BLUE CROSS AND BLUE SHIELD ASSOCIATION
44th Annual Lawyers Conference
Emerging Trends In Non-Participating
Provider Litigation
Friday, May 14, 2010
Cavender C. Kimble and Leigh Anne Hodge
BALCH & BINGHAM LLP
1901 Sixth Avenue North, Suite 1500
Birmingham, AL 35203
Phone: (205) 251-8100
1
EMERGING TRENDS IN
NON-PARTICIPATING PROVIDER
PAYMENT DISPUTES
2
Litigation Drivers
• Economic Woes
• Decreasing Provider Reimbursement
• Consumerism
3
Current Themes in Provider Payment
Disputes
• Out-of-Network Reimbursement
• Balance Billing
• Assignment of Benefits
• Third Party Vendor Billing
4
OUT-OF-NETWORK
REIMBURSEMENT
5
OUT-OF-NETWORK REIMBURSEMENT
Billed Charges
vs.
UCR or Allowed Amount
6
OUT-OF-NETWORK REIMBURSEMENT
Provider Theories
• Quantum Meruit
• Unjust Enrichment
• Third-Party Beneficiary
• ERISA Benefits (Third-Party Beneficiary)
• Unfair and Deceptive Trade Practices
7
OUT-OF-NETWORK REIMBURSEMENT
• What amount is “Reasonable?”
• “Reasonableness” is Benchmark.
8
OUT-OF-NETWORK REIMBURSEMENT
THE INGENIX SAGA
9
OUT-OF-NETWORK REIMBURSEMENT
Chronology
• February 2008
– New York State AG Andrew Cuomo launched
investigation
• June 18, 2009
– Completion of Settlement Agreements
– Assurances of Discontinuance signed by
UnitedHealth and other payors
10
OUT-OF-NETWORK REIMBURSEMENT
Cuomo Sound Bites
• Ingenix is a “scheme by health insurers to
defraud customers by manipulating
reimbursement rates.”
• “By distorting the ‘reasonable and customary’
rate, . . . insurers were able to keep their
reimbursements artificially low and force
patients to absorb a higher share of the
costs.”
11
OUT-OF-NETWORK REIMBURSEMENT
Products of Ingenix Investigations
• The Consumer Reimbursement System is
Code Blue
– http://www.aapmr.org/zdocs/hpl/NYAttryGenRpt01
1309.pdf
12
OUT-OF-NETWORK REIMBURSEMENT
Products of Ingenix Investigation
• $100 million paid by insurance companies
executing Assurances
13
OUT-OF-NETWORK REIMBURSEMENT
Products of Ingenix Investigation
• U.S. Senate Committee on Commerce,
Science, and Transportation
– March 2009 Hearings on Deceptive Health
Industry Trade Practices
http://commerce.senate.gov/public/index.cfm?p=H
earings&ContentType_id=14f995b9-dfa5-407a9d35-56cc7152a7ed&Group_id=b06c39af-e0334cba-9221de668ca1978a&MonthDisplay=3&YearDisplay=20
09&Label_id=&Label_id=
14
OUT-OF-NETWORK REIMBURSEMENT
Litigation Spawned by Ingenix
• Franco v. Connecticut General Life Ins. Co.,
2:07-CV-D6039 (D.N.J.) (Complaint Dec. 20,
2007).
– Putative Class of Providers and Subscribers
– Alleged ERISA, Sherman Act, RICO and state law
claims arising of payor’s UCR determinations
based upon Ingenix database.
15
OUT-OF-NETWORK REIMBURSEMENT
RECENT OUT-OF-NETWORK
REIMBURSEMENT LITIGATION
16
OUT-OF-NETWORK REIMBURSEMENT
“Reasonableness” = The Amount the
Provider is Paid
• Spectrum Health v. Good Samaritan Employees
Ass’n Trust Fund, No. 08CV182, 2008 WL 5216025
(W.D. Mich. Dec. 11, 2008)(In ERISA case, payor’s
determination of R&C charge was arbitrary and
capricious).
• -Payor’s reliance on 90th percentile using Physicians’
Fee Reference (PFR) was reasonable.
• However, Payor did not properly apply PFR to
geographic area as required by Plan.
17
OUT-OF-NETWORK REIMBURSEMENT
Fair Market Value = “Reasonableness”
• Baker County Med. Services, Inc. v. Aetna
Health Mgt., LLC, No. 1D08-0067, 2010 WL
624192 (Fla. Dist. Ct. App. Feb. 24, 2010).
