Happy Holidays from the Law Offices of SAC

Happy Holidays!

The Law Offices of Stephenson, Acquisto & Colman

Happy Holidays!

As the Holiday Season is upon us, our thoughts turn gratefully to those who have made our progress possible. We value our relationship with you and look forward to working with you in the year to come. It is in this spirit we would like to wish you peace, prosperity, health and great happiness during this holiday season and the year ahead.

As a special gift, please enjoy a compilation of our best blogs of 2014 written by our dedicated litigation team. We look forward to bringing you continued insight into the healthcare arena and providing you with the content that matters most.

Best Wishes, Joy, George, Barry, Rich and the SAC Team

Ensuring Reimbursement for a Newborn’s Hospital Costs Welcoming a newborn to this world is a joyful moment for new parents as well as for the health care team that takes part in this miracle. Wondering whether or not the costs of the birth and post-partum hospital stay will be reimbursed by your health plan is usually the furthest thing from anyone’s mind since many healthcare providers assume that a newborn is automatically covered under the mother’s healthcare policy for the first 31 days after birth. Unfortunately, this is not always true.

Although both Federal and state laws offer protections for newborns and parents, it is not always clear as to when these protections are enforceable. So it is important for hospitals and other healthcare providers to know the requirements and limitations on the health coverage afforded newborns so patients are not left with large unpaid claims after the baby goes home. Federal and state statutes are similar but not identical.

Let’s look at the Federal law first. If the mother’s plan provides maternity benefits, under the Federal Newborns’ and Mothers’ Health Protection Act, the mother and baby are entitled to the following: •

A minimum hospital stay of 48 hours following a vaginal delivery and 96 hours following a cesarean delivery

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No preauthorization from the plan is required for the minimum hospital stay

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As long as the newborn is enrolled in the mother’s plan within 30 days of birth, coverage should be effective as of the baby’s birth date.

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Self-insured coverage is also subject to the Newborn’s Act. Therefore, hospitals need to make sure that the baby has been added to the mother’s policy to ensure the services for extended hospital stays for a newborn will be covered.

Local laws vary by state. In California, for example, California Insurance Code section 10119 grants mandatory health coverage for a newborn child of an insured “from and after the moment of birth.” However, this unconditional coverage is limited to a period of 31 days after birth. This is so even if the child is sick from the moment of birth. Therefore, any hospital stay for a newborn that extends beyond the 31 day statutory period of mandatory coverage is covered only where the mother applies for coverage within the 31-day period. Hospitals need to make sure that the insured mother has in fact applied for the health coverage for the newborn where it is anticipated that the newborn will have an extended stay.

By making sure that newborns are timely enrolled after birth, hospitals can help ensure that the costs of necessary medical services for the newborn will be covered.

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Putting Time On Your Side!

Remember that popular song titled “Time Is on My Side?” While it’s about a romantic relationship, it also could be relevant to the one between hospitals and the health plans or insurers (payors) that reimburse them for the medical services they provide health care consumers (patients). More and more, it’s the plans that are singing this tune much to the detriment of healthcare providers. But does it have to be this way?

When hospitals and payors negotiate contracts, the payor generally will try to reduce the time period that a hospital has to respond to or appeal a wrongful denial of its claims. Of course, if the hospital blows the short deadline (because it might be focused on saving lives), then the hospital will usually have no legal basis to recover payment from that payor. This means that instead of paying the claim, the payor gets to keep the money. Clearly this can be very profitable for health insurers and plans because by denying claims, it increases the chances that the hospital will not meet the shorter deadline for appealing those claims and getting paid.

Hospitals therefore need to be aware of the consequences of including extremely short time periods in their contracts for disputing wrongful actions by payors and these shortened periods do not just include the time to appeal the denial of a claim. It also includes the time to file arbitration or legal action (limitations period) after the payor has repeatedly denied claims. Contractual limitations periods are often as short as one or two years after the appeals have been exhausted or the payment dispute arises. On the other hand, the law allows limitations periods of up to four years. So if you do the math, the hospital may have less than half the time it otherwise would have for taking the same action. No wonder the insurers are singing, “Time is on my side” all the way to the bank while the provider is playing “Beat the Clock.”

