URN network, it is our policy to credit this access fee toward satisfaction of the Specific deductible of any eligible plan participant, or to directly reimburse the access fee expense to the employer group should a claimant exceed the Specific deductible.

Carrier reimbursements will be contingent upon the continued eligibility of the claimant. All other provisions of the underlying self-funded plan and stop loss contract will apply.

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