First published in ITIJ 91, August 2008
Though international travel insurance companies are accustomed to spectacular payment demands by American hospitals, they are now facing new battles as these same hospitals mobilise collection companies – some of them in Europe or the Middle East – to boost their receivables and mine sources of untapped revenue.
Whether this turn to collectors is a matter of efficiency, opportunism or avarice depends on just who is speaking.
Insurers fear intervention
International insurers, who normally deal with hospitals through networks of preferred provider contracts, fear that the intervention of tough, professional collectors will lead to higher costs and patient premiums, erosion of relationships with hospitals, and deterioration of client trust.
On the other hand, collectors and their hospital clients say that international travel insurers have forced the issue by demanding unrealistic discounts far out of proportion to the fragmentary business they provide, and that American hospitals don’t have the same capacity to handle foreign accounts as they do domestic ones or the same leverage over them once the patients have left the country.
This conflict, say insurers, has led to the bizarre situation of clients in Canada being harassed by collectors in Switzerland calling in unpaid bills from hospitals in the United States.
“Hospitals have discovered that if they put pressure on the consumer, the underwriter will pay because it becomes a public relations issue,” says Magdi Riad, vice president, Product & Claims, for TIC Travel Insurance Coordinators. “And this is not a fair game … the consumer is not aware that this hospital is charging four times what it would have accepted from an American Medicare patient.” Or, for that matter, adds Riad, what it would have accepted only yesterday through a pre-existing contractual arrangement negotiated by a preferred provider network. “The last thing an insurer wants is to have his policyholder deal with intimidation from a collector, whether it’s a collector from the UK or a collector from the US. This is a no, no,” says Riad.
Yet intimidation in its rawest forms is exactly what Canadian travel insurers, who have a much greater share of their client base exposed to US hospital cost pressures than insurers from other nations, say they are increasingly experiencing. And this clearly has ominous overtones for insurers from all nations who have patients admitted to American hospitals.
International insurers ... fear that the intervention of tough, professional collectors will lead to higher costs and patient premiums
Though collection agencies have always been part of the US healthcare landscape, they have generally been used as vehicles of last resort, going after the insurer or client after all other attempts at settlement had failed.
Now, however, some Canadian insurers say hospitals are turning to collectors as front-line troops, circumventing existing PPO contracts, dumping patient collection, credit and financial information into collectors’ bins and letting them go at it – especially for foreign accounts, which they fear may be tougher to bring to ground.
Dr Colin Plotkin, a British Columbia-based consultant who assists international travel insurers in dealing with catastrophic claims, cites a ‘spawning’ of collection agency involvement, especially among hospitals in areas of heavy tourist density such as the American West or Florida. Accounting clerks are taught, he says, to quickly spot foreigners and differentiate them from domestic patients by watching their reactions when asking for a permanent address, drivers’ license, or social security number. “Any American can tell you their social security number off by heart. Canadians can’t.”
It is becoming commonplace, says Plotkin, for collection agencies “to simply institute a system into the business office of a hospital whereby every case that is international gets automatically sent to the collection agency. And that collection agency is now in control of the bill. They make a percentage on how much they collect and it stands to reason they will do everything they can to get as close to the full bill amount as possible.”
As others have noted, collectors may offer insurers discounts of five to 10 per cent off a bill in their grasp, but this is a long way from the 40 or 50 per cent insurers may have achieved via negotiated PPO discounts. And that, says Plotkin, can only lead ultimately to the consumer paying higher premiums. “It is another layer in the process that needs to be funded.”
Patrick Hrusa, director of Provider Relations, Assured Assistance Inc., an operating entity of RBC Insurance Company of Canada (RICC), concurs that calls from individual clients who have been contacted by collection agencies are increasing.
calls from individual clients who have been contacted by collection agencies are increasing
Some of these are for bills not yet submitted, while others are for bill balances – additional payments for bills already thought to be settled.
