THE GENERAL ASSEMBLY OF PENNSYLVANIA

HOUSE BILL

INTRODUCED BY LENTZ, DePASQUALE, BELFANTI, CALTAGIRONE, CREIGHTON, FRANKEL, GIBBONS, HORNAMAN, JOSEPHS, McILVAINE SMITH, MURT, J. TAYLOR AND YOUNGBLOOD, JUNE 23, 2009

REFERRED TO COMMITTEE ON INSURANCE, JUNE 23, 2009  

AN ACT

Relating to health care provider contracts with health insurers,

and health insurer utilization review of diagnostic studies.

Table of Contents

Section 1.  Short title.

Section 2.  Declaration of policy.

Section 3.  Definitions.

Section 4.  Provider contract standards.

Section 5.  Determination of eligibility and covered services.

Section 6.  Definition of "medically necessary."

Section 7.  Medically necessary health care services and

estoppel for precertification.

Section 8.  Medically necessary dispute procedures.

Section 9.  Mandated disclosure of contract information.

Section 10.  Mandated reimbursement disclosures and

requirements.

Section 11.  Mandated disclosure of administrative policies and

procedures.

Section 12.  Medical policy standards.

Section 13.  Restrictions on all products clauses, most favored

nation clauses and open practice requirements.

Section 14.  Prohibition on silent preferred provider

organizations.

Section 15.  Standardization of CPT coding nomenclature.

Section 16.  Fair valuation of physician services.

Section 17.  Utilization review of diagnostic studies.

Section 18.  Dispute resolution.

Section 19.  Health care provider claim submission.

Section 20.  Responsibility for compliance.

Section 21.  HIPAA compliance.

Section 22.  Penalties.

Section 23.  Severability.

Section 24.  Rules and regulations.

Section 25.  Effective date.

The General Assembly of the Commonwealth of Pennsylvania

hereby enacts as follows:

Section 1.  Short title.

This act shall be known and may be cited as the "Fair Health

Care Provider Contracting Act."

Section 2.  Declaration of policy.

The General Assembly finds and declares as follows:

(1)  An equitable and understandable contracting

environment is essential to the financial stability of this

Commonwealth's health insurers and health care providers and

ultimately to the well-being of patients and consumers.

(2)  Changes in the last decade in this Commonwealth's

health care marketplace have resulted in a shifting balance

of power, leaving health insurers with the leverage to drive

the contracting process.

(3)  This act is intended to protect the health and

welfare of this Commonwealth's health care consumers by

ensuring that health insurers enter into contracts with

physicians and other health care providers that are equitable

and reasonable, provide both parties with clearly articulated

and well-defined terms and parameters and assure the long-

term financial viability of both the health insurers and the

health care providers.

(4)  This act is a necessary and proper exercise of the

authority of the Commonwealth to protect the public health

and to regulate the business of insurance and the practice of

medicine and other health professions.

Section 3.  Definitions.

The following words and phrases when used in this act shall

have the meanings given to them in this section unless the

context clearly indicates otherwise:

"Clean claim."  A claim for payment for a health care service

that has no defect or impropriety. The term does not include a

claim from a health care provider who is under investigation for

fraud or abuse regarding that claim.

"Commissioner."  The Insurance Commissioner of the

Commonwealth.

"CPT codes."  Current Procedural Terminology codes

established by the American Medical Association or the Centers

for Medicare and Medicaid Services.

"Defect or impropriety."  The term includes, but is not

limited to, a lack of required substantiating documentation or a

particular circumstance requiring special treatment which

prevents timely payment from being made on a claim.

"Department."  The Insurance Department of the Commonwealth.

"Enrollee."  A policyholder, subscriber, covered person,

covered dependent or spouse or other person who is entitled to

receive health care benefits from a health insurer.

"Exempt plan."  A health benefit plan that is exempt, under

the Employee Retirement Income Security Act of 1974 (Public Law

93-406, 88 Stat. 829), or otherwise from any provision of this

act.

"Fair market value."  The most probable price at which a good

or service will exchange, expressed in terms of cash or

equivalent, in a free market assuming a:

(1)  Knowledgeable and willing seller unencumbered by

undue pressure to sell and acting in the seller's own best

interest.

