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Topics In Commercial Reimbursement

California Clinical Laboratory Association2014 Annual Conference

November 5, 2014

Presented By

Peter J. BrachmanHooper, Lundy & Bookman, P.C.Los Angeles, California [email protected]

Hooper, Lundy & Bookman, PC©

Topics

I. The Regulatory and Legal Landscape• “ERISA 101”

II. Copay/Coinsurance WaiversIII. Paying Patients/XIFIN Initiative

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The Regulatory and Legal Landscape

• Knox-Keene/DMHC• Insurance Code/DOI• ERISA/DOL• ERISA and DOI• ERISA-exempt self-funded• FEP• Blues Confusion

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The Regulatory And Legal Landscape

• Knox-Keene Act• Regulator: Department of Managed Health Care

(“DMHC”)• Governs HMOs + Blue Cross of California + Blue Shield

of California• But does not govern Blue Cross Life and Health

• Key provisions often incorporated by reference into network contracts• If in doubt, go to DMHC website 4


The Regulatory and Legal Landscape

• California Insurance Code• Regulator: California Department of Insurance• Governs PPOs• Except Blue Cross of California and Blue Shield of California

• Not uncommon to find verbatim statutes/regulations under both the KKA and Insurance Code

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Protections Under California Law

• Fair Claims Settlement Practices • Example: payor must disclose “all benefits, coverage,

time limits or other provisions of any insurance policy.” 10 Cal. Code Regs. § 2695.4(a)

• Common Law Doctrines• E.g., Untimely submission/appeal of claims

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ERISA

• Employment Retirement Income and Security Act of 1974 (“ERISA”), 29 U.S.C. § 1001, et seq.• Governs beneficiaries’ rights to benefits for

private employer-sponsored plans • Justice Scalia: “We have observed repeatedly

that ERISA is a comprehensive and reticulated statute, the product of a decade of congressional study of the Nation's private employee benefit system.”

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Reasons For Increase In Health Plans Covered by ERISA

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• Rise in healthcare insurance premiums• State mandates on health insurance•Multi-state employers


Self-Funded Plans• Employer contracts with TPA to administer plan;

employer remains financially at risk• Many TPAs for ERISA plans also operate insured health

plans, e.g., Anthem, Aetna, Cigna, Humana, United• TPA contracts with providers for discounted rates• Beware access through “Other Payor” provisions• Typical fight: WE didn’t sign• Consider proposing more favorable language

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Sue and Be Sued . . . .• Who can sue under ERISA?• Limited to “participant” or “beneficiary”• BUT providers can “step into the shoes” of the plan

member with a properly drafted assignment of benefits

• AOB litigation• Also implicates right to appeal• “Authorized Representative” status

• Lesson: review your requisition forms

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AOB

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Who Can You Sue?

• Scenario: A TPA is consistently underpaying you on fully insured claims as well as 50 different self-funded plans it administers.• Question: Who do you sue? The TPA? The

plans? All of them?

• Cyr v. Reliance Life Ins. Co., 642 F.3d 1202 (9th Cir. 2011)

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Difference Between State and ERISA Legal Claims

• Different substantive rules/causes of action• Forum• Exhaustion• Level of deference (e.g. discretionary clauses)• Who makes the decisions?

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What is recoverable?• ERISA claims• Benefits due to the beneficiary are recoverable (how much?)• Injunctions may be available• Reasonable attorneys’ fees may be awarded• Interest, and interest rate, at court discretion • No punitive damages

• State Law claims• Quantum meruit / reasonable value (how much?)• Injunctions and other equitable remedies available• Misrepresentation / statutory claims can be asserted• Generally, no attorneys’ fees absent contract provision allowing it• Interest at state law rates• Punitive damages may be available

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ERISA Claims Handling Regulations• Adopted in 2003 by DOL• Any claims appeals process must be “reasonable” • Notice of any ABD must:

1) Give specific reasons for the adverse determination2) Reference specific plan provision3) Describe any additional material/information necessary

to perfect the claim, and explain why it is necessary4) Describe the plan’s review procedures and time limits5) If an internal rule, guideline, protocol, or other similar

criterion was relied upon in making the adverse determination, explain and agree to provide for free

