Chapter 17 Managed Care – Generally

INTRODUCTION

DEFINITIONS

ADMINISTRATION OF MANAGED CARE ORGANIZATIONS

ACCESS TO SPECIALTY CARE

QUALITY ASSURANCE PROGRAM

FORMING A MANAGED CARE ORGANIZATION

Requirements

COVERAGE BY MANAGED CARE ORGANIZATIONS

SYSTEM FOR RESOLVING COMPLAINTS OF INSUREDS

Written Notice to Insured

Time Within Which Plan Must Resolve Complaints

Potential Penalties

Complaints Involving Potential Harm to Patient

Further Rights of Complaint

EMERGENCY SERVICES RENDERED

INDUSTRIAL INJURIES

PROHIBITED ACTS

Prohibited Interference of Communications

Prohibited Actions Against Providers Solely Because of the Provider’s Advocacy

Prohibited Financial Incentives

Physicians Options When a MCO Refuses to Authorize Referrals

CONCLUSION

INTRODUCTION

Managed care is a system that uses specified health care providers with the goal of efficient health care services. The techniques used to produce these goals include, but are not limited to:

1)         Managing the health care services of an insured who has a serious, complicated, protracted or other health‑related condition that requires the use of numerous providers of health care or other costly services;

2)            Providing utilization review;

3)            Offering financial incentives for the effective use of health care services; or

4)            Any combination of those techniques.

NRS 695G.040.

The statute defines utilization review to mean “the various methods that may be used by a managed care organization to review the amount and appropriateness of the provision of a specific health care service to an insured.” NRS 695G.080. Any insurer or organization that utilizes managed care in the state of Nevada is considered a “managed care organization,” subject to the laws governing managed care. NRS 695G.050. Examples of organizations subject to these provisions include “an insurer that issues a policy of health insurance, an insurer that issues a policy of individual or group health insurance, a carrier serving small employers, a fraternal benefit society, a hospital or medical service corporation and a health maintenance organization.” NRS 695G.090.

DEFINITIONS

This section highlights the key terms associated with the managed care system. Managed Care, as defined in the Nevada Revised Statutes, is an attempt to provide adequate, affordable health care to a large number of patients through the use of efficient medical procedures and management techniques in concert with the health insurance industry. NRS 695G.040. Managed Care Organizations are those insurers or other organizations, authorized to conduct business in the state, that provide or arrange for the provision of health care services through managed care. NRS 695G.050.

Perhaps the most important definition to understand under a managed care system is the primary care physician. A primary care physician is any physician or group of physicians who:

1. Provide initial and primary health care services;
2. Maintain the continuity of care for the insured; and,
3. Refer the insured, when necessary, to a specialist.

NRS 695G.060.

In simple terms, a primary care physician is the health care professional who generally must be first seen by an insured patient. He is the insured patients regular doctor.

Utilization reviews, which are the various methods that may be used by a managed care organization to review the amount and appropriateness of the . . . specific health care service provided to the insured, are a critical component of the managed care system. NRS 695G.080. It is important that insured patients clearly understand that the care they receive is reviewed by a individual or group to ensure that it falls within the coverage guidelines of the managed care organization. Physicians can play a role in helping patients understand how the process works.

Finally, under Nevada law, the provisions of Chapter 695 apply to each organization and insurer that operates as a managed care organization, including HMOs, small employer carriers, fraternal health societies, as well as the insurers issuing individual or group health insurance policies. 695G.090.

ADMINISTRATION OF MANAGED CARE ORGANIZATIONS

There are relatively few specific laws in the Nevada Revised Statutes that address the administration of managed care organizations. A skeleton for operations is provided, outlining certain key individuals responsibilities, as well as some of the reporting requirements imposed on all organizations.

Each managed care organization is required to have a medical director. The medical director of the managed care organization must be licensed to practice medicine in the State of Nevada. NRS 695G.110. In this manner the state attempts to ensure that some level of medical professionalism is imposed upon these organizations, and that ultimately only a physician will oversee the medical care delivered by the states managed health care organizations.