(2)  Knowledgeable and willing buyer unencumbered by

undue pressure to buy and acting in the buyer's own best

interest.

(3)  Reasonable time for exposure in a free and open

market.

"Generally accepted standards of medical practice."

Standards that are based upon:

(1)  credible scientific evidence published in peer-

reviewed medical literature and generally recognized by the

relevant medical community;

(2)  specialty society recommendations;

(3)  the views of providers practicing in relevant

clinical areas; or

(4)  any other relevant factors.

"Health care provider."  A physician or other health care

professional who is licensed, certified or otherwise regulated

by the Commonwealth to provide health care services to health

care consumers. The term includes a physician, podiatrist,

optometrist, psychologist, physical therapist, certified nurse

practitioner, registered nurse, nurse midwife, physician

assistant, chiropractor, dentist, pharmacist and professional

who provides behavioral health services. The term also includes

an integrated delivery system, in the context of its contractual

relations with health insurers and network administrators, and a

professional corporation, partnership, and other entity that

legally enters into provider contracts on behalf of its health

care professional shareholders, partners and employees.

"Health condition."  An illness, injury, disease or symptom

of an illness, injury or disease.

"Health insurer."  An entity that contracts or offers to

contract to provide, deliver, arrange for, pay for or reimburse

any of the costs of health care services in exchange for a

premium, including, but not limited to, an entity licensed under

any of the following:

(1)  The act of May 17, 1921 (P.L.682, No.284), known as

The Insurance Company Law of 1921.

(2)  The act of December 29, 1972 (P.L.1701, No.364),

known as the Health Maintenance Organization Act.

(3)  40 Pa.C.S. Ch. 61 (relating to hospital plan

corporations).

(4)  40 Pa.C.S. Ch. 63 (relating to professional health

services plan corporations). 

"Health care services."  Services for the prevention,

diagnosis or treatment of a health condition, including, but not

limited to, the professional and technical component of

professional services, supplies, drugs and biologicals,

diagnostic X-ray, laboratory and other tests, preventive

screening services and tests, including, but not limited to, pap

smears, mammograms, X-ray, radium and radioactive isotope

therapy, surgical dressings, devices for the reduction of

fractures, durable medical equipment, braces, trusses,

artificial limbs and eyes, dialysis services, home health

services and hospital, ambulatory surgery and other facility

services.

"HIPAA."  The Health Insurance Portability and Accountability

Act of 1996 (Public Law 104-191, 110 Stat. 1936).

"Integrated delivery system" or "IDS."  A partnership,

association, corporation or other legal entity that: 

(1)  Enters into a contractual arrangement with a health

insurer or network administrator.

(2)  Employs or has contracts with its participating

providers.

(3)  Agrees under its arrangements with the health

insurer or network administrator to provide or arrange for

the provision of a defined set of health care services to

enrollees principally through its participating providers.

(4)  Assumes some responsibility for disease management

programs, quality assurance, utilization review,

credentialing, provider relations or related functions.

"Network administrator."  An entity that provides a network

of participating health care providers to a health insurer. The

term includes an integrated delivery system in the context of a

contractual relationship between the integrated delivery system

and its participating health care providers. 

"Participating provider."  A health care provider who enters

into a provider contract with a health insurer, integrated

delivery system or network administrator.

"Provider contract."  An agreement between a health care

provider and a health care insurer, integrated delivery system

or network administrator that states the terms and conditions

under which the provider will deliver health care services to

enrollees. The term includes all attachments and appendices to

the contract and other documents that are referred to in the

agreement that may affect the provider's ability to make an

informed decision and may prompt the provider to seek additional

information or clarification before entering into the contract.

The term does not include an employment contract.

Section 4.  Provider contract standards.

A provider contract shall comply with the following minimum

standards to facilitate review by and negotiation with health

care providers:

(1)  A provider contract shall be in plain English and

readily understandable to the average reasonable physician or

other health care provider.

(2)  A provider contract shall explicitly define the

managed care plan's responsibilities to the health care

provider, the provider's responsibilities to the plan and

their joint responsibilities to health insurer enrollees.

