The cost of out-of-network (OON) facility claims is significantly higher than the contracted rates for Blue Shield of California (BSC) network ambulatory surgery centers (ASC). The purpose of this report is to assist the client and BSC in identifying opportunities for cutting costs.
OON claims, on average, cost an additional $15,800 per claim. In a given 12-month period, there are approximately 675 paid OON-facility claims, so there is a tremendous potential for savings. It continues to be an important endeavor to enforce in-network referrals.
The bulk of the OON-facility use comes from a small group of BSC surgeons which we will be identifying in this report. OON-facility claims represent about 15.5% of paid claims but account for 65.9% of spending:
Over the previous 12 months, OON claims represented 15.5% of paid claims . . .
. . . but accounted for 65.9% of spending for ASCs.
To track recent payments, the following scatterplot displays paid OON-facility claims from the last 12 months (by date of service). Hover over the points to view details of each claim, such as payment amount. The blue dots represent claim payments that appeared in a previous report, and the orange dots represent claim payments that are new to this quarter.
The above scatterplot shows a variability in facility costs. However, despite the variability of facility charges, the majority of the payments are between $10,000 and $12,000. A contributing factor to the allowed amount is the provision of the insurance plan, referred to as the Basic Benefit. Under this provision, payment is provided using the plan’s Schedule of Allowances. Effective October 1, 2021, that amount is $11,085.09.
However, if the charge amount and the MAC rate both exceed the Basic Benefit allowance, additional payment may be allotted under the Major Medical Benefit, which is why some claims pay more than the Basic Benefit.
The following graphs report on OON-facility use since 2019.
The following line graph tracks the number paid, OON claims year over year.
Due to provider billing practices - not all claims have been received or adjudicated. OON facilities generally take longer to submit claims and require additional time for ICM and CHC review.
OON costs in the line graph below are calculated by adding totals for each month’s payments to OON facilities.
One approach to gauging recent activity is to examine all OON facility claims submitted. This gives us an understanding of how frequently OON facilities are being used. The following line graph tracks all claims filed by OON facilities (referred by INN providers), both paid and zero-paid.
Blue Shield has terminated or set termination dates for a number surgeons who repeatedly appeared on this report for OON referrals. These providers have failed to utilize in-network facilities despite having received multiple requests to do so. The table below lists these providers, their effective termination dates, total referrals for the prior 12 months, and total costs associated with these referrals.
| Surgeon | Termination Date | Total OON Referrals | Total Billed OON | Total Paid OON |
|---|---|---|---|---|
| Elise Wu† | 06/01/2020 | 0 | $0 | $0 |
| Shahryar Betts† | 04/15/2019 | 0 | $0 | $0 |
| Michael Kurupath† | 04/15/2019 | 0 | $0 | $0 |
| Melanie Nguyen† | 03/01/2020 | 0 | $0 | $0 |
| Torin Im† | 04/15/2019 | 0 | $0 | $0 |
| David Liu† | 09/01/2019 | 0 | $0 | $0 |
| Todd Feizbakhsh† | 04/01/2020 | 0 | $0 | $0 |
| William Fuller† | 11/08/2020 | 0 | $0 | $0 |
| Harry Kim† | 05/22/2022 | 0 | $0 | $0 |
| Edward Bresnick† | 12/27/2021 | 0 | $0 | $0 |
| William Lala† | 05/22/2021 | 0 | $0 | $0 |
| Jamie Kwon† | 02/21/2020 | 0 | $0 | $0 |
| Jonathan Kim† | 01/11/2021 | 0 | $0 | $0 |
| * If provider was termed before last quarter, then the totals are based on the 12 months prior to term date. | ||||
| † Provider termed for excessive use of OON ASCs but all activity ceased 12 months prior to term date. |
Most of the termination dates are at the end of the providers’ contract dates which explains why some are relatively far in the future - as late as May 2022. While there are grounds for immediate termination for many providers, Blue Shield’s legal counsel believes that should any of them pursue litigation to avoid termination, they could forestall their removal from the network far past their contract termination date. The best course of action is simply not to renew contracts with these providers.
