Quarterly Newsletter - SUMMER EDITION 2013 - #8
IS POLICY RESCISSION THE END OF THE STORY FOR THE HOSPITAL? What Options Do the Hospitals Have
By Michael S. Robinson, Esq.
H
ealthcare providers often encounter the unfortunate situation where the patient’s health plan retroactively rescinds coverage after the care has been provided. Although the patient may have had a lengthy and expensive stay at the hospital, the health plan may cite to misrepresentations in the patient’s insurance application which it did not discover until after the patient’s stay. The patient, of course, generally has little or no ability to pay from his or her own funds. Under these circumstances, does the hospital have any options for obtaining payment? Or must the hospital simply accept this as yet another “write off” while it struggles to maintain its balance sheet in today’s challenging economic environment? The answer is that the hospital does have legal recourse against the payor, if some legal hurdles can be overcome. Here at SAC, we recently obtained a large settlement for a prominent Northern California provider under just these circumstances. The case involved an out-of-state patient who was referred to the hospital by the patient’s physician after being diagnosed with a tumor. Prior to admission, the hospital confirmed the patient’s health plan would be accessing the hospital’s contract with a healthcare network. The patient was admitted, underwent life-saving surgery to remove the tumor, and then remained in the ICU for several weeks until being discharged to another facility for rehabilitation. Even after the network contractual discount was factored in, the hospital’s expected payment for the treatment totaled several hundred thousand dollars. It thus came as quite a shock when the health plan informed the hospital several months later that no payment was being made. The plan stated the patient’s coverage had been retroactively rescinded after the plan reviewed the patient’s medical records from other providers and concluded the patient did not make a full disclosure to obtain coverage.
SAC filed suit on behalf of the hospital, seeking the full contractual amount owed for the patient’s treatment. The health plan defended the lawsuit aggressively, filing a motion to dismiss in federal court based on preemption by the federal Employee Retirement Income Security Act of 1974 (“ERISA”). We were able to defeat the motion, by relying on federal appellate court precedent (which the attorneys at SAC helped create in past cases) and arguing the requirements of ERISA did not apply to healthcare providers seeking contractual recovery from payors. After the health plan’s failed attempt to dismiss the case, it was willing to come to the table and explore settlement. We argued the plan had improperly engaged in post-claims underwriting by failing to complete its medical underwriting before issuing coverage, instead performing its investigation after the hospital had already rendered care. The case was complicated by the fact the patient had filed a separate lawsuit against the plan for wrongful rescission. We were able to obtain a settlement for the majority of the contractual amount owed. This was a highly favorable outcome considering the risks of litigation, including the patient’s wrongful rescission lawsuit. If the patient had lost that lawsuit, the hospital would have been faced with a judicial determination that the health plan had not acted wrongfully in rescinding the patient’s coverage. The hospital would have had practically no hope of obtaining any recovery from the plan under those circumstances. Thus, a hospital does not necessarily have to accept a full loss if the patient’s coverage is retroactively rescinded. With aggressive and competent legal representation, a health care provider can still obtain recovery and avoid being the one left holding the bag when a plan makes its after-the-fact coverage determination.
Aetna Reaches $120 Million Settlement Over Reimbursements By Annie Chang, Esq. In 2009, Aetna was sued and accused of systematically underpaying physicians and other clinicians who were out-of-network providers. Out-of-network providers should “push” for full billed charges where they rendered emergency services or have obtained verification and authorization for medically necessary services and have not entered into a letter of agreement or memorandum of understanding. The full billed charges should be asserted as the reasonable value of the services rendered. The class action plaintiffs accused Aetna of setting out-of-network usual customary and reasonable rates (UCR) at artificially low levels, using a database called Ingenix (developed by United Health Group). As a result, Aetna was able to transfer the medical costs that should have been covered under Aetna’s health plan policy, to patients. In turn, this system shortchanged out-of-network providers on insurance reimbursements. After five years of haggling with medical service providers and claimants, Aetna, the third largest healthcare insurance provider in the U.S., finally agreed to $120 million settlement. Just two days after Aetna consented to the $120 million settlement, United Health Group Inc. also agreed to a total settlement amount of $350 million over lawsuits concerning the same reimbursement issues. Both United Health Group and Aetna signed a written agreement to abandon the Ingenix database. Both insurers will develop a new independent database for calculating reimbursement rates. Unfortunately, the use of improper bases to pay lower reimbursement rates is a common practice that prevails in the insurance industry. SAC litigates many cases to obtain appropriate reimbursement in these non-contracted situations.