(3)  A provider contract or its cover materials shall

clearly and conspicuously disclose to the health care

provider the names, telephone numbers, fax numbers and e-mail

addresses of health insurer officials who can supply the

materials necessary to answer any questions in order to make

an informed decision about whether to enter into the

contract.

(4)  (i)  No provider contract may include an

indemnification clause that commits a participating

provider to indemnify the plan in the event of a

liability claim.

(ii)  A provider contract shall clearly state that

each party is fully responsible and liable for its own

actions.

(5)  No health insurer may compel a health care provider

to enter into an exclusive contract that precludes the health

care provider from entering into an agreement with any other

entity.

(6)  (i)  No provider contract may exceed one year in

duration.

(ii)  A provider contract may renew automatically

only if the managed care plan notifies the participating

provider of the pending renewal 60 days prior to the

renewal date. The provider contract may renew

automatically under the same terms and conditions if the

health care provider does not respond to the health

insurer's reminder notice within the 60-day period.

(7)  (i)  A provider contract shall include an appeal

process for a health care provider to seek

reconsideration of any decision by the health insurer to

terminate the provider contract for cause.

(ii)  To ensure appropriate continuity of care for

enrollees, a provider contract shall define the

obligations of the health insurer and the health care

provider to enrollees after the termination date of the

provider contract.

(iii)  The health insurer shall notify enrollees of

the termination of the provider contract with a health

care provider.

Section 5.  Determination of eligibility and covered services.

(a)    General rule.--A health insurer shall quickly and

efficiently determine an enrollee's eligibility for coverage and

reimbursement of health care services by the plan.

(b)    Eligibility information systems.--A health insurer shall

provide information systems that allow participating providers

to determine an enrollee's eligibility for services, which

systems shall include either a toll-free hotline or a secure

Internet website.

(c)    Erroneous statement of eligibility.--

(1)  If a health insurer erroneously informs a

participating provider that a person is enrolled and eligible

for services when in fact the person is not, the health

insurer shall reimburse the provider for all covered services

rendered up to the time that the health insurer notifies the

provider and nonenrolled person of the error.

(2)  No health insurer shall bear any financial

responsibility for services that the participating provider

renders to the nonenrolled person after the time of

notification. The health care provider may bill the former

nonenrolled person for these services.

Section 6.  Definition of "medically necessary."

A health insurer shall adopt the following definition of

"medically necessary" health services: Health care services that

a provider, exercising prudent clinical judgment, would provide

to a patient for the purpose of preventing, evaluating,

diagnosing or treating an injury, illness, disease or its

symptoms and that are: 

(1)  In accordance with generally accepted standards of

medical practice.

(2)  Clinically appropriate in terms of type, frequency,

extent, site and duration and considered effective for the

patient's illness, injury or disease.

(3)  Not primarily for the convenience of the patient or

provider and not more costly than an alternative service or

sequence of services at least likely to produce an equivalent

therapeutic or diagnostic result.

Section 7.  Medically necessary health care services and

estoppel for precertification.

(a)  Precertification decisions.--

(1)  A health insurer shall honor any precertification

decision based on medically necessary health care services

when the health insurer certifies or precertifies a proposed

service as being medically necessary.

(2)  No health insurer may include a contractual

disclaimer that can change a precertification decision at a

later date, with the effect of depriving a health care

provider of reimbursement.

(b)  Applicability.--This section shall not apply if a

medically necessary determination is made fraudulently or the

information submitted is materially erroneous or incomplete.

Section 8.  Medically necessary dispute procedures.

In the event of a treatment denial by a health insurer based

on a determination that the treatment is not medically

necessary, a challenge to the denial shall be permitted, subject

to the following standards:

(1)  The definition of "medically necessary" as

enumerated in this act shall be used in any medical necessity

adverse determination.

(2)  If the denial is based on a decision that the

service or treatment was experimental or investigational, the

health insurer must utilize credible scientific evidence

published in peer-reviewed medical literature generally

recognized by the relevant medical community, physician

specialty society recommendations, the views of practicing

physicians, individual clinical circumstances, the views of

the treating health care provider and any other relevant

factors.

(3)  (i)  Only a physician in the same specialty as the

treating health care provider may make the denial.

