1 BLUE CROSS AND BLUE SHIELD ASSOCIATION 44 th Annual Lawyers Conference Emerging Trends In...

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BLUE CROSS AND BLUE SHIELD ASSOCIATION44th Annual Lawyers Conference

Emerging Trends In Non-Participating Provider Litigation

Friday, May 14, 2010Cavender C. Kimble and Leigh Anne HodgeBALCH & BINGHAM LLP1901 Sixth Avenue North, Suite 1500Birmingham, AL 35203Phone: (205) 251-8100

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EMERGING TRENDS INNON-PARTICIPATING

PROVIDERPAYMENT DISPUTES

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• Economic Woes

• Decreasing Provider Reimbursement

• Consumerism

Litigation Drivers

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Current Themes in Provider Payment Disputes

• Out-of-Network Reimbursement

• Balance Billing

• Assignment of Benefits

• Third Party Vendor Billing

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OUT-OF-NETWORK REIMBURSEMENT

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Billed Chargesvs.

UCR or Allowed Amount


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• Quantum Meruit

• Unjust Enrichment

• Third-Party Beneficiary

• ERISA Benefits (Third-Party Beneficiary)

• Unfair and Deceptive Trade Practices


Provider Theories

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• What amount is “Reasonable?”

• “Reasonableness” is Benchmark.


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THE INGENIX SAGA


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• 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


Chronology

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• 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.”


Cuomo Sound Bites

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• The Consumer Reimbursement System is Code Blue– http://www.aapmr.org/zdocs/hpl/NYAttryGen

Rpt011309.pdf


Products of Ingenix Investigations

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• $100 million paid by insurance companies executing Assurances


Products of Ingenix Investigation

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• 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=Hearings&ContentType_id=14f995b9-dfa5-407a-9d35-56cc7152a7ed&Group_id=b06c39af-e033-4cba-9221-de668ca1978a&MonthDisplay=3&YearDisplay=2009&Label_id=&Label_id=


Products of Ingenix Investigation

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• 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.


Litigation Spawned by Ingenix

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RECENT OUT-OF-NETWORKREIMBURSEMENT

LITIGATION


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• 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.


“Reasonableness” = The Amount the Provider is Paid

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• 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


Fair Market Value = “Reasonableness”

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• Harrison v. Blue Cross and Blue Shield of Alabama, No. 7:08-CV-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


Fair Market Value = “Reasonableness”

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• Prospect Med. Group, Inc. v. Northridge Emergency Med. Group, 39 Cal. Rptr. 3d 456 (Cal. Ct. App. 2006).


Medicare Allowance ≠ “Reasonable”

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• 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.’”


Medicare Allowance ≠ “Reasonable”

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• 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).


Billed Charges ≠ “Reasonable”

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• ERISA Preemption

• ERISA claims – Failure to Exhaust Administrative Remedies

• Lack of Standing


Defense Strategies

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• 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).


Dismissal – Failure to Exhaust

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• 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).


State Statutes

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BALANCE BILLING

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• Emergency Care

• Hospital Based Providers

BALANCE BILLING

Areas of Heightened Litigation

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• Billed Charges vs. UCR/Allowed Amount

• May Non-Participating Providers Balance Bill?

BALANCE BILLING

Areas of Heightened Litigation

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• ERISA

• RICO

• Sherman Act

• Unfair Trade Practices

• Violations of State Statutes

BALANCE BILLING

Provider Theories

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• 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.

BALANCE BILLING

Providers Prohibited from Balance Billing

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• Sabban v. Scripps Health, No. 37-2009-00081971 (Cal. Super. Ct.) (Complaint Jan. 26, 2009).– Putative class of subscribers sued

providers of emergency services for balance billing alleging violations of California law.

BALANCE BILLING

Recently Filed Balance Billing Class Action

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• 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

BALANCE BILLING

Providers Prohibited from Balance Billing

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• 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.

BALANCE BILLING

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MAJORITY OF STATES HAVE NO STATUTORY

PROHIBITION AGAINST BALANCE BILLING

BALANCE BILLING

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• New York– N.Y. INS. LAW § 3221(i)(15)– Prohibits balance billing by ambulance

providers for emergency care

BALANCE BILLING

Statutory Protections

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• 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.

BALANCE BILLING

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ASSIGNMENT OF BENEFITS

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Traditional Public Policy Supporting theAssignability of Contracts

vs.Public Interest in Controlling Health Care

Costs

Tension


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• Encourages Network Participation

• Controls Health Care Costs by Limiting Reimbursement to Contract Amounts

Plan Benefits of Anti-Assignment Clauses


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MAJORITY OF COURTS HAVE UPHELD ANTI-ASSIGNMENT

PROVISIONS


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• 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).

Cases Upholding Anti-Assignment Clauses


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• 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).



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• 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).



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• 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.


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• 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.”


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• 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.

Cases Voiding Anti-Assignment Clauses


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COURTS WILL ENFORCEANTI-ASSIGNMENT CLAUSE INERISA PLANS IF THE PLAN IS

CLEAR AND UNAMBIGIOUS


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• 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.

Cases Enforcing Anti-Assignment Clauses in ERISA Plans


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• 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.



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• 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.



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• 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


Mandated Assignment Statutes

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• 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.

Assignment of Benefits

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• 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



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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


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THIRD PARTY VENDOR BILLING

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• Not DME

• Typically involving expensive implants– Orthopedic screws, joints, devices– Cochlear implants

• Facilities want to avoid front end expense

• On the horizon– Engineered tissues

Third Party Vendor Billing

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• 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

Vendor Pre-Litigation Strategies


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• 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


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• Access Mediquip

Theories– ERISA via assignment– Promissory estoppel – Quantum meruit– Unjust enrichment


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• 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?

Defense Strategies


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– 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

Defense Strategies


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Thank you.

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Cavender C. KimbleBalch & Bingham, LLP 1901 6th Avenue NorthSuite 1500 Birmingham, Alabama

35203(205) [email protected]

Leigh Anne HodgeBalch & Bingham, LLP 1901 6th Avenue NorthSuite 1500 Birmingham, Alabama

35203(205) [email protected]

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