The process for determining the extent to which medical services are covered by the organization is at the core of managed care. Therefore, Nevada law requires written policies concerning the utilization review process in an effort to ensure fairness and consistency in the review process. NRS 695G.120. Written reports are also required, on an annual basis, outlining the methods used by a given managed care organization to review the quality of its health care. For certain organizations (private entities with more than 100 insured patients), the report becomes more of a state of the organization report, requiring the organization to provide:

1. a copy of its quarterly and annual financial reports;
2. statements of financial interests in other health care businesses when such interest exceeds a certain threshold;
3. a description of each complaint received that resulted in arbitration, a lawsuit, or some other legal proceeding.

NRS 695G.130.

These reports are generally in the public domain, although some portions may be excluded due to certain prohibitions on disclosure. 

Both of these written report requirements must be prepared with the assistance of practicing providers of health care; prepared using generally recognized and accepted clinical principles and processes, to include specialized processes; reviewed, and updated as appropriate, at least once a year; and made available to an insured patient, at any time he requests, after coverage for a specific health care service has been denied. NRS 695G.160.

Finally, an unusual and ambiguous provision of the statutes states that the financial manager of a managed care organization owes a fiduciary duty to the insured. Specifically, the statute states that any person who receives, collects, or disburses money for such an organization is in a fiduciary relationship with the insured. NRS 695G.140. A fiduciary relationship creates the highest standard of good faith, fair dealing, and disclosure, thus presumably holding the managed care organization to these standards in all financial relationships with its insureds.

Other than these relatively few administrative requirements, the legislature has not seen fit to specifically mandate how managed care organizations must operate administratively.

ACCESS TO SPECIALTY CARE

In Nevada, like other states that regulate managed care, the primary care physician plays an important role. The primary care physician is the physician who:

1. a) Provides the initial and primary health care services to an insured;
2. b) Maintains the continuity of care for the insured; and
3. c) May refer the insured to a specialized provider of health.

NRS 695G.060.

It seems clear under the statute that the primary care physician steers the course of health care as the case manager for an insured. It is not clear, however, how the roles of maintaining continuity of care and referring to specialists interplay. In particular, there is nothing in either case law or statute that provides for the allowance or disallowance of standing referrals. Standing referrals are referrals by a primary care provider to a specialist for more than one visit without the necessity of the primary care provider having to provide a specific referral form for each visit. In California, the right to a standing referral is statutorily prescribed, but there is no such provision in Nevada.

There is no guarantee that a standing referral will be allowed in this state. However, if a primary care physician, a specialist, and the managed care organization determine that they would like to try to implement a standing referral policy as allowed in California, the following questions should be considered:

1. Is a plan established that would systematically determine when a patient may receive a standing referral?
2. Who will determine who makes the requests for standing referrals?
3. The primary care physician
4. The specialist
5. The insured
6. All of them
7. What is the scope of the standing referral that will be allowed (such as diagnosis, testing, or treatment)?
8. Does the plan limit any of the following:
9. The number of visits to the specialist
10. The time period for which the visits are authorized
11. The scope of the health care to be provided?
12. Does the plan provide for periodic and regular reports by the specialist to the primary care physician?
13. What documents must be included in the referral (for example, medical records, diagnosis, and past treatment records)?
14. What type of illnesses will trigger a standing referral (for instance, only those that are life threatening, disabling, or degenerative, or any illness that is easily rehabilitated)?
15. Who will review the requests for the standing referral?
16. What will be the appeals process?
17. Will extensions be granted? How, and in what circumstances?
18. Will specialists outside of the managed care organization’s network be allowed to have a standing referral? Under what conditions?
19. Who will oversee the process and appeals?

QUALITY ASSURANCE PROGRAM

Every managed care organization in Nevada must have in place a quality assurance program. There are five specific elements that must be present in every quality assurance program. These are: (1) a method for analyzing the outcome of health care services; (2) a system of peer review; (3) a system to collect and maintain information concerning the health care services provided insured patients; (4) recommendations for remedial action as necessary; and (5) written guidelines concerning remedial actions. NRS 695G.180. Each managed care organization must have a written description of the quality assurance program, and must provide the information to all health care providers employed by the organization. The quality assurance program must be properly staffed, and the program and its findings must be reviewed at least once a year. The managed care organization must take whatever steps are reasonable to improve the quality assurance program and ensure its continued effectiveness. NRS 695G.180(2).