Some of these collection intermediaries seem to have no idea of the normal contractual agreements that exist between hospitals, PPOs and insurers, says Hrusa. They simply call the client, “tell them how much is to be paid, give them a reference number and a lock box address in Austin, Texas to which they are told to send a cheque.” They are given no information about the services provided, a statement of benefits, or anything else, he adds. “When we get such a call from a client, and we look at these accounts, we look at all the bills and cheques that have been issued and see that everything has been paid in accordance with the contract between payer and provider. There have been no notice disputes, just clean payments. We then have to try to explain to the client that this is the reality of the US healthcare delivery billing system today.”
Hrusa says there is nothing cost effective in US hospitals simply circumventing the normal third party handling of foreign bills by routing them to collection agencies: “I don’t see physicians or hospitals receiving more funds. It is simply an additional layer of administration, with more people involved, more commissions paid, but not with additional revenues for hospitals or doctors.”
Ken Vorvis, vice president, Strategic Planning for Medipac International, one of Canada’s largest providers of snowbird insurance, confirms that ‘these types of companies are creeping in’ and adding another layer of cost to claims administration, But some are also seriously disrupting existing provider relationships. He cited one example of a major cardiac centre on the east coast of Florida that has dispensed with all of its PPO contracts and is now simply offering small 10 per cent reductions on a more or less take it or leave it basis.
Hospitals have discovered that if they put pressure on the consumer, the underwriter will pay because it becomes a public relations issue
“This hurts,” he says, “When I can negotiate a contract for $40,000 for a cardiac case and now I have to go to $100,000 that hurts. This can only have one result,” he continued – “Rates going up.”
Mila Pejovic, associate director of Travel Assistance and Medical Case Management at World Travel Protection Assist, concurs also that the intrusion of collection agencies into the claims payment process ‘is indeed a growing problem’. And she too notes that most of the collection companies involved are from Switzerland, England, and Israel.
The use of European collection services to pursue international bills makes logistical sense for many countries in Europe or Asia, but when it includes Canada, just across the border from the US, it becomes somewhat baffling. But they are ones that initially, have staked out this turf.
The European Connection
Though American collection companies have long been a part of hospital billing procedures domestically, much of the foreign collections business being handled for American hospitals is channeled through European or Middle East firms.
Ovag International A.G., headquartered in Switzerland, is reputed by some sources to have an impressive client list of America’s top hospitals, among them such institutions as Columbia Presbyterian, Johns Hopkins, Tenet Healthcare Group, Cedars-Sinai Medical Center (Los Angeles), Massachusetts General, Orlando Regional Healthcare System (Florida).
Global Recovery Alliance AG, also headquartered in Switzerland, states on its website that ‘11 of the top 30 North American hospitals have already enjoyed the benefits of using the international collection services of Global Recovery Alliance’. These ‘Top’ hospitals are among the US News and World Report catalogue of the top 100 hospitals in the US.
BDM Ltd. International Collection Services, headquartered in Tel Aviv, Israel, states on its website: “Pursuing non-payment for services rendered is tough enough with patients residing in the US; for patients who reside outside the country, it’s a whole new world.” BDM cites itself as the US healthcare industry’s “number one choice for international collections, with many years of experience pursuing foreign medical claims, travel insurance and collections for US healthcare providers.”
Gallagher Associates Ltd., headquartered in Kent, England, is another major player that Canadian insurers say is showing up frequently as a collector of foreign accounts for US hospitals.
And possibly because of the successful beachhead launched by the Europeans, American firms such as MedFi, CollectRx and Fort Lauderdale, Florida- based Sunbelt Medical Billings are expanding their base in the burgeoning foreign account collection business..
According to several Canadian insurers interviewed, some collectors tend to pounce on new claims that have not even been submitted to the insurer for payment. Says RICC’s Hrusa, “Many times we have notices coming from Switzerland before we have even received a statement from the hospital. And many times that notice is sitting in the patient’s mailbox … before it has been received by the insurance company. Let’s not get into the issue of discounts; we don’t even have a notice of the claim to begin with, and the collectors may only be offering a discount of between three and seven per cent.”
