Quarterly Newsletter - winter EDITION 2014-15 - #14
Attorney’s Fees and Network Contracts
SAC continues expanding the number of states in which it practices. Starting in 2015, SAC can represent providers in the State of Washington.
Health Plan Authorizations Can Actually Be a Big Waste of Time in Some Cases You are probably all too familiar with this scenario: A hospital or other health care provider contacts a patient’s health plan to confirm whether he is an active member of the health plan and to obtain authorization to treat the patient for a planned procedure. The health plan states the patient is an eligible member of the plan and tells the provider to treat the patient. The provider accepts the health plan’s representation and treats the patient. The provider then bills the health plan and the health plan denies the claim. The reason given by the health plan for denying the claim is that it discovered, (after receiving the claim for payment and after providing verification of eligibility and authorization for treatment), that the patient omitted important information on his or her health plan application. As a result,
the health plan retroactively cancels the patient’s policy to its inception date, which is prior to the hospitalization. In other words, the health plan now claims that the patient was not eligible for health plan benefits at the time of the hospitalization after all, and is therefore now not financially responsible for the claim. The above scenario occurs even though health plans usually have provisions in their applications that allow them to investigate an applicant’s health history prior to issuing health plans. In other words, health plans have the ability to obtain medical records and other information from the applicants’ prior and current health care providers and review that information prior to issuing coverage. But in reality, health plans rarely investigate the applicants’ health histories prior to
It is not uncommon for many everyday contracts to include attorney’s fees provisions. These provisions typically require that the losing party pay the attorney’s fees that the winning party incurred to pursue or defend a case. And over the course of a prolonged litigation, these fees can amount to tens of thousands of dollars! CONT’D- NEXT PAGE
issuing health plans or prior to representing to providers that the patient has eligibility or prior to granting authorization for treatment. It would be way too time consuming and overly burdensome to investigate every application! Yet, once the health plan is billed for one of its member’s hospitalizations, the health plan then finds the time to investigate the patient’s health history. After its investigation, if the health plan believes it has a basis to rescind the health plan contract with its member it will do so, and then deny the provider’s claim. So by postponing their investigations until after treatment is provided, yet verifying benefits and authorizing treatment, the health plans save money and transfer their actuarial risk to hospitals and other health care providers. Luckily California law now limits the ability of health plans to rescind or cancel coverage when the health plan failed to complete its investigation or medical underwriting. Plans are still able to rescind or cancel coverage though if they can show the applicant made a willful misrepresentation on the application (which is often difficult for the health plan to prove).
ATTORNEY FEES- CONT’D
Theoretically, in contracts between hospital providers and health plans, the attorney’s fees provision should be relatively straightforward. If the provider brings a lawsuit and prevails, the provider is awarded its attorney’s fees. Conversely, if the payor successfully defends a lawsuit against a hospital, it will be awarded its attorney’s fees. But the scenario gets complicated when an attorney’s fees provision is included in hospital agreements that end up as network contracts. Traditional network contracts used to involve a negotiating entity, such as Multi-Plan or Interplan, bringing together providers with payors to form a network. However, “direct” hospital services contracts, (contracts which on their face appear to be directly with a single health plan), now act as network contracts as well. This is because most, if not all, such direct contracts provide the health plan with the ability to allow access to its negotiated rates to other payors, (“third party payors”), who may be unknown to the provider at the time the contract was signed. Complicating this is the fact that the direct hospital services contract may include a provision that the original health plan cannot be held financially responsible if the third party payor fails to live up to the contractual terms. As a result, when a hospital provider pursues a third party payor by way of a network or a hospital services contract acting as a network contract, (“network payor”), the network payor will protest that it is not bound by the terms of that network contract as it is not a signatory. And certain judges have agreed with the network payor and are reluctant to enforce these network agreements. To add insult to injury, if the provider pursues the network payor under the terms of the contract, (such as by bringing a legal action or arbitration proceeding against them), the network payor may deny that the contract applies but still enforce the attorney’s fees provision of the same network contract pursuant to California Civil Code Section 1717. This is a statute that is designed to impose a “mutuality of remedy.” In essence, Section 1717 holds that in any action on a contract which provides for recovery of attorney’s fees, the prevailing party in such an action is entitled to recover those fees, even if the party denies they are subject to the very contract which provides for such fees. In other words, network payors are able to use this statute to collect attorney fees even when they have denied that they should be bound under the very contract that allowed for the fees. Given these issues, hospitals should seriously consider whether they should include attorney fees provisions in network contracts.
Can a Hospital Be at Risk for Negligently Referring a Physician? When we think of medical malpractice, we usually think of the obvious situation when a thoughtless physician amputates the wrong leg of his patient. In less obvious situations, medical malpractice may also occur when a physician harms his patient by providing a service or information that is below the standard of care. But what if a hospital physician referred the thoughtless physician to that patient? Can the hospital also be held liable for malpractice? You may be surprised to find that the answer to those questions may be yes.