These contractually shortened and reduced periods simply create one more unnecessary hurdle in the already arduous process of seeking fair and just reimbursement for medically necessary services. In some cases, the contractual limitations period expires while the hospital and health plan are still engaged in disputing the payment. In short, the health plan may simply be denying appeals as a matter of course, knowing full well the hospital is barred from any legal action against the plan once the clock runs out.

Of course, payors are not going to eliminate all contractual deadlines. The alternative then is to make sure that the obligations of the payors also have similar deadlines. You can limit the time, for example, that they hold on to a claim before payment or give notice of an overpayment.

One more thing that is important. Make sure the calculation of the time periods is the same for the hospital and the payor. Often plans will require hospitals to act within a certain number of “Calendar Days” while the plan is able to act within a certain number of “Working Days.” “Calendar Days” means every day counts.

“Working Days” eliminates weekdays and holidays and thus provides a longer period of time.

Setting contractual time limits does have its advantages such as prompt payment requirements. Just make sure they work fairly and are mutually applicable.

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Hospitals Should Consider Expe Experts are expensive.

They may charge hundreds of dollars an hour to review your documents and give their opinion on whether you have a strong case. They may charge thousands of dollars to attend depositions, appear at trial or attend arbitration.

By the end of a case, a health care provider could easily have spent thousands of dollars in expert fees. In the end, was it worth the cost? Since an expert, when used wisely, can make or break a case, the answer is a resounding “yes!”

Experts explain complicated information and present an opinion on a disputed issue in a way that a judge or arbitrator can understand and apply in making a decision on a case. Usually, experts are necessary because there are valid arguments on both sides, and the right expert can help tilt the scales in favor of one of the parties.

With healthcare reimbursement, experts are typically used in two broad contexts: Hospital Pricing and Clinical Denials.

In the pricing context, experts are invaluable for purposes of establishing that the prices hospitals charge for their services are reasonable. Because “reasonable” is such a loaded – and subjective – term, it is cause for constant debate between payors and healthcare providers, among patients, and a source of bafflement to judges who have to determine whether a million dollar heart transplant really should have cost a million dollars. Experts help explain, through statistical evidence, comparative data, and their own knowledge and experience, why the charges at issue make sense and are “reasonable.” They present and interpret a host of factors (the size and geographic location of the hospital, its patient population, the nature and quality of care provided) in an effort to persuade the judge that the hospital should be paid what it is charging.

In the clinical context, experts are typically used to show that the treatment provided was medically necessary, that the treatment should not be considered experimental, that certain charges should not have been disallowed, or that the patient was extremely ill and thus required to be treated at a very high level of care, such as in the intensive care unit or at the trauma level. Sometimes it is useful to retain an expert with experience in the very narrow area of medicine WWW.SACFIRM.COM

ert Testimony in Claims Disputes that is being disputed. An expert with specific knowledge and experience in a particular area will often trump the opinion of another expert who has only a generalized knowledge and understanding of the area.

In deciding whether to use an expert or not, a hospital needs to weigh the probable return on investment. A big factor, of course, is the amount at stake.

Paying an expert $50,000 on a case worth $60,000 might not make a lot of sense.

Sometimes, however, it is a matter of principle, and the cost becomes a secondary concern. On a strong case, it can provide an opportunity for the hospital to send a clear message to an insurer with a history of underpaying claims.

In selecting an expert, the goal is to have someone with significant knowledge and experience along with an impressive pedigree (a great educational background and practical training and experience is always helpful). Just as important is how the judge will perceive and experience the expert.

The expert should be able to communicate an opinion clearly, simply and eloquently; be the right “fit” for the case; and be highly knowledgeable without coming off as too esoteric or “ivory-tower.”

