More Than a Supplier: Responding to Payer Requests for Component Invoices
September 2014 Issue
Dealing with third-party payers can be challenging, even in the best of times. Lately, however, conversations at various O&P professional meetings, on the OANDP-L listserv, and with experts interviewed by The O&P EDGE, indicate that some insurance companies are making it even more difficult. Pressed for profit, some insurers are demanding to see the manufacturer and supplier invoices for the components that prosthetists and orthotists provide to their patients and, in some cases, paying only a small percentage over that cost in an attempt to whittle down reimbursement amounts.
We asked experts to share how they handle this challenge of responding to payer requests for these invoices and establishing that their services go beyond supplying a device.
Some practitioners state that they simply do not send the invoices.
"It's really none of their business," says Bruce "Mac" McClellan, CPO, LPO, FISPO, FAAOP, owner of Prosthetic-Orthotic Associates, Tyler, Texas, and past president of the American Academy of Orthotists and Prosthetists (the Academy). By providing the manufacturer's invoice to insurers, he says, "you are allowing them to tell you what you can charge for a component, and this doesn't even consider your service."
For about the last two years, some third-party payers—especially commercial health insurance companies—have ramped up requests for component invoices and then used that as the basis for reimbursement. As a result, practices are either getting less reimbursement, or having to deal with the unwelcome hassle of providing documentation above and beyond the norm just to get paid. "It is a trend, and we are seeing it more frequently now than we have in the past," says Anita Liberman-Lampear, MA, administrative director of the University of Michigan Orthotics and Prosthetics Center (UMOPC), Ann Arbor, and president of the American Orthotic & Prosthetic Association, (AOPA).
"I won't say it's accelerating at 90 miles per hour or something, but it's relatively new within the past two years," she says.
It's not just that insurance companies are looking to trim costs though, experts say. There's the long-held and inaccurate image of prosthetists as merely device providers, which does not acknowledge that these are patient-centered practices. Practitioners don't just order a device and put it on their patients. Those within the profession understand there are myriad treatment factors that go well beyond just the device, including fitting, education, determining patients' goals, gait work, and follow-up care.
"In O&P we provide a service that happens to include the device, but we're still providing the service," Liberman-Lampear says. "We have to take board exams to become certified, and our businesses have to be accredited. We have a lot of education, and this trend to get paid these ridiculous fees is an insult and [is] making it difficult to maintain our businesses. We are professionals, and we should be treated like professionals, not device providers."
Consolidation of Insurers
The mergers of several insurance companies in the past few years have also cut back on competition, says Joe McTernan, director of coding and reimbursement services, education, and programming for AOPA.
By snapping up small insurance companies, larger companies are able to create economies of scale and streamline operations. "The insurance industry, like every other industry in the world, is consolidating—nabbing smaller insurers—so now they have the power to control the market more than they may have had in the past," McTernan says. "They are using that leverage, without a doubt."
What's more, since O&P is such a small piece of the insurance industry's overall reimbursements, it tends to be thrown into the mix with larger business segments, he says. "Because we're such a small industry and represent a small number of insurers' payouts, we tend to get lumped into the DME [durable medical equipment] well," McTernan says. "That puts [O&P] into the default well of supplier instead of health professional—a battle that we have fought for years now."
A Rock and a Hard Place
More than a few questions are arising out of this trend, not the least of which is whether O&P practices are required by law to provide manufacturer and supplier invoices to insurance companies. They are not, says Liberman-Lampear. "It's not a matter of legality, because it's not a law," she says. "But it can be a part of your contract if you want to be paid by that payer. You are put up against a wall with some of these."
Susi Ebersbach, MT (ASCP), MBA, a senior reimbursement specialist with Ability Prosthetics & Orthotics, headquartered in Exton, Pennsylvania, says that 20 years ago "the advice was, 'don't give them your manufacturer's invoice.'"
"There are lots of good reasons for not doing that," she says. For instance, Ebersbach says one provider told her that he was paid less than his cost after providing the manufacturer's invoice. "You don't know what they are going to do with that information when they get it," she says.
"The very best reason for not providing the manufacturer's invoice is because HCPCS [Healthcare Common Procedure Coding System] L-Codes are intended to reimburse not only the product, but the [patient care] services as well," Ebersbach says. "A 10 percent markup over cost of purchased components is a quick way to go out of business, as the [patient care] service…costs are well beyond 10 percent over product costs. A margin determined by each O&P company above the costs of the product, plus service input costs, such as salaries, administration, and overhead, is the only way to be profitable and stay alive as a thriving business."
The low markup pricing model "is for products that are bought and resold with very minimal service involved, and custom O&P is not that business," she adds.
Also, if a practice has managed to negotiate a discount on the price of the component, then giving that invoice to the payer source essentially provides it with proprietary information, potentially losing the value of that discount, Ebersbach says.
Ebersbach says she believes the insurance industry has increased its pressure on practices by requesting invoices because, simply put, it has found out that it works as a way to trim reimbursements. "They learn from each other what they can do to pay out less," she says.
While not all of our sources identified specific payers from which they have experienced requests for invoices, Ebersbach says that "it seems to be the BlueCrosses. It is like they've had a conference with each other and found a pricing methodology on how not to pay full price."