A referral should never be casually made. It may seem that Facebook or Yelp reviews, which are often subjective, are not reliable sources to determine the competence of a physician. However, keep in mind that social media in today’s world is increasing in relevance and it is a good idea to read the reviews if you don’t really know the physician to whom you refer patients. Referrals should not be made because of a monetary benefit or personal relationship only. A referral should benefit your patient – not yourself!
Under the theory of “negligent referral,” the hospital may be held liable if its physician refers a patient to another physician that it knew or should have known was incompetent or has a strong possibility of committing medical malpractice. How would the hospital know that? Well, perhaps the hospital’s physician knew that the doctor to whom he referred the patient was often intoxicated at work or perhaps patients complained about that doctor’s competence. Surprisingly, even Yelp reviews may be enough to put a hospital on notice that a physician is more likely than not to commit malpractice as a result of negative patient reviews. Also, simply referring the patient to the wrong type of specialist such as sending the patient to a chiropractor when the patient needed an orthopedist could create liability on the part of the hospital.
JOIN TEAM BILI!
So what can hospitals do to protect themselves? Educate your physicians so that they are aware that they should make thoughtful referrals and be diligent in ensuring that the physician they are referring was not previously disciplined. Physicians should also ensure that they are referring their patients to the right type of specialist. It may even be important that the referring physician follows up with the patient, to make sure appropriate care was rendered.
Registration Deadline January 31, 2015
The Bili Project Foundation will be a ‘Participating Charity’ in the 2015 ASICS LA Marathon! Be a part of an exciting group of BILIevers as they run for one of the best foundations in one of the best marathons in the country. The Bili Project Foundation is dedicated to advance research to better detect and treat the complex family of cancers affecting the Hepatobiliary system, including cholangiocarcinoma, gallbladder cancer, and hepatocellular carcinoma (HCC). For more info on how to be a part of our team, visit www.thebiliproject.org!
church brings a church service to a park near Old Town Pasadena, and along with a sermon, provides a hot breakfast, coffee, tea and dessert. On average 250 homeless folks attend every week. I try to attend Church in the Park every other Sunday as a volunteer.
David Mastan This quarter’s Spotlight is on attorney David Mastan.
Spotlight Q&A What is your area of expertise within SAC? Twenty-four years ago I was sworn in as a member of the California State Bar. My first job was as a litigator, and I never felt the desire to change that. During those years I have participated in most aspects of the litigation process, from depositions to arbitrations and mediations to jury trials. For 12 of those years I was also in management, eventually running my own firm and overseeing other firms across the United States. I bring that experience to SAC as a firm litigation attorney.
What one piece of sage advice can you offer to our clients that can help them in the future? Everything you write should be written as if you are writing to an arbitrator, a judge or a jury. Always assume that your letters, memos, and/or computer notes are someday going to be displayed for all to see before a trier of fact or law. Write them accordingly, keeping your audience in mind. Nothing incriminating. Always professional.
Can you talk about a recent success story of yours? What was the challenge and how were you able to overcome it? I would rather talk about a recent success story involving my son Josh. Josh is a 22 year-old senior at Azusa Pacific University (APU). He loves psychology, philosophy and ethics but, like many people, has a fear of public speaking. To help overcome this fear Josh joined the APU “Ethics Bowl” team this last semester. This is a debating team that tackles ethical and philosophical questions and issues and debates those issues against other universities. There is a great deal of hard work and preparation involved, and also a very large dose of public speaking - - thinking on your feet, persuasive public speaking. As the semester progressed I could see his confidence grow. In December of 2014 the APU Ethics Bowl Team went to Regionals (think Glee, but even more nerdy). The team faced off against the UC schools and many other California private schools. For
the first time in history APU won Regionals. I’m proud of my son for facing a fear and overcoming it. This current semester Josh and the APU Ethics Bowl Team go to Nationals. Go Cougars!
Do you have any hobbies or interests outside of work? Over the last few years I have been trying to do a lot of those things that I’ve always wanted to do, but never made time for. The “I’ll do that someday” type of things. These last few years seemed like a good time to start. For example, currently I’m trying to learn how to play the electric guitar. My sausage like fingers don’t tend to want to cooperate, but I’m keeping with it. A couple years back I taught myself how to paint with oils and even set up a painting area in the house. I finished my first painting last year and gave it to my dad for Father’s Day. He framed it and put it up on his living room wall - - not in a prominent place mind you, but still. I’ve been trying to learn to speak Italian (as my family is mostly Italian), but that is slow going so please don’t ask me how to say anything in Italian, I won’t know. I decided to learn how to dance, and have taken classes in East Coast swing, waltz, two step, line dancing and cha cha. Those are very fun classes and you meet a lot of very nice people along the way. I like to read and tend to have 5 or 6 books going at once, not including the book on cd I listen to on the way to and from work. I enjoy exercising and pushing myself physically and early mornings tend to be the best time for that. I love to golf and know for a fact that I could be on the PGA Tour if I only had more time to practice!! Since I don’t have that time I would characterize my game as “optimistically impaired.” I like to play all kinds of board games and card games and watch movies. I am also an avid UCLA fan (having attended that prestigious institution undergrad) and enjoy watching UCLA football and basketball, although that has been a labor of love this past decade or so.