As part of the quality assurance program, each managed care organization must establish a quality improvement committee to oversee the quality of the health care provided by its parent managed care organization. The committee must be directed by a licensed Nevada physician, must have written guidelines for selecting its members, and must be properly staffed.   There are specific tasks that the committee, once established and staffed, must perform on a routine basis. The focus is on reviewing the quality of care provided, identifying the problems associated with the care being provided, and advising the organization on issues related to the quality of care provided. NRS 695G.190. Once in place, the committee can serve as a valuable tool to identify problems and assist in finding solutions.

FORMING A MANAGED CARE ORGANIZATION

In order to form a managed care organization in Nevada, two or more licensed providers of health care may apply to the commissioner for a permit to form an organization for managed care. In the application, the applicants must submit the following:

1. a) An application on a form prescribed by the commissioner which must include the names and addresses of all providers of health care who are included in the agreement and any other information that the commissioner determines necessary;
2. b) A copy of the proposed agreement; and
3. c) A nonrefundable application fee of $500.

NRS 616B.536(1).

Upon receipt of a complete application, the commissioner will grant a permit only if he believes all of the following criteria are met:

1. a) The stated purpose of the agreement must be to form an organization to provide comprehensive medical and health care services under a common agreement;
2. b) The agreement may only include licensed health care providers;
3. c) The concentration of health care services presented in the common agreement cannot adversely affect competition among certain currently operating organizations. The commissioner will determine the affect the proposed managed care organization will have on organizations that currently provide or indemnify or arrange for health care services.
4. d) The agreement cannot require that providers of health care will be compensated or reimbursed a sum less than reasonably necessary to defray the cost of the provided services.
5. e) The requirements of the application stated in the first paragraph of this section must be met.

NRS 616B.536(2).

If the commissioner finds that all of the following criteria are met, the permit issued will be valid for one year after the date of the permit’s issuance. If the providers of the health care listed in the common agreement wish to modify any portion of the agreement, they must submit a modification application form with a nonrefundable fee of $100. This request for a modification must even be submitted if there will be any change, including an addition, to the providers of health care. The commissioner must make a determination within 60 days of receipt of a complete application and fee. The commissioner must approve the application for modification if the agreement with the proposed modification would have satisfied the requirements necessary to obtain a permit in the first place. NRS 616B.536(3)- (5).

In order to renew a permit for additional one-year periods, a renewal form must be submitted with a fee of $500. The commissioner must revoke the permit only if the commissioner find that market conditions have changed such that the agreement has become restrictive to competition in the provision of health care services. Such a determination cannot be made without a public hearing on the matter, and can be subject to judicial review as a final decision. Any revocation becomes effective 60 days after the commissioner provides notice of the decision. NRS 616.536(4)-(7).

If at least two licensed providers of health care wish only to discuss the formation of a managed care organization, the process is similar as an application to actually form the organization. For an application to discuss, the commissioner must receive:

1. a) An application form prescribed by the commissioner which includes the names and addresses of the organizers and any other information the commissioner deems necessary;
2. b) An affidavit signed by the organizers that states that the only purpose of the communication among them is to discuss forming an organization for managed care which would comply with the common agreement; and
3. c) A nonrefundable $100 application fee.

The commissioner has 30 days from the receipt of a completed application and fee to issue a preliminary permit. This permit duration is also one year and can be renewed for additional one‑year periods if a renewal application and $100 fee are received. NRS 616B.533.

Requirements

Each managed care organization is expected to provide, in writing, both the criteria that it uses to determine whether to authorize coverage of a health care service and how it measures the quality of health services it provides to the insured. This criteria must be developed with the assistance of practicing providers of health care, using generally recognized and sometimes specialized clinical principles and processes, reviewed and, if necessary updated, at least one time each year. NRS 695G .160. Every year a report must be filed with the commissioner and state board of health, on or before March 1 of each year, which relates the methods for reviewing the quality of healthcare services. This report should also include an assessment of the nature, scope, quality and accessibility of healthcare services and a determination of any reduction or modification of the healthcare provided. Additional special requirements are mandated for managed care organizations that are not owned and operated by a public entity and yet have more than 100 insureds. NRS 695G .130.