| Facility | Contract Date | Total OON Referrals | Total Billed OON | Total Paid OON |
|---|---|---|---|---|
| Pacific Coast Surgical Center | 07/01/2019 | 82 | $3,807,195 | $1,120,528 |
| Beach District Surgery Center | 08/01/2019 | 55 | $1,171,665 | $685,360 |
| Complete Care Surgery Center | 11/01/2020 | 25 | $1,426,570 | $322,844 |
| Beach Cities Orthopedics Surgery Center | 12/15/2018 | 16 | $1,098,969 | $257,647 |
| Pacific West Surgery Center | 03/01/2020 | 0 | $0 | $0 |
The potential reduction in costs that may come from excluding or redirecting the referral behavior of the above providers as well as bringing facilities in-network is significant. Prior to the last two quarters, the proportion of out-of-network facility had been decreasing in relation to BSC facility use:
The recent increase in out-of-network facility use is actually attributed more to a decrease in in-network use rather than a sharp rise in the former:
| Quarter | OON | BSC |
OON Percentage of Total |
|---|---|---|---|
| 2021 Q1 | 93 | 423 | 18% |
| 2021 Q2 | 93 | 458 | 16.9% |
| 2021 Q3 | 118 | 426 | 21.7% |
| 2021 Q4 | 104 | 347 | 23.1% |
The proportion of spending for out-of-network spending:
Recall the vast difference between the cost of BSC and out-of-network facilities. On average, a typical out-of-network facility claim reimburses at a rate of six to seven times more than a BSC facility claim. This explains how a minority of claims can be the source of the majority of the costs.
(Be aware that the steep drop in the last quarter is not an accurate representation of the actual distribution. Out-of-network claims require additional ICM and CHC review, so approvals generally take longer than BSC claims.)
Using facility claims for surgeries in 2019, if every patient of these excluded providers or providers scheduled for termination in 2021 had used an in-network facility, the annual reduction in costs would be:
|
Paid OON Claims Terminated Providers |
Average OON Cost Terminated Providers |
Average BSC Cost |
Reduction in Costs from Removing Providers |
|||
|---|---|---|---|---|---|---|
| 228 | × | ( $13,150 | - | $2,516 ) | = | $2,424,552 |
Using the same timeframe, the potential reduction in costs from adding five more facilities to Blue Shield’s network is:
|
Paid OON Claims New BSC Facilities |
Average OON Cost New BSC Facilities |
Average BSC Cost |
Reduction in Costs from Adding New Facilities |
|||
|---|---|---|---|---|---|---|
| 188 | × | ( $14,965 | - | $2,516 ) | = | $2,340,412 |
Combining those two amounts (accounting for overlap of excluded providers who used newly-contracted facilities), the reduction in costs could potentially be:
|
Reduction in Costs Terminated Providers |
Reduction in Costs New BSC Facilities |
Total Potential Reduction in Costs |
||
|---|---|---|---|---|
| $2,424,552 | + | $2,340,412 | = | $4,764,964 |
The entire extent of the estimated reduction in costs will not be fully realized for some time to come because a number of physicians will not be removed from Blue Shield’s network until 2022.
We can, however, see real reductions when examining four of the ASCs that Blue Shield has brought into their network. What follows are scatter plots of facility payments for those facilities, before and after their network status change:
By comparing the average cost for each facility before and after joining Blue Shield’s network, we can see an enormous difference:
Three of the facilities have increased the number of procedures performed since joining Blue Shield’s network, so it appears that the estimated annual reduction in costs of $2,340,412 is supported by the available data.
The tables in the three tabs below show overall use of OON facilities by BSC surgeons. The names highlighted in red are of focused concern because they frequently refer out-of-network but are not scheduled for termination or do not refer to newly-contracted ASCs. The provider names with a single asterisk indicate those service providers who are terminated or scheduled for termination. The facilities with two asterisks are newly-contracted ASCs.
These tables have been created for Blue Shield’s use in determining which providers would generate the greatest savings if they were to reduce OON-facility use and are thus intended to assist Blue Shield in its prioritization of outreach efforts.
By default, these lists are sorted by BSC surgeons who use OON facilities the most. Click on the column names to re-sort list.
The following table compiles the data for OON facilities most-frequently used by BSC surgeons, but it excludes providers who have received termination notices as well as facilities that are entering Blue Shield’s network.
This table has been created for Blue Shield’s use in determining which facilities would generate the greatest savings if brought in-network and is thus intended to assist Blue Shield in its prioritization of outreach efforts.
The following table compiles the data for OON facilities most-frequently used by all BSC surgeons as well as newly-contracted ASCs. It includes the surgeons who have received termination notices. It is limited to dates of service within the last 12 months.