Albany Med Pursues Legal, Regulatory Action Against CDPHP for at Least $50 Million in Breaches
• Insurer shortchanges hospital on 16,225 claims to date
• CDPHP gives Albany Med no reason for decision or indication it will pay what it owes
• Monumental impact threatens local health care access, sustainability
The Albany Med Health System has filed legal and regulatory proceedings against the Capital District Physicians Health Plan, Inc. (CDPHP) for withholding at least $50 million from Albany Medical Center for care it provided to CDPHP members. Since Aug. 8, the insurance company shortchanged 16,225 claims and has continued to do so. New York State law requires that insurers fully reimburse health care providers for claims within 30 to 45 days of submission and issue a written explanation for any delay. Albany Med has received no formal response from CDPHP for failure to wholly cover care rendered to its members. The potential impact poses a monumental threat to local health care and Albany Med’s ability to sustain its scope and scale of services.
Withheld claim payments to Albany Med from CDPHP have averaged $2 million per week. Approximately $8 million in additional obligations have been withheld or unpaid since January. By Oct. 1, the impact was already $27 million. Despite multiple conversations between the insurance company and the hospital, CDPHP has given no indication that it will pay what it owes. Albany Med projects that CDPHP will fail to cover approximately $50 million in total payments by the end of the year. The hospital has not experienced similar practices with other insurance companies.
“CDPHP’s deliberate decisions place the entire landscape of local health care at perilous risk,” said Albany Med Health System President and CEO Dennis P. McKenna, MD. “Patients should be able to trust that their insurance company is being managed in a fiscally responsible way, because it impacts access to the care they need.”
On Sept. 16, Albany Med informed the New York State Department of Financial Services, the regulatory body overseeing insurance companies and financial institutions, that the hospital has taken the position that CDPHP is in violation of state insurance law. Albany Med filed a prompt pay complaint given the magnitude of claims impacted and the ongoing nature of violations. In addition, the health system filed a lawsuit today against the insurance company for failure to meet terms set forth in CDPHP’s current contract with Albany Med.
“As a nonprofit organization, we are obligated to use all of our funds to the benefit of our community,” Dr. McKenna said. “With $50 million in funds potentially vanished this year and an untold amount in the future, we may have no choice but to reduce the number of services only we offer. As the largest health system and private employer in the area, we value the indispensable role we hold in our communities. We have long been proud to provide a level of advanced care right here at home that is on par with academic medical centers in large cities across the country. If CDPHP does not change the way it does business, we will not be able to do ours in the way we have for years.”
Insurance companies like CDPHP have pointed to changes in the Medicare Wage Index (MWI) as reasons for deterioration of their financial position. For nearly 40 years, the MWI favored insurance companies over health care providers, leaving Capital Region hospitals severely underfunded. That changed last year when the federal government adjusted the area’s MWI. Hospitals like Albany Med that were reimbursed at a rate that was 28 percent under the actual labor cost began to receive reimbursements that more closely aligned with labor costs. More than 65 percent of Albany Med patients are Medicare or Medicaid subscribers.
“While hospitals like ours remain grateful for the MWI adjustment, it did not solve everything,” Dr. McKenna said. “Over four decades, we were required to make necessary investments to care delivery, which included staff and technology, to ensure our commitment to quality. Our financial margins remained slim, in large part due to our continuous reinvestment with the resources we had. Recovery is a long process, and it takes even longer when the importance of mission supersedes that of profits.”
Dr. McKenna added, “Just as Albany Med finds itself in a position to finally stabilize finances, CDPHP’s actions significantly impact our ability to meet our mission. Both of our organizations are based and run locally, and we exist solely to elevate the care that is provided here. By CDPHP turning its back on Albany Med, it is turning its back on the 3 million people of our region.”
The hospital has not yet decided to drop CDPHP as an accepted insurance plan, but it will not negotiate next year’s contract until the insurance company fulfills its outstanding obligations. Talks regarding annual contracts typically begin mid-year to be completed by the open enrollment period. Medicare open enrollment begins Oct. 15.