By Franklin J. Rooks Jr., PT, MBA, Esq.
Many physicians have come to the conclusion that some insurance contracts aren’t worth having. More and more physician specialties have opted out of participating provider contracts or have chosen not to participate in the first place. Reimbursement is the primary reason for not participating. The amount allowed for various CPT codes simply is not enough. On top of that, there is the “MPPR” – Multiple Procedure Payment Reduction. This ominous concept was crafted by the Centers for Medicare & Medicaid Services (CMS).
The MPPR functions to reduce the allowable amount of multiple medical procedures that are performed during the same session by the same provider. Insurance carriers, such as United Healthcare have modeled their reimbursement on this CMS policy, and implemented their own versions of the MPPR. Often, in-network reimbursement is not commensurate with the education, skill, and value that the physician delivers.
Under a provider agreement with the insurance carrier, the physician is bound by its terms, including nuances such as the MPPR. The provider agreement requires the physician to accept pre-negotiated payments for specified services as payment in full. When a contract exists with the insurer, the physician is referred to as a “participating provider.” One legal definition of a participating provider is “[o]ne who agrees in writing to render health care services to or for persons covered by a contract or contracts issued by a health service corporation in return for which the health service corporation agrees to make payment directly to the participating provider.” Physicians who are not contracted with a particular insurance carrier are referred to as “non-participating” physicians. Unlike participating providers, these non-participating physicians do not agree to accept the insurer’s reimbursement (and approved amounts) as payment in full. Out-of-network providers are subject to a different reimbursement structure.
Out-of-network reimbursement is usually higher than in-network allowable. Absent a law or regulation, the non-participating physician can bill the patient for the difference between the amount charged and the insurance carrier’s out-of-network reimbursement amount. Reimbursement for out-of-network services may be on a “usual, customary, and reasonable” (UCR) basis. UCR generally means the prevailing rate that is standard or most common for a particular medical service rendered in a particular geographic area. UCR typically exceeds the negotiated amount in the participating provider agreement. However, out-of-network reimbursement is not always pegged to the UCR standard. Many physicians mistakenly believe that the out-of-network benefit is paid at the UCR rate. Even under ERISA, there is no requirement for an insurer to reimburse out-of-network services at UCR rates. Out-of-network reimbursement can be linked to Medicare’s rates, or less. Because there is no contract, patients are responsible for paying any balance left unsatisfied after the insurer’s payment. Out-of-network claims can be more costly to the insurance carrier and to the patient.
As a mechanism to encourage participation, insurance carriers issue payments directly to its participating providers on behalf of the patients who receive covered services. Many insurance carriers do not extend this same courtesy to non-participating physicians. Rather than pay the non-participating physician directly, some insurance carriers issue payment for services rendered by the physician directly to the patient. The reimbursement check is made payable to the patient, not to the physician. Physicians may wonder how this happens, considering that all the right authorization and verification steps are performed in the physician’s office. The physician practice’s patient financial policy or other intake paperwork invariably contains an assignment of benefits. An assignment of benefits is an agreement whereby the patient requests that his or her insurance carrier issue payment directly to the provider. Most physicians have the expectation that, regardless of participation status, the insurance check will be sent to their office. To the surprise of many physicians who have not provided services on an out-of-network basis, the assignment is unlikely to be honored.
Unbeknownst to many physicians, the patient’s subscriber agreement with the insurance carrier may contain anti-assignment language. An anti-assignment clause will generally render the patient’s assignment of benefits to the physician null and void. This clause gives the insurance carrier the discretionary right to not accept the patient’s assignment of benefits. In other words, the anti-assignment clause allows the insurer to issue payment directly to the patient. For the clause to be effective, the insurance agreement with the plan subscriber must contain specific and express language “[m]anifesting an intention to prohibit the power of assignment…” To meet that standard, courts have held that the anti-assignment clause generally must state that patient’s assignment “(i) shall be ‘void’ or ‘invalid,’ or (ii) that the assignee shall acquire no rights or the non-assigning party shall not recognize any such assignment.” These contractual anti-assignment clauses are generally enforceable.
In many instances, the patient and the physician alike are unaware that the insurer’s payment of the benefit will be sent to the patient. Patients are typically not knowledgeable about whether their insurance plan contains an anti-assignment clause. Even if they are informed, the significance of this is seldom realized. It is generally only through routine claims follow up, that the physician’s billing staff discovers that the check they have been waiting for has been sent to the patient. The staff member verifying and authorizing the patient’s benefits is not informed of this at the time of contact with the insurance carrier. “By the way, we’ll be sending the surgery payment to the patient,” is not something the staff member is likely to hear. And, as many physicians have discovered, it is not always easy to get insurance payments from patients who have cashed, and possibly, spent the insurance reimbursement check.