Udi Ben-Gal, director of operations for BDM Ltd., in Israel, disputes the contention that his collection firm moves prematurely or that insurers are denied the opportunity to make reasonable payments. He says that ‘All US hospitals will gladly accept payments that are based on PPO rates’ but many foreign insurers want better than that. “They try to play it both ways,” he says, demanding the Medicare rate offered to domestic insurers but without offering the great volumes the Medicare system provides. “The insurer says ‘if the hospital is not losing money on Medicare and the Medicare rate for a procedure is $10,000, how come you charge me $100,000?’”
On the other hand, says Ben-Gal, they don’t take into consideration that American hospitals treat many millions of uninsured or underinsured patients from whom ‘they will not receive a dime’.
He says there are also the realities that US hospital computer systems are not set up to capture foreign information such as different address formats or personal identifiers, and this makes recording of information on such patients fragmentary and sometimes unreliable. Then there are the differences in time zones and language that impede follow-up communication.
Sometimes the patient returns home “and doesn’t even inform his insurer that he was in hospital, and the hospital can’t do anything because it can’t find the patient, and it loses leverage over the patient and therefore leverage over the insurance company. Other times the patient is not even aware the insurer has not paid,” he says. “Some (hospitals) outsource the account a week after the bill drops,” he continues, “Some of them try their best for 60 or 90 days and when they get no response or payment, only then will they send their accounts to us.”
TIC’s Riad echoes the concern that insurers are not being given the chance to make a fair assessment of the claim before they are sent out for collection. “It looks like hospitals now are turning inward and basically ignoring any contractual obligations that they may have with a PPO network when it comes to foreign patients.” he says.
Ben-Gal confirms that many hospital/PPO relationships are changing: “I know most of my clients have changed their PPO contracts and have reduced the rates of discounts they were prepared to give.” He notes also that insurers who may have received 40 per cent discounts now may get 25 per cent and if the bill is $1,000, “then insurer’s say it’s OK, but if the bill is $200,000 the insurance company will say its not good enough, they want to negotiate a better discount.
“That is not right,” he says. “You cannot one day pay according to the contract and another day say you’re not happy with the discount.”
Though the intrusion of collection agencies into the claims settlement process still appears to be in its early stages, with some Canadian insurers not having been impacted yet, those who have see it as a deeply disturbing, ominous omen for all foreign insurers dealing in the turbulent US healthcare market.
It is something to be dealt with early, and to be stopped, they feel. But how?
Plotkin believes much of the sense of frustration hospitals feel in dealing with foreign insurers has been precipitated by their ‘greed’ in pursuing demands for unrealistically deep discounts hospitals can not accept. “Hospitals have become aware that international cases are being funneled through domestic (PPO) networks (such as those provided by Aetna or United Healthcare) and are being reimbursed as though the patient were a domestic patient, an American citizen, paying taxes toward healthcare and belonging to a legitimate PPO network working for a legitimate American employer.”
'these types of companies are creeping in' and adding another layer of cost to claims administration
Expecting foreigners to qualify for the same discounts that people on Medicare get, whose subsidies are paid for by American taxes is not fair, he adds. “Hospitals have picked this up. They say ‘we’re not having any of it … give this to collectors. Let them deal with it.’”
Plotkin’s solution is for payers to “simply dig their heels in and refuse to deal with collection agencies and deal directly with the hospital. That will cause their demise. And that’s what I do. I refuse to deal with collection agencies. I say ‘sorry, I’m not permitted to discuss anything with you. Please supply me with a letter from the patient authorising discussion with you.”
That appears to be one way to stop dealing with collectors. But perhaps the more fundamental problem for the entire travel insurance industry is to figure out how to stop American hospitals getting into the position that they need to hire collectors to deal with foreign insurers. And that may take more than saying ‘NO’.