Commercial Audits and Appeals White Paper - Part 4


Michigan healthcare providers and their legal counsel are tasked with the responsibility of remaining up to date on the evolving commercial audit and appeals processes. Providers should be aware of the various components to different payor’s auditing processes and implement proactive strategies to be prepared when presented with a commercial audit. Furthermore, provider’s proactive readiness for commercial audits will also likely increase their ability to withstand an audit and preserve through appeals of any denied claims. Being well informed of the various appeals options and critical strategies in approaching an audit or an appeal will help providers successfully withstand a commercial audit and the subsequent appeals process.

Back to: Commercial Audits and Appeals White Paper - Part 1

1 The information contained in this section is set forth in BCBSM’s Provider Participation Agreement, Addendum E. See also, BCBSM Provider Manual Chapter: Appeals and Problem Resolution (April 2, 2017).

2 MCL 550.1901 et seq.

3 BCN Provider Manual, Chapter 8 (Care Management), at 71 (January 2017).

4 Id.

5 Id.

6 Id.

7 Id.

8 Id. at 72.

9 Id.

10 Id.

11 Id.

12 Id.

13 BCN Provider Manual, Chapter 14 (Claims), at 71 (January 2017).

14 Id. at 71-73.

15 Id. at 75.

16 Id. at 74.

17 Id. at 75.

18 Id. at 74.

19 MCL 550.1901 et seq. Excluded from the scope of PRIRA are, for example, policies that provide coverage only for specified accident or accident-only coverage, credit, disability income, hospital indemnity, long-term care insurance, or any other limited supplemental benefit other than specified disease, dental, vision care, or care provided pursuant to a system of health care delivery and financing operating under section 3573 of the insurance code of 1956, Medicare supplemental policies, coverage under a Medicare plan, the federal employees health benefits program, worker’s disability compensation, or automobile medical-payment insurance. MCL 550.1905.

20 MCL 550.1903(i). Throughout, PRIRA extends the right to an external review to the covered person or the covered person’s authorized representative. An “authorized representative” means (1) a person to whom a covered person has given express written consent to represent the covered person in an external review; (2) a person authorized by law to provide substituted consent for a covered person, or (3) if the covered person is unable to provide consent, a family member of the covered person or the covered person’s treating health care professional. MCL 550.1903(c). In the interest of clarity, this white paper will refer generally to the “covered person” as inclusive of both the covered person and any authorized representative, where applicable.

21 A health benefit plan is a “policy, contract, certificate, or agreement offered or issued by a health carrier to provide, deliver, arrange for, pay for, or reimburse any of the costs of covered health care services.” MCL 550.1903(r).

22 PRIRA uses the terms “adverse determination” and “final adverse determination.” An adverse determination is “a determination by a health carrier that an admission, availability of care, continued stay, or other health care service that is a covered benefit has been reviewed and, based on the information provided, does not meet the health carrier’s requirements for medical necessity, appropriateness, health care setting, level of care, or effectiveness,” and that results in the denial, reduction, or termination of that requested service. MCL 550.1903(a). The health carrier’s failure to respond to a request for a determination in a timely manner is considered an adverse determination. Id. A final adverse determination is simply an adverse determination that has been upheld through the health carrier’s internal grievance process. MCL 550.1903(q).

23 A health carrier is a person, which is a general term defined to include a corporation, partnership, or similar entity, that is subject to Michigan’s insurance law and regulations or the jurisdiction of the Director that contracts or offers to contract to provide, deliver, arrange for, pay for, or reimburse any of the costs of health care services. MCL 550.1903(v).

24 PRIRA gives the Director the responsibility to approve IROs who are eligible to conduct external reviews, with each approval period to be effective for 2 years. See MCL 550.1917. PRIRA also establishes minimum standards that an IRO must satisfy in order to be approved by the Director. See MCL 550.1919. An IRO and the clinical peer reviewer is shielded from damages for any opinions rendered during or upon completion of an external review conducted under PRIRA, unless the opinion was rendered in bad faith or involved gross negligence. MCL 550.1921. PRIRA also imposes timeframes on the IRO for maintaining records. MCL 550.1923.

