PSA on Unbundling


One of the most common refrains surrounding healthcare in the United States is cost. The cost of healthcare is resurrected each year during open enrollment for individuals and families, and is dusted off every time a politician runs for office. Everyone seems to be in agreement that healthcare in America costs too much, but everyone also seems more than happy to point the finger of blame to others.

Patients claim that providers charge too much for services, and providers protest that they only charge what they do because health insurance companies won’t reimburse them correctly. Health insurance companies, on the other hand, say that consumers are driving up the cost of healthcare by receiving services they don’t really need, and providers are driving up the cost of healthcare by billing for services and procedures that they don’t actually perform. Unfortunately, blame is shared across all parties, but one thing that mental health consumers and providers can identify and mitigate is a practice called “Unbundling.”

As this post examines this practice, please keep in mind that unbundling insurance claims is considered healthcare fraud by the United States Office of the Inspector General, and can have serious consequences for members and providers.

What is Unbundling?

The easiest way to think about unbundling insurance claims is to compare it to a meal at a restaurant. Imagine that you go to your favorite hamburger restaurant, and stand in line to order a meal. The restaurant advertises combination meals, where the price for a sandwich, fries, and a drink is listed as $9.00. However, the restaurant also sells the sandwich you ordered individually for $6.00, while selling the fries individually for $2.50, and the drink individually for $2.75. By purchasing a combination meal, you save $2.25 more than you would have if you purchased each item individually.

Unbundling, in its most basic economic sense, would be if your favorite restaurant (despite advertising combination meals) charged you the price of each individual item, rather than the agreed upon combination price. The restaurant is incentivized to do so, because then the restaurant makes an additional $2.25 on every “combination” meal they sell.

Now take the analogy of a restaurant one step further: imagine that the salary of the cashier who takes your money is based on the percentage of money they charge for the restaurant. In this case, the cashier would be even more incentivized to unbundle your meal, and receive the addition $2.25 per meal sold.

While this scenario seems farfetched when applied to a restaurant transaction, the payment structure for health insurance allows for this practice to take place far too often. Health insurance companies also combine revenue codes for services that are commonly received together, and agree to pay a set rate for a combination of services, rather than pay each service at the individual level. The system works as long as all parties involved honor the agreement of billing combines services as combined services.

While there has been wide coverage of medical instances such as the 2016 couple who were charged an unbundled fee for the delivery of their child (including a $39.00 fee for skin to skin contact), unbundling in mental health care has received far less coverage.

When Does Unbundling Happen in the Mental Health Industry

The most common instance of unbundling insurance claims  in the mental health industry occurs when a patient is receiving consecutive, inpatient treatment in a residential treatment center (RTC) or intermediate outdoor behavioral health (IOBH) program. Both of these levels of care offer 24/7, multi-week care to mental health patients who require more intensive treatment than can be found in standard outpatient levels of care.  Because these programs offer milieu therapy, group therapy, individual therapy, and room and board charges, the National Uniform Billing Committee has assigned comprehensive billing codes that comprise a daily rate for RTC and IOBH care. The all-inclusive codes for these two types of treatment are the equivalent of the combination meal mentioned earlier.

However, insurance companies are sometimes hesitant to pay the daily rate for RTC and IOBH programs, which can range from hundreds of dollars a day up to thousands of dollars per day. RTC and IOBH stays billed with the daily rate code are more closely scrutinized by insurance companies, usually require pre-authorization, and are often denied before treatment even begins. To combat these often wrongfully denied claims for treatment, insurance policies offer providers the option of participating in a time intensive appeals process to attempt to gain reimbursement for the treatment.

Rather than go through this longer, but correct process, providers and billing companies are tempted to “unbundle” RTC or IOBH care into the sum of its pieces. Insurance companies see thousands of claims for outpatient group, family or individual therapy visits each day (none of which require pre-authorization from insurance carriers). Providers, or third-party billing companies working on behalf of providers, who unbundle therapies from the larger daily rate are expecting that the mass of claims being submitted will enable their unbundled claims to slip through an insurance process without detection, which is what almost always happens.

Some billing companies might actually contact an insurance carrier to gain permission to unbundle the therapeutic services from the daily per diem charge. But in our experience, not all insurers grant permission, and not all billing companies properly make the request. To bill a level of care not actually received without payer permission can also create issues. The potential legal consequences of unbundling almost always outweighs the benefits of someone receiving a small portion of the full claim. Rule of thumb is (especially since liability rests with the provider) is to make sure that any unbundling request is well documented and, remember, that best practices is to have the approval in writing in your patient financial file

What is the Result of Unbundling?

The allure of unbundling therapies is understandable. Receiving reimbursement sooner for services rendered, even if that reimbursement is a lower amount, can help providers maintain a positive cash flow, and mitigate the upfront costs for patients. Despite these potential positives, the fact remains that unbundling is considered to be fraudulent by the Office of Inspector General and insurance companies, and can have serious consequences for members and providers.

The consequences for providers can be as severe as being barred from receiving any insurance funding from an insurer, regardless of how the claims were billed. We have even seen instances where a provider receives a letter telling them they are blacklisted from all reimbursement from a carrier, based on unbundling actions taken by a third party billing company that the provider didn’t even know was happening! In addition to blacklisting facilities and providers, insurance companies can also ask that providers return payments they received for unbundled claims, which can sometimes equal hundreds of thousands of dollars. Consequences for members can also include having the entire payment amount rescinded because of fraudulent billing.

Insurance carriers are on the lookout for any type of fraudulent billing, including unbundling. Articles on Aetna’s, United Healthcare’s, and Blue Cross Blue Shield’s website, along with the Centers for Medicaid and Medicare Services all warn providers that fraudulent billing, including unbundling services, will not be tolerated. With so much scrutiny over billing practices, the potential consequences for unbundling services is not worth the risk.

At Denials Management, we understand and sympathize that receiving health care reimbursement is important, but urge providers and third party billing companies to do so within the framework established by law. If you are a member or provider who has concerns over unbundling, please reach out to one of our experienced healthcare advocates, who will be able to assist you in correcting this issue and submitting claims with the appropriate codes. Remember, it is your name on the claims being submitted, and if you suspect that fraudulent activity is taking place, speak up and say something.






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