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Providers must not accept undue insurance delays

May 1, 2009
by Paul Howarth
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Until now, most of the discussion involving our economic crisis has centered on banks and their unwillingness to provide credit to consumers and businesses, despite the infusion of hundreds of billions of dollars in federal bailout funds. An equally serious though less publicized problem for addiction treatment professionals at present involves insurance companies and their increasingly brazen efforts to delay payment for services rendered.

As co-founder and CEO of a five-year-old drug and alcohol treatment company in Southern California, I have seen this problem evolve as our economy has deteriorated. Before the crisis, we typically received insurance payments within 60 days of submitting our claims. During the past year, however, these delays have grown to the point where it typically takes 90 to 120 days for insurers to pay our claims.

California Insurance Code 10123.13 requires insurance companies to pay properly submitted, undisputed claims within 30 days of receipt. But insurance companies are developing new tactics to delay the state's time clock. These include frequently changing their billing codes and fax numbers without notifying us of the changes, and avoiding our phone calls. I can't tell you how many times our staff members have called insurance companies to chase down payment of claims, only to be left on hold for long periods before being disconnected. It is as if insurers are playing a game of dodgeball with our money-money we need to treat, feed and house our clients.

Options now limited

Before the banking debacle, we could tolerate occasional delays in insurance payments by obtaining low-interest, short-term business loans. But with credit markets frozen, we no longer have that option.

Of course, we could go to a factoring company. But I refuse to borrow money at high interest rates to cover our operating expenses because insurance companies are delaying payment of our claims. It is as if these insurers have forced us to provide them with interest-free loans. We didn't agree to this, and we aren't being compensated for it.

To some extent, the financial difficulties facing the health insurance industry are understandable. After all, many of these insurers lost billions of dollars in mortgage-backed securities and other risky investments in recent years. And as job losses have mounted across the country, their income from employer-subsidized healthcare premiums has declined. But their effort to hoist their financial misfortunes onto the backs of providers such as us is not going to work.

Going public

We plan to take our story public, as we have with this article, and let it be known to the state insurance commissioner, policy-makers and the public at large that timely payment of healthcare insurance claims is needed just as much as reforms to our banking system. We already have had to lay off clerical staff, reduce our marketing budget and make other cutbacks because insurance companies are delaying paying us our money in a timely fashion.

We hope other addiction treatment and health professionals will join us in this effort, both individually and through their trade associations. And while this might seem like a tall mountain to climb, we know from experience that exposing wrongdoing and other heavy-handed tactics by financial institutions can bear fruit.

Earlier this year, Wells Fargo Bank inexplicably withheld tens of thousands of dollars in funds from credit cards that our clients had used to pay for their treatment. When we called the bank's office to find out what was going on, no one returned our calls. It wasn't until one of our representatives visited a Wells Fargo office that we learned that the bank had placed a hold on our credit card transactions and wasn't going to process any more credit cards for our clients until we had built up a cash reserve of $200,000.

Outraged by Wells Fargo's actions, we drafted a press release explaining what the bank had done to us and the ramifications of its actions on our business. We e-mailed the release to Wells Fargo's communications department and asked them to comment, but they remained silent.

We then took our story to the media and were immediately interviewed by several news organizations across the country, including American Banker and Fox Business News. Within hours of our issuing the press release, Wells Fargo apologized, released our funds and backtracked on its previous demand for a $200,000 reserve. Suddenly, our addiction treatment business, which apparently had been flagged as “high-risk” by Wells Fargo's newest computer software program, was no longer seen as high-risk.

Wells Fargo underestimated our willingness to go public with our story about how its actions were both unjustified and possibly illegal. We think insurers who delay paying properly submitted claims could stand a dose of similar medicine.

Paul Howarth is Co-Founder and CEO of Forterus Inc., which owns two Southern California drug and alcohol treatment centers: A Better Tomorrow Treatment Center Inc., in Murrieta and Dana Point Recovery in Dana Point. His e-mail address is Addiction Professional 2009 May-June;7(3):34