(ii)  For purposes of this paragraph, "same

specialty" means a physician with similar credentials and

licensure as those physicians who typically treat the

health condition in question or a health care provider

who has experience treating the same health condition as

that in question in an appeal.

(4)  Any challenge to the health insurer's medically

necessary determination adverse to the provider may be

initiated in a court of competent jurisdiction.

Section 9.  Mandated disclosure of contract information.

(a)  Duty to provide copies of documents.--A health insurer

shall supply a health care provider with a copy of each

appendix, attachment or other document referred to in a provider

contract. A health insurer shall send the materials with

proposed provider contracts to health care providers. In the

event any materials are missing or a health care provider

requests supplementary information, the health insurer shall

supply the materials within seven business days of the request.

(b)  Required appendices.--A health insurer shall include in

a provider contract appendices that define:

(1)  The health insurer's responsibilities under the act

of May 17, 1921 (P.L.682, No.284), known as The Insurance

Company Law of 1921.

(2)  Key terms and phrases in the provider contract.

(3)  The diagnostic and therapeutic services to which the

health insurer commonly gives prior authorization.

(4)  The prescription drug formularies commonly used by

the health insurer or its pharmacy benefit manager.

Section 10.  Mandated reimbursement disclosures and

requirements.

(a)  General rule.--A health insurer shall disclose in a

provider contract the following information about potential

reimbursements:

(1)  For a health care provider who commonly participates

with and is paid by Medicare, a table that contains the ten

most commonly submitted evaluation and management CPT codes,

if applicable, and the ten most commonly submitted

nonevaluation and management CPT codes, showing the

applicable Pennsylvania area Medicare reimbursement for that

year and the health insurer's actual reimbursement for those

codes under the provider contract, to facilitate a direct

comparison.

(2)  Upon request, a health insurer shall disclose to a

health care provider its range of payments for the 100 CPT

codes most commonly submitted in the health care provider's

designated specialty of practice.

(b)  Time period for payment.--A health insurer shall pay

within 30 days a clean claim submitted from a participating

health care provider.

Section 11.  Mandated disclosure of administrative policies and

procedures.

Within ten days of execution of a provider contract with a

health care provider, a health insurer shall make available all

of its administrative policy and procedure manuals, including,

but not limited to:

(1)  Coverage policies and technology assessments of

specific diagnostic or therapeutic services, drugs or

biologics, devices or medical supplies or equipment.

(2)  Mechanisms for resolving administrative or clinical

disputes and opportunities for participating in plan

governance by participating providers.

(3)  Health care provider peer review, quality assurance

and credentialing programs. The provider contract shall

describe the plan's policies and procedures as they relate to

the plan's relationship with its health care providers. The

health insurer shall make available to the health care

provider considering a contract, copies of procedure or

policy manuals typically made available to participating

providers.

Section 12.  Medical policy standards.

(a)  General rule.--A health insurer shall provide 90 days'

notice before a medical policy is changed or implemented after

the execution of a provider contract with a health care

provider.

(b)  Criteria.--When formulating and adopting medical

policies, health insurers shall rely on each of the following

criteria:

(1)  Credible scientific evidence published in peer-

reviewed medical literature generally recognized by the

relevant medical community.

(2)  National physician specialty society

recommendations.

(3)  The views of prudent physicians practicing in

relevant clinical areas.

(4)  Any other clinically relevant factors.

Section 13.  Restrictions on all products clauses, most favored

nation clauses and open practice requirements.

(a)  General rule.--A health insurer shall comply with the

following provisions:

(1)  No health insurer may compel a participating

provider to participate in all of its lines of business nor

penalize a participating provider for not participating in

all lines of business.

(2)  A health insurer shall differentiate between its

lines of business in the provider contract and give

participating providers the opportunity to affirmatively

choose or defer participation in any particular line without

penalty.

(b)  Lines of business.--

(1)  Lines of business differ if the contracting

provider's rights and responsibilities are materially

different or if there is any other difference in the features

that would be material to the contracting provider when

determining whether to participate in the lines of business

on a line-by-line basis.