Similarly, every managed care organization or any person with whom it subcontracts for a utilization review must develop and maintain written policies and procedures which set for the manner in which the organization or person conducts the utilization review. NRS 695G .120.

COVERAGE BY MANAGED CARE ORGANIZATIONS

The managed care organization is expected to authorize coverage of a health care service that was recommended under the scope of the health care provider’s practice if that service is covered by the health care plan. A refusal for such coverage will only be allowed if the decision is made by a Nevada‑licensed physician who possesses the education, training and expertise to evaluate the medical condition of the insured and has reviewed the available medical documentation and records. Such a decision to refuse coverage must be transmitted in writing and in a timely manner to the insured, the provider who recommended the service, and the primary care physician. NRS 695G .150.

SYSTEM FOR RESOLVING COMPLAINTS OF INSUREDS

Every managed care organization is expected to establish a system which is reviewed by the State Board of Health for resolving complaints concerning:

1. a) Payment or reimbursement for covered health care services;
2. b) Availability, delivery or quality of covered health care services (including but not limited to an adverse decision made in a utilization review); or
3. c) The terms and conditions of a health care plan.

NRS 695G.200(1).

Each system for resolving complaints must include, without limitation

1. a) An initial investigation;
2. b) A review of the complaint by a review board;
3. c) A procedure for appealing a determination regarding the complaint.

The review board must have a majority of members who are insureds who receive health care services from the managed care organization. NRS 695G.210(1).

If an insured makes an oral complaint, the managed care organization must inform the insured that the complaint must be in writing for further action to be taken. If requested by the insured, the managed care organization must assign an employee of the managed care organization to assist an insured or other person in filing a complaint or appealing a decision. If the insured appeals a decision by the review board, the organization must also allow the insured to present testimony or introduce any documentation at a hearing concerning the appeal. The only limitation to the documentation introduced is that the managed care organization may require that it be submitted to the review board no later than five business days before the hearing. NRS 695G .200(2)‑(3). See the sample complaint form in the Appendix of this chapter.

Written Notice to Insured

The managed care organization must provide written notice to an insured which is clear, comprehensible, and understandable to an ordinary layperson, and which explains the right of the insured to file a written complaint and obtain an expedited review. This notice must be given at various different times including:

1. a) At the time the insured receives the certificate or evidence of coverage;
2. b) Any time the managed care organization denies or limits coverage of a health care service to an insured; and
3. c) Any other time the commissioner deems necessary.

If the review board determines that it will not authorize coverage of a certain service and denies such a request, the board must notify the insured in writing of:

1. a) The reason for denying coverage of the service;
2. b) The criteria used by the managed care organization for determining whether to authorize or deny coverage of health care services; and
3. c) The insured’s right to file a written complaint.

Time Within Which Plan Must Resolve Complaints

Plans instituted by a managed care organization must resolve grievances within 30 days of the review board’s receipt of the complaint. The review board must notify the insured of its decision within that same 30 days unless both the insured and the review board agree to a longer duration of time. NRS 695G.210(2).

Potential Penalties

Under the Nevada Administrative Code, a failure to provide employer or employee notice of the right to file an appeal or an untimely provision of such a right can result in automatic penalties up to $1000. NAC 616D.406, .410, .412.

Complaints Involving Potential Harm to Patient

A managed care organization must include an expedited review process for complaints involving an imminent and serious threat to the health of the insured. In such a situation, the managed care organization must inform the insured immediately of the right to an expedited review of the complaint. Further, if the expedited review is required the review board must make its decision and notify the insured in writing within 72 hours of the filing of the complaint. NRS 695G.210(3).

Further Rights of Complaint

Under either a normal review (issued within 30 days of the complaint’s filing) or an expedited review (issued within 72 hours of filing), any further rights that an insured might have available under the health plan regarding the complaint must be explained by the managed care organization. There can be no limitations placed upon the explanation of the further rights. NRS 695G.210(4).