Do you have any charitable causes that interest you and events you have participated in recently? For decades the church I belong to has operated a program called Church in the Park. This is an outreach to the homeless population of Pasadena. Every Sunday the
Do you have family and/or pets you’d like to tell us about? I come from a large Italian family that is warm, caring, generous and supportive. I am very lucky in that. My dad is an ophthalmologist and my mom a Registered Nurse. She ran his private practice office for 25 years. She retired this last year but my dad is still working part time at 79 years old. They are the kindest people I know. I have one son, Josh, who is 22, and is living with me during his last year of undergrad. That is a blessing to me as he will be going off to graduate school soon enough. I have one daughter, Jessica, who passed away from a very rare form of cancer when she was 14. That was in 2010. She was an extraordinary young lady; smart (‘A’ student), compassionate, artistic, loving and a great athlete. She was on a club soccer team and club track team, and her high school swim team. She was the sweetest of the sweet, but also a fierce and determined competitor. She battled her cancer with the strength, grace and faith that she did everything else in life. I could not be more proud of either Josh or Jessie. I currently live with three cats (two Ragdolls and one tabby), none of which are all that bright, but all three are very loving.
Do you have any guilty pleasure television shows, movies or other activities to tell us about? I’m a sucker for those Hallmark movies around Christmas time. The cheesier the better. And I think Archer (Netflix) is hilarious.
What are your favorite Colors? Other favorites?
foods?
My favorite food is anything with Panda Express Orange Sauce. I add it to (just about) everything. My favorite dessert is a tie between chocolate covered marshmallow, chocolate chip cookies, and sugar cookies, but I would not turn down a piece of cake or pie, or sadly most desserts for that matter. My favorite color is anything that will match my blue jeans. One of my favorite memories is of driving the kids to school when they were little. We would always stop at a donut shop along the way, but before they were allowed to go into the shop they had to sing the “Daddy Donut Day” song - which was a song I made up because when I drove them to school it was “daddy donut day.” My son has still not forgiven me.
UPCOMING EVENTS
SOCIAL MEDIA HIGHLIGHTS
TOP SAC FACEBOOK POST FOR DECEMBER 2014 Convicted rapists can become medical doctors? Yes!! Criminal background checks are not required for licensing physicians in 16 states! The Maryland Board of Physicians (MBOP) licensed Dr. Dando in 1996, even though he pleaded guilty in 1987 to raping a woman at gunpoint, according to state records. Criminal background checks are not required for licensing a physician in almost a 3rd of the 50 states. Read more on this topic on Medscape and Fox News. Links below. http://buff.ly/11TxyET and http://buff.ly/1Cx7hgt All articles are written by the SAC Litigation team. The SAC Litigation team includes attorneys, nurses and physicians with extensive experience in all areas of law related to healthcare matters. Additionally, SAC partners hold legal advisory positions with healthcare organizations and sit on the boards of numerous healthcare-related organizations and monitor all out-going SAC client marketing materials and related content.
February 2015 - ‘Wisdom for a Young Golfer’ book release written by Chuck Acquisto SAC’s very own Chuck Acquisto has written a book entitled ‘Wisdom for a Young Golfer’ which will be released February 2015. More details to come! March 15, 2015 - Team Bili at the LA Marathon, Los Angeles, CA Interested in being a part of Team Bili as they run for one of the best foundations in one of the best marathons in the country? Email msearle@thebiliproject.org for more information on how to be a part of the team!
DISCLAIMER: This newsletter is for general educational and informational purposes only. You should not act upon this information without seeking your own independent professional advice. Southern California Office 303 North Glenoaks Boulevard Suite 700 Burbank, CA 91502 (818) 559-4477 - Main (818) 559-5484 - Fax
Northern California Office 5700 Stoneridge Mall Road Suite 350 Pleasanton, CA 94588 (925) 734-6101 - Main (925) 463-1805 - Fax
303 North Glenoaks Boulevard Suite 700 Burbank, California 91502
WWW.SACFIRM.COM
George Colman will be sitting on a discussion panel talking about important health care issues as it relates to managed care networks, 6pm - 8pm.
Quarterly Newsletter winter Edition Enclosed
We would love to hear from you! If you have questions, comments or feedback please email us at SACReview@sacfirm.com.
January 28, 2015 - The UCLA Health Forum at the Jonathon and Karin Fielding School of Public Health (SPH), Westwood, CA