– Court considered relevant factors
• Reimbursement from other commercial payors
• Contracted rates with other HMOs
• Worker’s Compensation Payments
• Private Pay
• Charity Care
18
OUT-OF-NETWORK REIMBURSEMENT
Fair Market Value = “Reasonableness”
• Harrison v. Blue Cross and Blue Shield of Alabama, No. 7:08CV-1039-LSC, U.S.D.C. for the Northern District of Alabama
(Order of Jan. 12, 2010, Denying Class Certification).
– Fact Finder must consider relevant, individualized factors in
considering “reasonableness” of charges and reimbursement for
Ambulance Services:
• wear and tear on vehicle for mileage charges
• amount of time required for treatment
• severity of injuries
• number and type of supplies used for treatment
19
OUT-OF-NETWORK REIMBURSEMENT
Medicare Allowance ≠ “Reasonable”
• Prospect Med. Group, Inc. v. Northridge
Emergency Med. Group, 39 Cal. Rptr. 3d 456
(Cal. Ct. App. 2006).
20
OUT-OF-NETWORK REIMBURSEMENT
Medicare Allowance ≠ “Reasonable”
• Baker County, 2010 WL 624192 at *3.
– “In determining the fair market value of the services, it
is appropriate to consider the amounts billed and the
amounts accepted by providers with one exception.
The reimbursement rates for Medicare and Medicaid
are set by government agencies and cannot be said
to be ‘arm’s-length.’”
21
OUT-OF-NETWORK REIMBURSEMENT
Billed Charges ≠ “Reasonable”
• Victory Memorial Hosp. v. Rice, 493 N.E. 2d
117, 119 (Ill. App. Ct. 1986).
– Hospital’s costs, functions, and services must be
considered.
– Random sampling of hospital charges in the area
all used to establish “reasonableness.”
• Greenfield v. Manor Care, Inc., 705 So. 2d
926, 930-31 (Fla. Dist. Ct. App. 1997).
22
OUT-OF-NETWORK REIMBURSEMENT
Defense Strategies
• ERISA Preemption
• ERISA claims – Failure to Exhaust
Administrative Remedies
• Lack of Standing
23
OUT-OF-NETWORK REIMBURSEMENT
Dismissal – Failure to Exhaust
• Urology Center of Georgia, LLC v. Blue Cross
Blue Shield Health Plan of Georgia, Inc., and
Blue Cross and Blue Shield of Georgia, Inc.,
Civil Action No: 5:09-CV-161, United States
District Court for the Middle District of
Georgia, Order of Dismissal (Mar. 4, 2010).
24
OUT-OF-NETWORK REIMBURSEMENT
State Statutes
25
•
Oklahoma
– OKLA. STAT. ANN. tit. 36, § 6571C.
•
Colorado
– COLO. REV. STAT. § 10-16-704.
•
Florida
– FLA. STAT. § 641.513(5).
•
Utah
– UTAH CODE ANN. § 31A-22-617(2)(b).
•
Maryland
– MD. CODE. ANN. HEALTH-GEN. § 19-710.1(h).
•
California
– CAL. CODE REGS, tit. 28 § 1300.71(a)(3)(B).
BALANCE BILLING
26
BALANCE BILLING
Areas of Heightened Litigation
• Emergency Care
• Hospital Based Providers
27
BALANCE BILLING
Areas of Heightened Litigation
• Billed Charges vs. UCR/Allowed Amount
• May Non-Participating Providers Balance
Bill?
28
BALANCE BILLING
Provider Theories
• ERISA
• RICO
• Sherman Act
• Unfair Trade Practices
• Violations of State Statutes
29
BALANCE BILLING
Providers Prohibited from Balance
Billing
• Prospect Med. Group, Inc. v. Northridge
Emergency Med. Group, 45 Cal. 4th 497, 198 P.
3d 86 (2009).
– Balance Billing For Emergency Services is Illegal
Where Provider has Recourse Against HMO
– Construing Health and Safety Code § § 1340, et.
seq.
30
BALANCE BILLING
Recently Filed Balance Billing Class Action
• Sabban v. Scripps Health, No. 37-200900081971 (Cal. Super. Ct.) (Complaint Jan. 26,
2009).
– Putative class of subscribers sued providers
of emergency services for balance billing
alleging violations of California law.
31
BALANCE BILLING
Providers Prohibited from Balance
Billing
• Joseph L. Riley Anesthesia Assocs. v. Stein and
Florida HealthCare Plan, Inc., 27 So. 3d 140
(Fla. Dist. Ct. App. 2010).
– Non-participating hospital-based anesthesiologists
and other hospital-based providers may not balance
bill HMO enrollees.