25 MCL 550.1911(9). The Michigan Court of Appeals has upheld challenges to PRIRA and held that it satisfies due process requirements. See English v. Blue Cross Blue Shield, 263 Mich. App. 449, 688 N.W.2d 523 (2004).

26 MCL 550.1907(1). Any written notice required under PRIRA must be provided in a culturally and linguistically appropriate manner, as required by 45 CFR 147.136(b)(2)(ii)(E). These federal regulations require, for applicable non-English languages, providing (1) oral language services, such as a telephone customer assistance hotline that includes answering questions in any applicable non-English language and providing assistance with filing claims and appeals (including external review) in any applicable non-English language; (2) upon request a notice in any applicable non-English language; and (3) include in the English versions of all notices, a statement prominently displayed in any applicable non-English language clearly indicating how to access the language services. See 45 CFR 147.136(e). Federal regulations define an “applicable non-English language” as a non-English language if ten percent or more of the population residing in the United States county is literate only in the same non-English language, as determined in guidance published by the Secretary of HHS. 45 CFR 147.136(e)(3). A health carrier may satisfy delivery of notice to a covered person using electronic media that complies with federal regulations found at 29 CFR 2520.104b-1(c). MCL 550.1909(3). A description of the internal grievance and external review procedures must also be included in or attached to the policy, certificate, membership booklet, outline of coverage, or other evidence of coverage it provides to the covered person. MCL 550.1925(1). This description must include a statement informing the covered person of the right to request the grievance or review, the Director’s toll-free telephone number and address, and a statement that when filing the request for external review the covered person will be required to authorize the release of any medical records that may be required in order to reach a decision on the review. MCL 550.1925(2).

27 MCL 550.1907(3). For an adverse determination issued after the service was provided, the written notice of the right to request an external review must include the standard external review procedures information required under MCL 550.1907(3) and be provided in the manner prescribed by the Director. MCL 550.1907(4).

28 MCL 550.1907(3)(a)(i).

29 MCL 550.1907(3)(a)(ii).

30 MCL 550.1907(3)(a)(iii).

31 MCL 550.1907(3)(b).

32 PRIRA includes its own definition of protected health information, which it defines, in terms conceptually similar to HIPAA, as “health information that identifies an individual who is the subject of the information or with respect to which there is a reasonable basis to believe that the information could be used to identify an individual.” MCL 550.1903(bb). “Health information” is “information or data, whether oral or recorded in any form or medium, and personal facts or information about events or relationships that relates to 1 or more of…(i) the past, present, or future physical, mental, or behavioral health or condition of an individual or a member of the individual’s family; (ii) the provision of health care services to an individual; (iii) payment for the provision of health care services to an individual.” MCL 550.1903(w).

33 MCL 550.1907(3)(c).

34 MCL 550.1907(2).

35 MCL 550.1911(1).

36 MCL 550.1909(1).

37 MCL 550.1911(2).

38 A “health care service” is a service “for the diagnosis, prevention, treatment, cure, or relief of a health condition, illness, injury, or disease.” MCL 550.1903(u).

39 MCL 550.1911(2)(a)-(e).

40 MCL 550.1911(4).

41 MCL 550.1911(5)(a).

42 MCL 550.1911(5)(b).

43 MCL 550.1911(6).

44 Id.

45 MCL 550.1911(7).

46 MCL 550.1911(7).

47 Id.

48 MCL 550.1911(8).

49 MCL 550.1911(8).

50 Id.

51 A utilization review organization is a person that conducts utilization review. MCL 550.1903(ff). Utilization review is defined as “a set of formal techniques designed to monitor the use of, or evaluate the clinical necessity, appropriateness, efficacy, or efficiency of, health care services, procedures, or settings.” MCL 550.1903(ee). Formal techniques can include ambulatory review, prospective review, second opinion, certification, concurrent review, case management, discharge planning, or retrospective review. Id. Each of these latter terms is separately defined by PRIRA. See MCL 550.1903(b), (d), (e), (g), (l), (aa), (cc), (dd).

