FRANKFORT — Gov. Steve Beshear vetoed a bill Friday designed to help hospitals and doctors receive prompt payment from three Medicaid managed care companies.
After announcing his veto, Beshear unveiled a five-point plan designed to speed up the resolution of disputes between medical providers and managed care companies.
Beshear's veto of House Bill 5 will stand. The legislature passed the bill in the last two days of the legislative session and cannot return to overturn Beshear's veto.
At a news conference Friday, Beshear said that House Bill 5 could have had unintended consequences because the language was too broad. The bill would have allowed the Department of Insurance to mediate payment disputes between providers and three statewide private managed care companies.
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The language in the bill went beyond prompt payment and could have had unintended consequences that could cost taxpayers money, Beshear said.
"I understand and appreciate what legislators were working to accomplish with House Bill 5 and I fully agree with its intent," Beshear said. "It's clear they are driven by a desire to maintain reliable and accessible health care in their communities. But as written, HB 5 has possible unintended consequences that reach far beyond the so-called 'prompt pay' dispute."
House Bill 5 — sponsored by House Speaker Greg Stumbo — passed unanimously in the House and Senate during the 30-day legislative session. It had the backing of many in the medical community who have repeatedly complained that the managed care companies take too long to resolve payment disputes.
A recent audit by state Auditor Adam Edelen showed that the Cabinet for Health and Family Services, which oversees managed care, did not do enough to ensure that the managed care companies followed up on providers' complaints. Reports sent to the cabinet did not contain enough information to determine whether grievances were being handled in a timely manner, the audit showed.
The state moved more than 500,000 people in Medicaid to managed care in November 2011 in an effort to curtail rising costs. Roughly one in five people in Kentucky is on the federal-state health care program for the poor and disabled.
On Friday, Beshear said he will implement the intent of the bill by asking the Department of Insurance to oversee billing complaints. He is also asking that the three managed care companies — Coventry, WellCare and Kentucky Spirit — meet with every hospital in Kentucky and review all past-due billing claims.
The Department of Insurance will conduct targeted audits of all three statewide managed care organizations by August. The results of those audits will be made public.
There will also be educational forums between the managed care organizations and the providers on the claims process. In addition, there will be forums on emergency room uses.
Beshear said that the managed care companies have already begun meeting with hospitals on past-due billing disputes.
Those reviews show that some hospitals are claiming millions of dollars in past-due claims but were owed less than a third of what they claimed and what they told legislators they were owed, he said.
For example, one hospital showed that it billed $15 million to one managed care company. After the hospital and managed care company met, it turned out the hospital was owed $118,000 from the company, he said.
Under the previous fee-for-service system, Medicaid claims were paid but there was little oversight or accountability. That's why costs skyrocketed, Beshear said. Managed care companies are now questioning many of those claims, which can delay payment.
Some of those questions are legitimate, Beshear said.
For example, over the past year Kentucky hospitals billed Medicaid for 643,839 emergency room visits. If the emergency room visit was for a non-emergency — a cold or other minor ailment — the hospital should have billed it as a non-emergency visit. A non-emergency visit receives a $50 payment as opposed to a much higher rate for a true emergency.
Out of the more than 643,000 emergency room visits, only one emergency room claim used the non-emergency claim, Beshear said. The managed care companies looked at the more than 643,000 claims and determined about 30,000 were non-emergency room visits, Beshear said.
But some providers on Friday said that the problem is with disputed claims — sometimes referred to as "unclean claims" — that the managed care companies have denied but the provider believes are legitimate. It's those claims that take too long to resolve, providers said.
Kip Bowmar, executive director of the Kentucky Home Care Association, said that it's not clear if the Department of Insurance will be able to referee those disputes on what is a legitimate claim. Bowmar also questioned why Beshear's plan did not require the managed care companies to meet with all provider groups, not just the hospitals.
"We do have concerns about what's going to be called a 'clean claim' and if the department of insurance is going to be able to deal with that issue," Bowmar said. "There is also the issue of an agency billing for $1,000 and only receiving a $100 payment and the managed care companies are saying that it is a paid claim."
Mike Rust, the president of the Kentucky Hospital Association, said the association was disappointed that Beshear vetoed House Bill 5 but was pleased that billing disputes would still be sent to the Kentucky Department of Insurance.
Rust said he had not had an opportunity on Friday to review all of Beshear's proposed reforms and could not comment on them.
"It looks like it is a step in the right direction," Rust said. "We recognize that Medicaid managed care is here to stay."
Stumbo said Friday that he hopes Beshear's reforms will address the continued problems in the Medicaid managed care system.
"We will continue to monitor the situation and every legislator will talk with their local providers to see if the new approach is working," Stumbo said. "The intent of HB 5 was to give all parties a fair forum to resolve disputes and I believe the governor's directive is clear."