6) If decision based on medical necessity or experimental treatment, etc…, explain and agree to provide for free 15


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Consequences for Failure To Comply With Regs

• Potential waiver/estoppel re procedural defenses and even substantive coverage defenses

• Exhaustion Doctrine• Exhaustion: Claimant must exhaust an ERISA plan’s “reasonable” internal

appeal process before suing

• BUT . . . BUT . . . BUT• Deemed Exhausted if plan fails to comply with the Claims

Handling Regulations• Consequences can include claimant being allowed to sue

right away, and plan’s decision getting no deference in court• Exception if plan “substantially complied” with the rules

• Important: ACA cuts way back on this exception

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Waiver of Co-Payments

• As managed care contracts have become more onerous, an increasing number providers are non-contracted• Many non-contracted providers give discounts to patients on

co-payments/co-insurance (“co-payments”) • . . . or waive entirely

• Trend of insurers and/or TPA bringing lawsuits against providers • How much do they want back?

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Plan Investigations

• What triggers plan investigations?• Provider inquiries:

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Patient Questionnaires

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Labs Are Not Immune . . . .

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State Law

• Some states have statutes that prohibit copay discounts • E.g., Colorado, Florida, Georgia, Illinois, Texas• Florida: All providers other than hospitals commit insurance fraud if

they “engage in a general business practice” of waiver. Fla. Stat. Ann. §817.234(7)(a).

• Georgia: • OK for provider to “occasionally” waive copays so long as “not a

general business practice.” Ga. Code Ann. § 43-1-19.1(c).

• What about California????• No statute or court decision directly on point 22


State Law: Payor Theories

• Affirmative Fraud/Misrepresentation• Theory is that billed charges on UB-04/CMS 1500

are false because the provider never had any intent to collect the full amount of charges• E.g., Feiler v. New Jersey Dental Ass’n (N.J. Super. 1983)• “A dentist’s statement that asserts he charges $100 for a

procedure is untrue if he intends to forgive copayment upon receipt of $80 and if he almost always receives such part payment.”

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The Fine Print . . . .

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Provider Response

• UBs/HFCAs are not a promise/representation• E.g.: “Cigna has not alleged that the charges set forth on

the face of the UB-04 were not the charges for each item, service, and supply provided to the Cigna member.” -- Cal Super. Ct.

• California AG Opinion“We are asked [by a dentist] whether that practice [waiver of copayments]

violates various California laws relating to the making of false and fraudulent statements to obtain advantage. We are also asked whether a dentist advertising that practice of waiver violates the various California laws against false or misleading advertising. Our answers to both questions are negative.” -- 64 Ops. Cal. Atty. Gen. 782 (1981)

• BUT . . . . . 25


Payor Theories

• Fraud by concealment• Slightly different theory premised upon passively

misleading the payor

• Provider should have disclosed the discount policy

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Provider Response: Not My Problem

• No duty to disclose• Buller v. Sutter Health, (Cal. App. 2008)• American Federation v. Bristol-Myers Squibb, (S.D.N.Y. 2013)• No general rule that “routine and hidden” waiver is fraud

• People v. Brigham (N.Y. Ct. App. 1999)• People v. Duz-Mor Diagnostic Lab., Inc. (Cal. App. 1998)• Garcia v. Health Net of New Jersey, Inc., (N.J. Sup. 2007)•

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Payor Theory: Don’t Mess With My Contracts

• Intentional Interference• With Health Plan Contracts• With Network Contracts

• Unfair Competition• “At most the allegations against [CLIENT], the

discounting of insured responsible charges has the effect of notching up competition.” --Cal Sup. Ct.

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Safe Harbors

Prompt Pay Discount: “To encourage the prompt payment of health or medical care claims, health care providers are hereby expressly authorized to grant discounts in health or medical care claims when payment is made promptly within time limits prescribed by the health care providers or institutions rendering the service or treatment.” B&P 657(b).

Charity Care Discounts: “Notwithstanding any provision in any health care service plan contract or insurance contract to the contrary, health care providers are hereby expressly authorized to grant discounts for health or medical care provided to any patient the health care provider has reasonable cause to believe is not eligible for, or is not entitled to, insurance reimbursement . . . .” B&P 657(c)

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ERISA Claims

• Different focus: coverage under plan terms• Kennedy v. Cigna (7th Cir. 1991)• “Charges you are not obligated to pay, charges that you are not billed or

that you would not have been billed except that they were covered under this plan.”