52 MCL 550.1911(10).

53 MCL 550.1911(10).

54 MCL 550.1911(11).

55 MCL 550.1911(13).

56 Id.

57 Id.

58 MCL 550.1911(12).

59 MCL 550.1911(9).

60 MCL 550.1911(14).

61 MCL 550.1911(14).

62 MCL 550.1911(16).

63 MCL 550.1911(16)(a)-(g).

64 MCL 550.1911(17).

65 MCL 550.1911(18). If the Director kept the request and did not assign it to an IRO, the written notice to the covered person must be provided within 14 days of the decision to keep the request. Id. The Michigan Supreme Court has clarified that an IRO’s recommendation is not binding on the Director. See Ross v. Blue Care Network, 480 Mich. 153, 747 N.W.2d 828 (2008).

66 MCL 550.1911(18)(a).

67 MCL 550.1911(18)(b).

68 MCL 550.1911(19).

69 See MCL 550.1911(3). In PA 274 of 2016, the Michigan Legislature amended PRIRA, effective September 29, 2016. One of the substantive amendments to PRIRA in this legislation was the addition of sections addressing review of adverse determinations involving experimental or investigational services.

70 MCL 550.1911(3).

71 MCL 550.1911(3)(b)(i).

72 MCL 550.1911(3)(b)(ii).

73 MCL 550.1911(3)(c).

74 MCL 550.1911(3)(d).

75 MCL 550.1911(15).

76 MCL 550.1911(15)(a).

77 MCL 550.1911(15)(b).

78 MCL 550.1903(y).

79 MCL 550.1903(n).

80 MCL 550.1913(1). This process is not available for retrospective adverse determinations or retrospective final adverse determinations. MCL 550.1913(12).

81 Id. If the covered person has not completed the health carrier’s expedited internal grievance process, the IRO must determine immediately after it receives the assignment from the Director whether the covered person will be required to complete the expedited internal grievance before conducting expedited external review. MCL 550.1913(3). If the IRO determines that the expedited internal grievance process must be completed first, the IRO must immediately notify the covered person that it will not proceed with the expedited external review until the internal grievance process is completed. Id.

82 See generally MCL 550.1913.

83 MCL 550.1913(2).

84 MCL 550.1913(5).

85 See MCL 550.1913(6), (7).

86 MCL 550.1913(8).

87 MCL 550.1913(4).

88 MCL 550.1913(9), (10).

89 MCL 550.1913(11).

90 MCL 550.1915(1). By its own terms, PRIRA does not preclude the seeking of other available remedies under applicable state or federal law. MCL 550.1915(2), (3); see also William Beaumont Hosp. v. Wass, 315 Mich. App. 392, 397; 889 N.W.2d 745 (2016) (holding that “subsection (3) plainly provides that subsection (1) does not preclude an aggrieved party from pursuing other remedies under state and federal law, which would include the right to bring an original and separate action in circuit court for breach of contract.”). Subsection (4) precludes the covered person from filing a subsequent request for external review involving the same adverse determination for which a decision has been received. MCL 550.1915(4).

91 MCL 550.1915(1).

92 MCR 7.103(A).

93 MCR 7.104(A), MCR 7.103(A).

94 See MCR 7.104.

95 See MCR 7.123.

96 MCR 7.109.

97 See, e.g., MCR 7.111, MCR 7.212.

98 MCL 550.1915(2)-(3). In addition to the Director’s role in the external review process, PRIRA also gives the Director authority to punish persons for violations of PRIRA, depending on the nature and gravity of the violations, through the issuance of a cease and desist order, imposition of civil fines, the suspension, limitation or revocation of a license or certificate of authority, and petitioning the circuit court for injunctive relief. See generally MCL 550.1929.

99 English, 263 Mich App at 455, quoting Northwestern Nat’l Cas Co v Comm’r of Ins, 231 Mich App 483, 487-488; 586 NW2d 563 (1998).

This publication is intended to serve as a preliminary research tool for attorneys. It is not intended to be used as the sole basis for making critical business or legal decisions. This document does not constitute, and should not be relied upon, as legal advice.

2017 State Bar of Michigan Health Care Law Section and Michael Bossenbroek, Jesse Markos, Jessica Forster, and Kevin Miserez; All Rights Reserved. Photocopying or reproducing in any form, in whole or in part, is a violation of federal copyright law and is strictly prohibited without consent. This document may not be sold for profit or used for commercial purposes or in a commercial document without the written permission of the copyright holders.

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