Because this group of payers was identified, The O&P EDGE contacted BlueCross BlueShield (BCBS) for comment. A comment could not be made at the corporate level, according to a company representative, because each affiliate—37 independent companies in the United States and Puerto Rico, covering 100 million Americans—is operated independently. That means that each affiliate sets up its own operation.
Ebersbach says, however, that she has had similar manufacturer invoice requests from BCBS companies in Delaware, Pennsylvania, North Carolina, and South Carolina, among other states.
Not all of the local BCBS companies responded to The O&P EDGE 's request for comment, but some provided statements explaining why they ask for invoices.
In an e-mail, Pittsburgh, Pennsylvania-based Highmark spokeswoman Leilyn Perri said this BCBS affiliate is "committed to fair and reasonable reimbursement to all healthcare providers for covered products and services.
"We use industry benchmarks, internal research, and external industry consultants to establish our reimbursements," she says. "When a provider requests a higher reimbursement, we ask that they provide supporting documentation for such a request. Manufacturer invoices are just one type of documentation that we would accept."
BCBS of South Carolina, Columbia, also responded by e-mail. "We do not publically discuss details of our contracts," wrote company spokeswoman Patti Embry-Tautenhan. "However, our goal in all negotiations is to achieve and/or maintain a reasonable cost structure for our members. With that goal in mind, some prosthetics are so specialized that we do ask for documentation."
Solutions: Education and Negotiation
Long term, of course, the solution is to educate insurers so that they understand the depth of O&P professional services. "We have a responsibility to educate insurers," McTernan says.
Michelle Hall, CPO, FAAOP, with Gillette Children's Specialty Healthcare, St. Paul, Minnesota, and immediate past president of the Academy, agrees that education is critical. "Most [O&P] companies use contracts with those payers," Hall says. "It's a difficult, tricky situation, and what it comes down to is that those payers are seeing us as device fitters and not as professionals."
Education, she says, echoing Liberman-Lampear's position, "is needed for payers to see it's not just that we order the devices and put them on the person, and off they go. It's much more than that. There's an evaluation of the patient; finding out what their goals are; measuring or molding; custom making the device or getting prefabricated pieces; fitting the patient; educating and instructing the patient on its use; and adjusting or optimizing the fit and function for the patient. All of that takes time and skill."
In addition, the entry-level education for new practitioners to the profession is a master's degree, and "that shows we're a profession, not a trade," she adds. "It's not like we're a Walmart and [patients] can just go get a device. Clinical skills are necessary for the care we provide."
The profession is making some headway toward that goal. But it's a tack that will take quite a while to gather momentum. "As a profession, we probably need to improve upon our education of third-party payers," says McClellan. "It's not that we haven't done that in the past, but we need to constantly keep reminding and/or educating those who don't know about the greater scope of what we do, versus just letting them simply focus on the device."
Another alternative is to try to include a clause in your contracts that prohibits requests for invoices. McTernan says the best place to handle the issue is during contract negotiations. "This is truly a business issue rather than an issue involving clinical care," he says.
Responding to Requests Today
So in the meantime, what should practices do?
While McTernan suggests handling the issue in the contract stage, if you find yourself dealing with requests from an existing contract, "It's important to educate them about how much care [and] what type of care you provide, and how that figures into the reimbursement for the services. Usually it involves follow-up care and an ongoing relationship with the patient."
Some practices, McClellan says, "will simply say, 'I am not sending you the invoice because it's none of your business.'" Others, he adds, tell the payer they will not send an invoice but will send a calculated amount of the component costs that will include practice time, administrative overhead, and other factors that play into the cost.
"They will send them something that says here's what the value…is and this is why," McClellan says. "That's a much better strategy than just sending them an invoice because you know that when you do, something is going to happen, and it's not going to be good." He also says that sending the invoice might encourage third-party payers to request them more often.
It's not, however, an issue that should be handled by the practitioner alone, McClellan says. This is an issue for the entire practice. "There should be a policy for this in the business," he says. "There is in my practice."
For instance, at McClellan's practice, they have a photograph and description for each component that does not have an assigned code or falls under the "miscellaneous" category, which tend to be the items for which invoices are most often requested.
"We have laid out documentation that is specific to that particular component, and we explain the reason that we're not sending an invoice—because integrating components into a device requires technical and professional expertise and additional time. I know other practices that do the same thing, and it's a wise strategy for all practices— anticipating what may come up in the future and being prepared to respond to it."
"Some people are intimidated by this," McClellan says. "It's better to have a game plan ready rather than to say: 'What do we do about this?'"
Finally, and as a last resort, there are times that practices may need to walk away from a payer.
"If you get invoice requests repeatedly from an insurance company, the owner may have a business decision to make," McClellan says. "Sometimes it's not worth the administrative grief. If you don't do enough business with them to justify dealing with these inappropriate requests, you may just want to sever the relationship."
There are certainly times when a request by a third-party payer for an explanation of the bill is reasonable, "but what is unreasonable is requesting the invoice for the components that you bought," he says. "Sending them the invoice is not reflective of the cost. It doesn't even include shipping costs."
"The profession needs to put up resistance against these unreasonable requests," he says.
Garrison Wells is an award-winning freelance writer and author. He has written for newspapers and magazines nationwide and authored five books on martial arts. He can be reached at