Both houses of the New York state Legislature are rejecting a proposal from Gov. Kathy Hochul that would require hospitals be paid within days of ordering a treatment or test for a patient. 

Lawmakers are against the proposal included in Hochul's executive budget to reform managed health care, including requiring hospitals to be paid swiftly and limit lengthy reviews by a health care insurance provider.

Lawmakers don't want the final budget to require health insurance providers pay hospitals within days of medical treatment or tests, which would limit an insurance provider's scope to review a claim and if treatments were done out of medical necessity.

Lev Ginsburg, executive director of the state Conference of Blue Cross & Blue Shield plans, says it would raise premiums and cost patients more on average, giving hospitals an incentive to order unnecessary testing.

"Really, the push for this change is coming from these downstate mega hospitals who are looking to essentially have cash in hand for this extended period of time," Ginsburg said.

The proposal is estimated to cost $7.7 million in fiscal year 2024 and $31.8 million in FY 2025, according to the governor's executive budget.

Most upstate hospitals have agreements with insurance companies to do cash advances, ensuring timely payments.

Hochul's proposal would require a committee of clinicians to review claims when a patient questions their medical necessity. 

The plan was omitted from each of the Senate and Assembly's one-house budget proposals released last week, signaling they reject the plan. 

Hospitals want doctors to be paid in real time for the work they do — just like paying for food at a restaurant before leaving the table.

"For about one in four of these claims is that the payers are not paying, and that's creating a tremendous cashflow problem for hospitals," said Bea Grause, executive director of the Healthcare Association of New York State.

Grause argues insurers delay reimbursements, and the pay and pursue model does not prevent insurance companies from contesting a patient being admitted to the hospital.

Gov. Hochul continues to support the premise first proposed under her predecessor, arguing hospitals should be paid quickly after providing emergency care to patients.

"...If you get admitted, subsequent to an emergency room visit, there's a medical reason for it, and a physician has evaluated you and determined that you are so sick or injured that you need to be in the hospital," Grause said Monday. "It's very straightforward."

But insurance companies maintain the change would remove oversight of what people are being charged for. 

Ginsburg says the proposal undermines patient safety because hospitals will be compensated without requiring an independent check of medical necessity.

They'll continue to fight to keep the proposal out of the final state budget. 

"It really isn't their money," Ginsburg said. "It belongs to the premium payers. The plans act as stewards and this does away with any kind of prior approval and check-and-balance on sort of the behavior and the operations of what hospitals performed on their patients."

Health insurance plans review a claim submitted by the hospital and can deny it as-is, requiring the hospital to appeal the claim to overturn the denial under current state law, according to a spokesperson with Gov. Hochul's office.

Hospitals do not receive payment for the claim until that approval or appeal is completed, which can take months — creating significant administrative costs and burdens on providers and safety-net hospitals. The governor is looking at changing the system because hospitals continue to struggle to recover from the COVID-19 pandemic, according to Hochul's office.

Representatives with the Democratic leaders in the Senate and Assembly say they are concerned about how cumbersome this would make the process of approving or denying medical claims as why they rejected this proposal. 

Budget negotiations are ongoing and it's important to note anything could change by the time the budget deadlines April 1.