The practice of issuing payments to the patient has negatively impacted the cash flow of some practices. Chasing patients for payment has also consumed valuable practice resources. But, which is the lesser of two evils? Accepting insufficient in-network rates or chasing payments received by the patient? Fortunately, not every patient pockets the money. But enough of them do. While this practice is frequently a detriment to the physician, it allegedly has the opposite effect for insurers. Issuing the physician’s payment directly to the patient has been purported to occupy an important function in reining in the costs of health care. It has been rationalized that an insurer’s ability to control costs and provide affordable health care coverage is directly related to the number of medical providers participating in its program. One insurer was quoted on the practice of issuing payment directly to patients. “This discretion is crucial to the [insurer’s] ability to maintain a viable provider network, as the provider’s right to receive direct payment represents an important incentive for hospitals to become [the insurer’s] network members.” Paying patients directly may provide an impetus for non-participating physicians to enter into participation agreements. Whether such “participation inducement” actually accomplishes its intended purpose is debatable.
In 2010, New Jersey weighed in on the insurer’s practice by passing a statute governing such payments issued to patients:
“With respect to a carrier which offers a managed care plan that provides for both in-network and out-of-network benefits, in the event that the covered person assigns, through an assignment of benefits, his right to receive reimbursement for medically necessary health care services to an out-of-network health care provider, the carrier shall remit payment for the reimbursement directly to the health care provider in the form of a check payable to the health care provider, or in the alternative, to the health care provider and the covered person as joint payees, with a signature line for each of the payees.”  [emphasis added]
Other states have taken similar measures by enacting mandatory assignment of benefit laws. A mandatory assignment of benefit law requires insurers to send payments directly to out-of-network providers if the patient has an assignment agreement with that provider. Alabama, Alaska, Connecticut, Georgia and Texas are among the handful of states which have some enactment of a mandatory assignment of benefit statute.  Texas, for example, provides that “[a]n insurer may not deliver, renew, or issue for delivery in this state a health insurance policy that prohibits or restricts a covered person from making a written assignment of benefits to a physician or other health care provider who provides health care services to the person.” Proponents of these statutes have argued that there are benefits beyond just making it easier for the provider to receive payment. It could potentially lead to a decrease in the litigation between out-of-network providers and insurance carriers. It could also lessen the administrative burdens associated with managing out-of-network claims on both sides. Access to care may be limited as well. Some providers who are keen to the insurance carrier’s practice of issuing checks to the patient require up-front payment, prior to receiving any service. This may either discourage the patient from receiving service or delay necessary services, or, place a burden on the patient to fund the service in advance. 
Physicians who contemplate accepting patients on an out-of-network basis should be aware of the potential obstacles. The physician should determine whether the state in which he or she practices has a mandatory assignment of benefits statute. It would be beneficial to educate the out-of-network patients by informing them that the physician’s payment for services rendered may be sent to them. Clearly express that the practice requires the patient to promptly endorse the check over to the physician. By knowing the potential challenges to out-of-network reimbursement, the practice can better manage its risk and its expectations. And, thus lessens the probability of chasing payment.
Franklin J. Rooks Jr., PT, MBA, Esq. is a physical therapist and practicing attorney in Philadelphia, Pennsylvania. Prior to his practice of law, Frank was a founding partner of PRO Physical Therapy, a Wilmington, Delaware based operator of physical therapy clinics (now ATI Physical Therapy). Frank can be contacted at firstname.lastname@example.org
SeeKrauss v. Oxford Health Plans, 418 F.Supp. 2d 416, 426 (S.D. N.Y 2005). With respect to insurance plans governed under ERISA, Congress did not specifically state that coverage was “subject to” UCR limits. Id.
SeeOwen v. CNA Ins./Continental Ins. Co., 771 A.2d 1208, 1214 (N.J. 2001).
SeeGroup Health Ins. of N.J v. Howell, 193 A.2d 103 (N.J. 1963).
SeeThe Renfrew Center v. Blue Cross and Blue Shield of Central New York, 1997 WL 204309 at *4 (N.D. N.Y.).
 N.J.S.A. 26:2S-6.1c.
 McKinnis, Elliot, The Case for Mandatory Assignment of Benefits Laws, 8 Ind. Health L. Rev. 171, 173 (2011).
 Tex. Ins. Code Ann. § 1204.053.
When I started traveling I never even considered that fact that I would or could be canceled for any reason; after all isn’t there a huge demand for qualified nurses throughout the country?
Well, let me tell you that having your contract canceled as a travel nurse is a real phenomenon and believe me it happens.
I personally have had my contract canceled early once, one threat of cancellation and in one instance, canceled my own contract.
Hospitals can Cancel Contracts
There are a few reasons hospitals will cancel travel nursing contracts. In my case, I was working in a facility in Florida, which is a seasonal type of place, and my contract was canceled early because of low census; I was supposed to be there until March and ended up leaving a month early.