EMERGENCY SERVICES RENDERED

Every managed care organization is expected to provide for “medically necessary emergency services” whether or not there was prior authorization. These services encompass health care given in a very narrowly defined range. To be considered a medically necessary emergency service, the service must meet the following elements:

1)         They must be provided by a health care provider;

2)         After the sudden onset of a medical condition;

3)         The condition must produce symptoms of such severity that a prudent person would believe that if no immediate medical attention is given, there would be:

1. a) Serious jeopardy to the health of an insured;
2. b) Serious jeopardy to the health of an unborn child;
3. c) Serious impairment of a bodily function; or
4. d) Serious dysfunction of any bodily organ or part.

Any plan that has been delivered, issued, or renewed after October 1, 1997 is subject to these conditions. NRS 695G .170.

Notice that the requirements under this chapter are relatively stringent. The requirements of a “serious” jeopardy, impairment or dysfunction and “sudden” onset of symptoms has the effect of requiring the patient to obtain prior authorization from the managed care organization in most claims.

INDUSTRIAL INJURIES

The manager of the state industrial insurance system may contract with organizations for managed care to provide comprehensive medical and health care services to injured employees whose employers are insured by the system. NAC 616B.515. These organizations are governed by a separate chapter of the Nevada State statutes. Though many of the requirements of a health care provider in an industrial or occupational injury setting are similar to the requirements of any other health care provider, legal advice should be sought to ensure conformity with the additional requirements in this setting. For further information, see the chapter on Workers Compensation in this book.

Of import to all health care providers, however, is the rule regarding emergencies due to an industrial injury. Any physician or chiropractor who must provide services due to an emergency or severe trauma as a result of an industrial injury may utilize whatever resources and techniques are necessary to cope with the situation. It is not necessary for the physician to have been a member of a panel established by the administrator of the state insurance plan nor does the physician need to have contracted with the managed care organization who provides health care services to injured employees. NAC 616C.126.

PROHIBITED ACTS

Prohibited Interference of Communications

A managed care organization may not restrict or interfere with any communication between a health care provider and the insured that the health care provider believes is relevant to the health care of the patient. NRS 695G.170.

            Prohibited Actions Against Providers Solely Because of the Provider’s Advocacy

A managed care organization may not end a contract, demote, refuse to contract with or refuse to compensate a health care provider solely because the provider, in good faith:

1. a) Advocates on the behalf of the patient in private or public;
2. b) Helps a patient appeal a denial of coverage for a health care service; or
3. c) Reports a violation of the law to the appropriate authority.

NRS 695G.250.

Prohibited Financial Incentives

A managed care organization may use capitation or other financial incentives to encourage effective and consistent health care services in the best interest of the insured. However, the managed care organization may not offer or pay any type of financial incentive to a health care provider to deny, reduce, withhold, limit or delay specific medically necessary health care services to an insured. NRS 695G.260.

Physicians Options when a MCO Refuses to Authorize Referrals

Sometimes a managed care organization or utilization committee refuses to authorize referrals to certain providers or denigrates the provider’s work skills. Sometimes a letter to the entity might be appropriate if you believe that the entity is treating you unfairly. Attached is a sample letter from a physician to a plan. A few legal theories are enclosed for of which you might consider.

CONCLUSION

The system of managed care is carefully and methodically explained in Chapter 695G of the Nevada Code. There is sufficient detail to establish basic guidelines for a system of managed care, and to ensure that the business of medicine and the healing art of medicine coexist successfully. There are quality assurance checks in place, and prohibitions against activities that clearly hurt the profession and the concept of managed care.

SAMPLE LETTER BY PHYSICIAN TO PLAN CHALLENGING FAILURE TO AUTHORIZE REFERRALS TO THAT PHYSICIAN

Dear__________________:

I have been informed by physicians that wish to refer patients to me that [Name of Plan] has refused to authorize these referrals. I am a member of good standing of the [Name of Plan] network and do not believe that I am being treated fairly. The referring doctors were told by [name of person on the reviewing committee] who said [the untrue statements].