– Construing FLA. STAT. § 641.3154
32
BALANCE BILLING
• Do payors have a duty to monitor balance
billing practices by Participating
Providers?
– Edith Harris v. MCG Health, Inc., d/b/a MCG
Hospital, United Healthcare Insurance Company
and UnitedHealthcare of Georgia, Inc., currently
pending in the Superior Court of Richmond
County, Georgia.
33
BALANCE BILLING
MAJORITY OF STATES HAVE NO
STATUTORY PROHIBITION
AGAINST BALANCE BILLING
34
BALANCE BILLING
Statutory Protections
• New York
– N.Y. INS. LAW § 3221(i)(15)
– Prohibits balance billing by ambulance providers for
emergency care
35
BALANCE BILLING
• Florida
– FLA. STAT. § 641.3154
– No balance billing for covered services provided to
HMO enrollees
• Maryland
– MD. CODE. ANN., HEALTH-GEN. § 19-710(p)(i).
– No balance billing of HMO enrollees.
36
ASSIGNMENT OF BENEFITS
37
ASSIGNMENT OF BENEFITS
Tension
Traditional Public Policy Supporting the
Assignability of Contracts
vs.
Public Interest in Controlling Health Care Costs
38
ASSIGNMENT OF BENEFITS
Plan Benefits of Anti-Assignment
Clauses
• Encourages Network Participation
• Controls Health Care Costs by Limiting
Reimbursement to Contract Amounts
39
ASSIGNMENT OF BENEFITS
MAJORITY OF COURTS HAVE
UPHELD ANTI-ASSIGNMENT
PROVISIONS
40
ASSIGNMENT OF BENEFITS
Cases Upholding Anti-Assignment
Clauses
• Abraham K. Kohl v. Blue Cross & Blue Shield
of Fla., Inc., 955 So. 2d 1140, 1144-45 (Fla.
Dist. Ct. App. 2007).
• Somerset Orthopedic Assocs., P.A. v. Horizon
Blue Cross & Blue Shield of N.J., 785 A. 2d
457, 461 (N.J. Super. Ct. App. Div. 2001).
41
ASSIGNMENT OF BENEFITS
Cases Upholding Anti-Assignment
Clauses
• Parrish v. Rocky Mountain Hosp. & Med. Servs.
Co., 754 P. 2d 1180 (Colo. Ct. App. 1988).
• Obstetrics-Gynecologists v. Blue Cross & Blue
Shield of Neb., 361 N.W. 2d. 550 (Neb. 1985).
42
ASSIGNMENT OF BENEFITS
Cases Upholding Anti-Assignment
Clauses
• Kent Gen. Hosp., Inc. v. Blue Cross & Blue
Shield of Deli, Inc., 442 A. 2d 1368 (Del. 1982).
• Augusta Med. Complex, Inc. v. Blue Cross of
Kan., Inc., 634 P. 2d 1123 (Kan. 1981).
43
ASSIGNMENT OF BENEFITS
Cases Upholding Anti-Assignment
Clauses
• Blue Cross and Blue Shield of Alabama v.
Nielsen, et al., 714 So. 2d 293 (Ala. 1998)
(option not to honor).
– Blue Cross plan exempt from statutes requiring
direct payment to various classes of providers
holding assignments.
44
ASSIGNMENT OF BENEFITS
Cases Upholding Anti-Assignment
Clauses
• Kassab v. Med. Serv. Ass’n of Pa., Inc., 39 Pa.
D. & C. 2d 723, 725 (Pa. Ct. Comm Pl. 1966,
aff’d, 230 A. 2d 205 (Pa. 1967).
– “Agreement against assignment of any right is not
only valid, but essential to the continued success of
the Blue Shield Plan.”
45
ASSIGNMENT OF BENEFITS
Cases Voiding Anti-Assignment
Clauses
• Am. Med. Int’l, Inc. v. Ark. Blue Cross & Blue
Shield, 773 S.W. 2d 831 (Ark. 1989).
– As a matter of public policy, a payor may not refuse
to honor an assignment of benefits.
• Toranto v. Blue Cross & Blue Shield of Tex.,
Inc., 993 S.W. 2d 648, 649 (Tex. 1999).
– Enforcement of anti-assignment clause is prohibited
by the Texas Insurance Code.
46
ASSIGNMENT OF BENEFITS
COURTS WILL ENFORCE
ANTI-ASSIGNMENT CLAUSE IN
ERISA PLANS IF THE PLAN IS
CLEAR AND UNAMBIGIOUS
47
ASSIGNMENT OF BENEFITS
Cases Enforcing Anti-Assignment
Clauses in ERISA Plans
• Physician’s Multi-specialty Group v.