(2)  The following also shall be considered a separate

line of business:

(i)  The provision of insurance or a network for

workers' compensation medical benefits.

(ii)  The provision of insurance or a network for

motor vehicle medical benefits.

(iii)  The provision of a network for another insurer

or network administrator.

(iv)  The provision of a network for an exempt plan.

(3)  Nothing in this section shall be construed as

prohibiting a health insurer or network from using a single

provider contract for multiple lines of business as long as

the provider has the right to opt in or out of each line of

business on a line-by-line basis.

(c)  Prohibited contractual provisions.--

(1)  No health insurer may use a most favored nation

clause in a provider contract.

(2)  No health care insurer may use a clause in a

provider contract to prohibit a participating provider from

limiting the number of individuals covered by the insurer who

are accepted as new patients of the provider.

Section 14.  Prohibition on silent preferred provider

organizations.

A health insurer shall explicitly identify in its provider

contract each network in which the health care provider agrees

to participate and the health or other insurers who are

authorized to access the network. A health insurer shall not

agree nor represent that a participating provider will

participate in the network of another health insurer, other

insurer or network administrator without the provider's explicit

written agreement. 

Section 15.  Standardization of CPT coding nomenclature.

(a)  General rule.--A health insurer shall abide by the CPT

codes, modifiers and definitions as established by the American

Medical Association or the Centers for Medicare and Medicaid

Services. No health insurer may arbitrarily or automatically

alter, reassign or downcode the CPT code on a submitted claim or

bundle multiple CPT codes into one code to reduce reimbursement.

(b)  Patient billing for denied reimbursement.--In the event

that a health insurer denies reimbursement for a billed code on

a basis other than that the service or product was not medically

necessary, the health insurer may not prohibit the physician or

other provider who rendered the service or product from billing

the patient for the service as if the service or product were a

noncovered service.

(c)  Global surgical periods.--No health insurer may create a

global surgical period longer than exists under standards of the

Centers for Medicare and Medicaid Services.

(d)  Separately payable services.--CPT codes for supervision

and interpretation or radiologic guidance shall be separately

payable health care services.

Section 16.  Fair valuation of physician services.

(a)  General rule.--A health insurer shall provide

reimbursement for physician services at fair market valuation. 

(b)  Contesting reimbursement rates.--A physician shall have

standing to contest the adequacy of the reimbursement rates paid

by a health insurer for physician services if the rates apply to

the services of the physician or a competitor of the physician.

Section 17.  Utilization review of diagnostic studies.

(a)  Conditions for prior authorization in studies.--No

health insurer may require prior authorization for a diagnostic

imaging or other diagnostic study unless:

(1)  the proposed study falls outside of clinical

practice guidelines that are nationally recognized or are

adopted by the insurer in consultation with physicians who

are in active clinical practice and experts in the field;

(2)  the ordering physician does not meet specialized

training, education or skill qualifications for the ordered

study that is nationally recognized or adopted by the insurer

in consultation with physicians who are in active clinical

practice and experts in the field;

(3)  there is a reasonable basis for imposing the prior

authorization requirement based upon an assessment of the

ordering physician's prior utilization record through a

retrospective utilization review program adopted by the

insurer in consultation with the physicians who are in active

clinical practice and experts in the field; or

(4)  the ordering physician does not agree to a

retrospective audit of the medical appropriateness of the

ordered study in accordance with a retrospective utilization

program adopted by the insurer in consultation with

physicians who are in active clinical practice and experts in

the field.

(b)  Documentation of medical necessity.--A health insurer

shall permit a physician seeking to document the medical

necessity of diagnostic imaging or another study proposed or

performed by the physician to provide a written explanation and

may not require the physician to speak personally with the

insurer's review personnel.

Section 18.  Dispute resolution.

(a)    Arbitration.--No health insurer may compel a health care

provider to accept arbitration as the sole or primary means of

dispute resolution between the parties. A provider contract may

provide for arbitration as an option for dispute resolution

available to the parties only when there is joint consent and

the contract describes all of the following:

(1)  The circumstances in which arbitration is an option.

(2)  The procedures to seek an arbitration.

(3)  The process for selecting a certified arbitrator.

(4)  How the parties would share the costs of the

arbitration.