Defamation

I believe that your comments outlined above are defamatory. The Nevada Supreme Court has stated that defamation occurs when there is a false and defamatory statement, an unprivileged publication of this statement to a third person, fault, and actual or presumed damages.   Further, if the defamation tends to injure the plaintiff in his or her business or profession, it is deemed defamation per se, and damages will be presumed. Nevada Ind. Broadcasting v. Allen, 99 Nev. 404, 409, 664 P.2d 337, 341 (1983).

Your untrue statements were said in such a context to make them defamatory. [Repeat the untrue statements and the context in which they were “published” to others]. Such false accusations are actionable as they injure me professionally

Breach of Contract

My contract with you provides that I am a participating physician to whom referrals will be made. You have not upheld your end of the contract by refusing to authorize referrals to me. Consequently, your actions are a material breach of that contract

If there are issues as to my [performance, utilization, etc.] please direct them to me in writing so that I may [respond to these allegations, learn from them]. Your behavior surrounding the authorization of referrals to me is illegal as I have outlined above; as such, I must strongly request that this behavior cease. Further, I ask that henceforth, any requests for referrals to me be granted. Thank you for your cooperation.

Sincerely,

[Physician’s Name]

1. Nevada Medical Association

SAMPLE COMPLAINT FORM

1. Complete name of insurance company involved:

_____________________________________________________________________

2. Circle type of Insurance: Auto Life Home Health Other __________
3. (a) Name of policyholder if different from your name:

_____________________________________________________________________

(b) If a group policy, provide the group name:

_____________________________________________________________________

4. Policy identification or certificate number:

_____________________________________________________________________

5. Claim number (if applicable) ________________________________________
6. Date request was made _________________________
7. Person to whom you requested authorization ________________________________

Employee identification number if applicable _________________

Street address ______________________________

City/State______________,_____ Zip __________

8. How many times have you contacted the company, agent or broker?

State the date(s) and person(s) contacted:

_____________________________________________________________________

(Provide copies of all correspondence)

9. Is there attorney representation in this matter?     Yes   No

If yes, do not file this Request for Assistance until this matter has been settled.

10. Is a lawsuit currently on-going or pending?           Yes   No

If yes, then do not file this Request for Assistance until the lawsuit is concluded or settled.

11. Describe your problem (use additional paper if needed):

_______________________________________________________________________

________________________________________________________________________

________________________________________________________________________

________________________________________________________________________

________________________________________________________________________

________________________________________________________________________

________________________________________________________________________

________________________________________________________________________

________________________________________________________________________

12. What do you consider to be a fair resolution to your problem?

________________________________________________________________________

________________________________________________________________________

________________________________________________________________________

_______________________________         ______________________________

(Signature)                                                                (Date)

California Medical Association 1999. Reprinted with permission.

SAMPLE PATIENT WRITTEN COMPLAINT LETTER

Dear [Managed Care Organization]:

I write this letter as written documentation for the oral complaint I had raised on [date you complained]. Please review the following facts and provide me with a written response including an answer and my further rights within the 30 days mandated by Nevada Revised Statute section 695G.210(2).

On [date you received a denial of service], my request for [type of service] was denied. I believe that this was an erroneous decision and request that the review board reevaluate the denial. As you know, my health policy clearly states:

[relevant policy written]

My request was clearly within the provisions as stated above. The policy says [policy language] which certainly should cover my request for [name of service]. Dr. [physician’s name who recommended the service] recommended this service on [date recommended] because of my [name of ailment/affliction]. [She/he] believes that this would be the [best/only] available treatment for me and will respond as such if asked. We have already tried [name of any other treatments attempted] on [dates treatments prescribed] which did not work, and believe that [requested service] is the next necessary step toward treatment.

Under Nevada law, if a service is covered by the health care plan and is recommended for the insured by a provider of health care acting within the scope of his practice, that service, with limited exception, must be covered. I would be happy to provide you with any further documentation you believe is necessary to show that the service is within the policy and should be authorized.

Thank you for your anticipated authorization.

Sincerely,

[Patient Name]

STATUTES AND REGULATIONS