• Easterbrook: “If he wishes to receive payment under a plan that requires co-payments, then he must collect those co-payments—or at least leave the patient legally responsible for them.”

• Trustmark Life Ins. Co. (7th Cir. 2000)• “Unlike the medical care provider in Kennedy, who perpetrated an ongoing

scheme of fraud . . . , [this] agreement held [the patient] ultimately legally responsible for any outstanding balance not covered by insurance.”

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Spindex Problem

• What does it mean for patient to be “legally responsible”?• In non-payment cases, payors/TPAs may argue that provider

has no standing because patient was not injured• Insurers have been successful, at the district court level, in

two cases:• Spinedex Physical Therapy v. United Healthcare, 2012 WL 8169880

(D. Ariz. Oct. 12, 2012); and• North Cypress Med. Ctr. Operating Co. v. Cigna, 2012 WL 8019265

(S.D. Tex. June 25, 2012).

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Potential Defenses

• Standing for TPA to bring claims• “Article III” Standing• Statutory Standing

• Tracing defense

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Potential Defense: Plan Procedural Violations

• Attempt to recoup is an ERISA ABD

• Pennsylvania Chiropractic Ass’n v. BCBSA, 2013 WL 5951765, *1 (N.D. Ill. Nov. 7, 2013)

• Premier Health Center v. UnitedHealth Group, 2013 WL 3943516 (D.N.J. Aug. 1, 2013)

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Paying Patients

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Paying Patients

• Some states have statutes requiring payors to pay providers directly

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• Alabama (except for non-profits, like Blue Cross)

• Alaska• Arkansas• Colorado• Connecticut• Florida• Georgia• Louisiana

• Maine• Nevada (for individual policies)• New Hampshire (for HMO)• New Jersey• Ohio• South Dakota• Tennessee• Texas• Wyoming


Paying Patients• Some states have statues allowing the practice:

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• Delaware• Illinois• Kansas• Kentucky• Minnesota• Missouri

• Nebraska• Nevada (for group

policies)• New York• Oregon • Pennsylvania


Paying Patients: California Law

• Knox-Keene Act• H&S § 1371.4 requires health care service plans to pay

hospitals directly for ER services• Cal. Sup. Court has held that ER providers cannot

balance bill. Prospect Med. Group, Inc. v. Northridge Emergency Med. Group • Only applies to emergency services

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Paying Patients: California Law• California Insurance Code 10133:

“Upon written consent of the insured … any disability insurer shall pay group insurance benefits … for expenses incurred on account of hospitalization or medical or surgical aid to the person or persons furnishing the hospitalization or medical or surgical aid …”

• Civ. Code § 954 • “A thing in action, arising out of the violation of a right of property,

or out of an obligation, may be transferred by the owner.”

• Civ. Code § 953•A thing in action “a right to recover money or other personal property by judicial proceeding.”

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Paying Patients

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What about ERISA plans?

• Davidowitz v. Delta Dental• What does the clause actually say?• Spendthrift?

• Waiver• Course of dealing?

• Preemption• Rapides: State law may trump the ERISA plan

language

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XIFIN Initiative

• Blue Shield• Engagement with DOI• Potential for favorable comment to apply to ERISA

plans

• What can YOU do about it?• May depend upon quality of assignments, types of

plans, loss ratios

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Any views or opinions expressed in this presentation are solely those of the author(s) and do not necessarily represent those of Hooper, Lundy & Bookman. You should not assume or construe that this presentation represents the opinion of Hooper, Lundy & Bookman.Although this presentation provides information concerning potential legal issues, it is not a substitute for specific legal advice from qualified counsel. You should not and are not authorized to rely on this presentation as a source of legal advice. This presentation is solely for general educational and informational purposes. Your attendance at this presentation does not create any attorney-client relationship between you and Hooper, Lundy & Bookman. You should not act upon this information without seeking your own independent professional advice.

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Questions?

www.health-law.com

Peter Brachman• (310) 551-8157• [email protected]

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