What happens in seasonal places such as Florida and Arizona is snowbirds flock there in the winter, so there is a huge influx of people and hospitals have to increase staff. This makes it difficult to predict staffing so if the census stays low for a few weeks then facilities will cancel travel contracts early.
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There are instances when facilities will cancel your contract prior to you even starting; this usually happens in cases where hospitals are staffing for EMR (electronic medical record) conversion. Hospitals like to have increased staff on hand so their own employees have enough time to learn the new EMR system.
Sometimes the EMR conversion will be pushed back, leading to canceled travel contracts at the last minute. In this instance they will cancel you a week before you are supposed to start orientation, leaving you scrounging for a new assignments.
The third most common reason facilities will cancel a travel contract is because of poor nursing performance. This topic can include patient complaints, attendance issues and even personality conflicts with staff. I personally had an issue with a staff member at a facility I was working at and was threatened with cancellation.
The facility contacted my agency letting them know that I was suspended from work for 2 days until they came up with a resolution. In the end, the manager of the unit made me write an apology letter to the other staff member involved and that was that. I ended up finishing my contract and declining their offer to have me extend. I was lucky enough to have an awesome recruiter who I had been working with for a while and knew that the accusations against me were false.
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Nurses can Cancel Contracts
Travel nurses do have the ability to cancel their own contracts but it is not recommended. The majority of reasons travel nurses cancel are because of family emergencies, personal health problems, facilities not adhering to agreed time off and schedule, and a poor working environment.
Cancelling a contract for family emergencies and health problems are valid reasons, just don’t make a habit of it. If this issue comes up in more than one assignment, then it may be time to go home. If you have an emergency and a good working relationship with your agency, your recruiter will do his/her best to find another traveler to take over your assignment and housing, without any financial penalty towards you.
When it comes to scheduling conflicts and poor working environment I would tell you that unless you feel your nursing license is being threatened, it’s probably best to choose your battles and bite the bullet because the financial and professional penalties can be devastating.
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Consequences of Cancelling a Contract
If a travel nurse has the agency’s housing and decides to cancel his/her contract, then that nurse may be responsible for paying for the remainder of the lease if his/her recruiter can’t find a replacement.
If a nurse sets up his/her own housing, then he/she will have to deal with ending their lease early, if he/she can’t find another contract in the same city. If you get in the habit of cancelling contracts then it will be very difficult for you to obtain references for future employment. If you absolutely feel that you cannot finish an assignment then give your recruiter plenty of notice so he/she can fill your place with a new travel nurse so you don’t have any financial penalties.
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Are there any Guarantees?
I personally do not believe there is a way to prevent a facility from cancelling you. The best you can do is have a clause written into your contract that prevents the agency from holding you financially responsible for anything if your contract is canceled.
You can also write in your contract that you expect to be reimbursed for any travel and licensing expenses you incurred if your contract happens to be canceled prior to you starting; this will be between you and your agency. You have to remember that the facility that is contracted with your travel nurse agency is a customer. Your agency is going to do everything in its power to keep them happy. If that means replacing you with someone else, then that is what’s going to happen. It may not be fair but that’s the way it goes sometimes.
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What to do if you are canceled?
I can’t say that having a contract canceled happens often, but I do know it happens and it has happened to me personally. Flexibility has to be the ultimate character trait of every travel nurse. The field of travel nursing can be very unpredictable. It is always best to have a plan B just in case Plan A doesn’t work. If you get canceled, try to find a facility as close to you as possible to cut down on travel and housing expenses, always get your references for future employment early on in the contract in case a cancellation occurs by either you or the facility and make sure you have some money in the bank; it could take weeks to find another assignment. I have always thought that travel nurses needed a union. I personally feel that we get the short end of the stick sometimes and not much representation. Having a good recruiter and agency to back you up is of utmost importance; or if you are loaded, get a lawyer and fight for your rights.
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If you have been canceled or have canceled a travel nursing contract, I wouldn’t worry too much about it. Even after my unexpected cancellation and conflict with that nurse, I still have multiple recruiters calling me every week with travel assignments. There are hundreds of companies out there who are looking for great nurses. Becoming a travel nurse is a huge commitment and it is important to understand that even though you are temporary, your presence will last a lifetime; make the best of it, be flexible and choose your assignments and battles your wisely.
By Crystal Gustafson, RN
Crystal Gustafson is a Critical Care Registered Nurse who spent time as a travel nurse in various states including Arizona, Texas, Florida and California. She has recently accepted a system wide float pool position with Exempla Healthcare System in her hometown of Denver, Colorado and also has blog about prevention and education in healthcare. You can learn more about Crystal at Google+ or you can visit her blog at http://grassrootsprevention.blogspot.com/.