(b)  Informal dispute resolution.--

(1)  A health insurer and a health care provider may

agree to an informal dispute resolution system for the review

and resolution of disputes between the health care provider

and the plan. Disputes that may be handled informally include

denials based on procedural errors and administrative denials

involving the level or types of health care service provided.

(2)  The informal dispute resolution system shall be

stated in the provider contract and shall be impartial,

include specific and reasonable time frames in which to

initiate appeals, receive written information, conduct

hearings, render decisions and provide for final review and

determination of disputes.

(3)  An alternative dispute resolution system may not be

used for any external grievance filed by an enrollee.

(c)  Judicial review.--A provider contract shall not preclude

a participating provider from seeking judicial review of a

dispute with the health insurer.

Section 19.  Health care provider claim submission.

(a)  Claim form.-—

(1)  A provider contract shall require the health care

provider to submit claims on the CMS Form 1500 or its

successor, as defined by the Centers for Medicare and

Medicaid Services.

(2) No health insurer may require a health care provider

to submit claims electronically unless the health insurer

offers the appropriate tools and infrastructure to facilitate

electronic claims submission.

(b)    Erroneous payments.--

(1)  No health insurer may withhold future reimbursement

as a means to recoup payments believed to have been made in

error.

(2)  A health insurer shall establish, disclose in

contracts and include in provider procedure or policy

manuals, the administrative process by which the plan can

challenge and seek to recover potentially erroneous payments

to the health care providers.

(3)  A managed care plan shall disclose its intent to

challenge a potentially erroneous payment within 180 days of

the date of the payment.

(4)  A health insurer that seeks to recoup overpayments

made to a health care provider shall complete its

administrative procedures and allow the health care provider

to complete available appeal procedures within 90 days of the

date it notifies the health care provider of its intent to

seek remuneration.

(5)  For any amount in excess of $10,000, a health

insurer shall allow the health care provider to reimburse the

plan in installments over not more than three years.

(6)  In a situation where the health insurer has

identified provider medical record documentation

substantiating that a service was performed that should have

been legitimately reimbursed at a higher level if properly

coded, the health insurer shall make payment to the provider

equivalent to the difference between what was originally paid

for the billed service and the amount that would have been

paid had the service been coded and billed accurately.

(7)  A corrected payment shall be made by the health

insurer to the health care provider within 90 days of

discovery.

(c)  Fraud.--Subsections (a) and (b) shall not apply where

the health insurer reasonably suspects fraud, illegality or

other malfeasance regarding claims submitted and payments made.

(d)    Claim period.--

(1)  Health insurers shall not compel health care

providers to submit claims or encounter data to the plan

within not less than 180 days nor more than 360 days from the

date of service.

(2)  No health insurer or plan enrollee shall be required

to bear any financial responsibility for claims that a health

care provider does not submit within the claim period.

Section 20.  Responsibility for compliance.

(a)  Health insurer.--A health insurer remains responsible

for complying with the requirements of this act, regardless of

whether the insurer arranges for claims to be processed or paid

by another entity.

(b)  Network administrators.--A network administrator shall

make the disclosures required of health insurers under sections

7, 8 and 9 for each health insurer who is able to access the

network and shall comply with all sections of this act as if it

is a health insurer.

Section 21.  HIPAA compliance.

A provider contract shall:

(1)  Delineate the obligations of each party to comply

with the terms of HIPAA.

(2)  State that the health insurer and the health care

provider, if applicable, are covered entities under the terms

of HIPAA and shall comply with HIPAA or any more restrictive

privacy law of this Commonwealth.

Section 22.  Penalties.

In addition to any other remedy available at law or in

equity, the department may assess an administrative penalty on a

health insurer that violates a provision of this act. The

penalty may not exceed $5,000 per violation.

Section 23.  Severability.

The provisions of this act are severable. If any provision of

this act or the application thereof to any person or

circumstance is held invalid, the invalidity does not affect

other provisions of applications of this act which can be given

effect without the invalid provision or application.

Section 24.  Rules and regulations.

The department may promulgate rules and regulations to

administer and enforce this act.

Section 25.  Effective date.

This act shall take effect in 60 days.