HealthCare Plan of Horton Homes, Inc., 371
F.3d 1291 (11th Cir.), cert. denied, 543 U.S.
1002 (2004).
– Unambiguous anti-assignment clause consistent
with Congressional intent.
48
ASSIGNMENT OF BENEFITS
Cases Enforcing Anti-Assignment
Clauses in ERISA Plans
• Le Tourneau Lifelike Orthotics & Prosthetics,
Inc., v. Wal-Mart Stores, Inc., 298 F.3d 348
(5th Cir. 2002).
– Anti-assignment clause renders assignment
unenforceable, reversing District Court.
49
ASSIGNMENT OF BENEFITS
Cases Enforcing Anti-Assignment
Clauses in ERISA Plans
• City of Hope Nat’l Med. Ctr. V. Health Plus,
Inc., 156 F.3d 223 (1st Cir. 1998).
– Anti-assignment clause not contrary to public
policy; Congress chose to bar alienation of
pension plan benefits, but not welfare plan
benefits.
50
ASSIGNMENT OF BENEFITS
Mandated Assignment Statutes
• Tenn. Code Ann. § 56-7-120
– General Application: Applies to All Covered Services
• Alaska Stat. § 21.51.120
– General Application: Applies to All Covered Services
51
Assignment of Benefits
Mandated Assignment Statutes
• CMS Rule: Special Rules for Ambulance
Service and Emergency and Urgently
Needed Services, and Maintenance and
Post-Stabilization Care Services, 42 C.F.R.
§ 422.113
– Applies to Emergency and Urgently Needed
Services Provided to Medicare Advantage Plan
members.
52
Assignment of Benefits
Mandated Assignment Statutes
• FLA. STAT. § 641.513
– Applies to Emergency Services
• CAL. HEALTH & SAFETY CODE § 1371.4
– Applies to Emergency Services
• 40 PA. CONS. STAT. ANN. § 991.2116
– Applies to Emergency Services
53
Assignment of Benefits
ERISA Preemption of Mandated
Assignment Statute
• La Health Serv. & Indem. Co. v. Rapides
Healthcare Sys., 461 F.3d 529 (5th Cir. 2006),
cert. denied, 549 U.S. 1279 (2007).
– ERISA does not preempt Louisiana anti-assignment
statute
54
THIRD PARTY VENDOR BILLING
55
Third Party Vendor Billing
• Not DME
• Typically involving expensive implants
– Orthopedic screws, joints, devices
– Cochlear implants
• Facilities want to avoid front end expense
• On the horizon
– Engineered tissues
56
Third Party Vendor Billing
Vendor Pre-Litigation Strategies
• Pre-Service
– Obtain letter approving medical necessity of
implant directly or through surgeon
• Pre-Litigation Appeals
– Voluminous (30 + pages) letters to plan sponsors
and plans
– Threats to sue plan sponsors and members
– Threats of criminal sanctions and civil fines
– Multiple appeals: 7 – 8 appeals
57
Third Party Vendor Billing
• Access Mediquip v. United Health Group and
United HealthCare Insurance Company, CA
No. 4:09-CV-02965 (S.D. Texas filed 9/11/09).
• Allegations
– Characterize themselves as out-of-network
provider
– Relied on misrepresentation that provider was
covered
– $18,000,000 owed on 2,200+ claims
58
Third Party Vendor Billing
• Access Mediquip
Theories
–
–
–
–
59
ERISA via assignment
Promissory estoppel
Quantum meruit
Unjust enrichment
Third Party Vendor Billing
Defense Strategies
• Analyze contract for defenses
– Was claim timely and properly submitted?
– Are third party vendors covered providers for this
device?
– If performed at PAR facility, is implant included in
global reimbursement?
– Is assignment valid?
– Have administrative remedies been exhausted?
60
Third Party Vendor Billing
Defense Strategies
– Manage discovery logistics
• 2,200+ claims involving over 400 non-party
providers
• Discovery regarding actual cost
• Discovery from non-party providers regarding
agreements with vendor
61
62
Thank you.
63
Cavender C. Kimble
Balch & Bingham, LLP
1901 6th Avenue North
Suite 1500
Birmingham, Alabama 35203
(205) 226-3437
ckimble@balch.com
64
Leigh Anne Hodge
Balch & Bingham, LLP
1901 6th Avenue North
Suite 1500
Birmingham, Alabama 35203
(205) 226-8724
lhodge@balch.com