Value billing in health care: Back to the future for law?

Insurance companies hire lawyers as in-house counsel at reduced (wholesale) rates, pay lawyers in accordance with insurance policies for their insureds, and otherwise have a dramatic influence over the billing practices in the legal community. Wasn’t it insurance companies in or about the 1960s that demanded lawyers submit bills that showed the time expended in matters for which they pay? And then, as a consequence, lawyers began using time increments as a basis for pricing, not just as a management tool. Before then, lawyers based their fees on the value received by the client.

Perhaps the insurance industry will, once again, have a dramatic impact on the legal profession, but indirectly this time. In Rhode Island, it’s reported that the Lifespan hospital group and Blue Cross have reached an agreement intended to overturn the way hospital care is financed. The goal is to promote and pay for health (value) rather than episodes (hourly) of treatment. Currently, when you go to a hospital, you pay (and the insurance company reimburses or pays directly) for your stay in the hospital, for tests performed and surgeries and related care. Does this remind you of the hourly bill that lawyers produce monthly (hopefully no less frequently?.

The agreement is the first to meet Rhode Island’s unique rules concerning health insurance policies and their premiums. Blue Cross, the largest health plan in the state, and Lifespan, the largest provider in the state, have agreed in principle (details yet to be worked out). The program will provide for fixed fees (alternative, or value, billing) for given procedures, thus discouraging tests and procedures that might not be needed – but usually performed because of insurance payments or attempts to make sure “no stone is unturned” in the treatment. Does this sound familiar? Performing more discovery than needed just to make sure “no stone is unturned” and to avoid an accusation of malpractice for failure to uncover the hidden evidence.

The hospital will be eligible for bonus payments when they meet as yet to be determined quality standards. Again, does this sound familiar? Bonus payments for faster resolution of the litigation, payment for results below the insurance company’s reserve or other standards determined by the parties. Almost sounds like a sport’s figure’s bonus payments when playing more games or hitting more home runs, etc. than set forth as minimums in the contract.

Increased and more effective communications and streamlining payment processes to increase the hospitals cash flow are also part of the agreement. Again, does this sound familiar? When lawyers have effective communications in place, it is seldom that the client is upset with the lawyer and it is seldom the client refuses to pay in accord with the engagement agreement, thus increasing realization rates for the lawyer.

Tying payment to quality care is available elsewhere, but to a modest extent and never before to an entire state. The insurance commissioner in Rhode Island is mandating change in connection with premium rate reviews. As they say elsewhere, “follow the money.” In this case, when customers demand change, suppliers change. Here, the review process for payment of insurance premiums and health care will change, not overnight, but quite assuredly … only because the customer (or regulator) demands the change. When will clients of lawyers finally say “enough is enough” and demand change? Until then, lawyers are not likely to alter current billing practices   

Categorized in: Management