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01:54 PM
Charles Babcock, InformationWeek
Charles Babcock, InformationWeek
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Problems with WebMD's handling of claims leads to hundreds of thousands of dollars worth of delayed and denied payments, and has caused some doctors to revert to paper.

The American Medical Association has sent a letter to WebMD Corp., likely the medical industry's most powerful player in electronic insurance claims processing, complaining that it has mishandled claims submitted by doctors resulting in "hundreds of thousands of dollars" in delayed and denied payments, InformationWeek has learned. WebMD acknowledges there have been problems, but attributes them to implementing a new process.

According to the letter dated Jan. 8, sent to WebMD CEO Roger Holstein and signed by the AMA and seven other medical associations, the frequency of physicians' complaints about WebMD has risen since the Health Insurance Portability and Accountability Act (HIPAA) standards went into effect Oct. 16, 2003. In addition to setting standards regarding the privacy of patient information, HIPAA is intended to simplify and encourage electronic claims processing.

But WebMD's efforts at HIPAA compliance appear to be having the opposite effect, according to the letter, a copy of which was obtained by InformationWeek. Problems include "lost claims, incomplete claims transmissions, and lack of connectivity between WebMD and health insurers' internal claims management systems as well as the practice management software systems employed by physician practices," states the letter.

Among all their concerns, "physicians have identified WebMD most frequently as being non-compliant with HIPAA Transaction and Code Set Standards," the letter says. The AMA says that claims submitted to WebMD in a HIPAA-compliant format are sometimes never received by health plans, significantly delayed, or transmitted with missing or noncompliant information.

WebMD attributes any problems to the early stages of a new process. "There have been some glitches," acknowledges a spokeswoman for WebMD. "We deal with the lion's share of claims, so it's not that surprising that we get more complaints. We are working very hard with all our trading partners to minimize problems with HIPAA compliance," she says.

Also, WebMD acknowledged problems with HIPAA compliance soon after the regulation went into effect.

Holstein said in a prepared statement after the company reported results for its third quarter, ended Sept. 30: "The results, particularly in the month of September, reflect the difficulties we encountered responding to increased demand for our physician software and services and the challenges of assisting thousands of providers and payers implement the HIPAA transaction standards in the face of uncertainty concerning the October 16th deadline."

But the continuing problems are prompting some physicians to bypass electronic claims processing altogether. Some have stopped using WebMD's Envoy clearinghouse system for claims processing and have resorted back to mailing claims directly to insurance companies. Clearinghouses like WebMD serve as middlemen in the medical industry, typically charging physicians a monthly fee to reformat claims and submit them to various insurance companies.

So far, WebMD has offered little response to specific physician inquires, according to spokespeople for some of the associations that signed the letter.

"Offices are really frustrated that they can't figure out who is the source of the problem," says Marilyn Rissmiller, program manager in healthcare financing for the Colorado Medical Society. The letter urges WebMD to "provide additional resources to assist in answering some of the most common transaction questions associated with WebMD products and services." Others signing the letter were the American Academy of Family Physicians, American College of Physicians, Arkansas Medical Society, Iowa Medical Society, Kentucky Medical Association and Texas Medical Association. Medical association spokespeople interviewed by InformationWeek say the physicians expected difficulties in implementing the new HIPAA formats, but problems have been more significant than anticipated. The claims-processing problems have resulted in "thousands, and in some cases, hundreds of thousands of dollars in delayed and denied claims payment to physicians," states the letter.

Medicare has strict rules that require a physician's office or clinic to submit a claim electronically within 17 days or on paper within 30 days, says Teresa Devine, director of the healthcare financing unit at the Texas Medical Association. Texas also recently passed a law that set similar time limits in which claims must be submitted and paid, she says.

In reverting to paper-based claims, the association's physicians who have used WebMD in the past are meeting the prescribed time limits, but "health plans are not geared up to handle a big increase in paper," Devine warns. And printing claims to paper means "a great deal of extra work that most physician practices can ill afford," she adds.

A copy of the letter went to the Centers for Medicaid and Medicare Services, a federal agency with enforcement power over HIPAA standards. WebMD started as an online service for doctors in 1998. For its quarter ended Sept. 30, the company reported revenue of $250.6 million, up nearly 16 percent compared to the third quarter of last year, and net income was up 36 percent to $6.1 million.

This article originally appeared at InformationWeek Online.

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