He or she should be able to command respect and exude a certain amount of gravitas, yet be “likeable” and approachable but not too casual or “jokey.”

It helps if they are well dressed.

Finally, the expert should never appear to be just a “hired gun”—i.e., unduly biased. In other words, while they are representing one side of the case, they are not there to toe the party line no matter what. Experts lose credibility where they merely sound like a broken record, repeating the same opinion and conclusions even when presented with information that shows their opinion to be incorrect.

The best experts will have already anticipated the weaknesses in their position and have a ready response as to why the weakness isn’t really fatal.

The right expert can make or break a case. A hospital would do well to consider all of the relevant factors and not make a decision based solely on cost.

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Beware the Narrow Networks Bait-and-Switch You know the bait-and-switch game. An unwary consumer is offered something they really want at a price that can’t be beat. Then when they try to take the product home, they learn the price is actually higher or that the product is no longer in stock and the only other similar product in the store costs three times as much. And if you think this only happens with retail products, think again. Two California health plans have recently been accused of doing a classic bait-andswitch with consumers. So rather than being stuck with a more expensive coffee pot, these patients were left holding the bag for the costs of necessary medical services that the health plan should have paid for.

These plans were recently sued in two separate lawsuits because they allegedly misled patients regarding the number of doctors and providers in their network, leaving members with large bills and no doctors to treat them. In both cases, a local consumer advocacy group claims that the two plans offered lists of participating doctors to members and that many members joined these plans because of their preference for a particular listed doctor. But when the members then tried to use the services of these doctors, they learned that the doctors were not part of the network after all. For many, this meant their treating physicians could not provide medically necessary services because it was too late for the members to switch plans. And for those members seeking answers and a solution to this problem, services were often delayed or did not occur at all.

According to media reports, “the cases are part of growing consumer pushback against so-called ‘narrow network’ health plans, which are increasingly common, especially in the state and federal insurance marketplaces created by the Affordable Care Act.” Health plans say such plans are necessary to hold down premium prices.

For instance, in one of the lawsuits, a 61-year-old female member alleges that she picked the plan specifically because she had pelvic inflammatory disease and she thought that her specialist would be in network. At first, the plan paid her doctor’s bills and counted her annual toward her deductible. However, she later learned that the insurer then switched all her doctors to out-of-network status when she was about to reach the $6,350 annual maximum. This meant that she had to pay a $12,500 deductible before the insurer paid any more on her plan.

Similarly, in the other case, two members allege that they checked and signed up for the plan because they believed their doctors were in the network. However, after the patients received care from that doctor, they found out that the doctor was actually not in-network and that the insurer would not cover any payments at all. To add insult to injury, the complaint alleges that the nearest in-network doctor was over 30 miles away from the patient’s home!

If these allegations are correct, then providers may also be greatly harmed when patients unknowingly receive treatment at hospitals, unaware that they are not in-network. For patients that cannot afford the care rendered without their plan’s coverage, this would mean that the hospital runs the risk of losing thousands of dollars. SAC will keep a close look at these cases and keep you updated on the results. At this time, no trial date has been set.

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Maximizing the Financial Benefit of an LOA Among the many tools hospitals and other healthcare providers have at their disposal for ensuring prompt payment for the medically necessary services they provide their patients is the Letter of Agreement, or LOA for short. If used correctly, LOAs can greatly benefit a hospital.

Hospitals typically use LOAs for very specific situations, such as when they need to arrange payment for individual patients with a health insurer that has not have any other type of agreement with the hospital. These agreements can be an important tool in managing relationships especially with low-volume and especially out-of-state health insurers or when a hospital services agreement (HSA) would be overkill.

Simply stated, LOAs are designed to address the scope of the medical services to be provided and the compensation for the treatment. But they often fall short in that they typically do not cover how the healthcare provider and the healthcare insurer will resolve any disputes they may have later over reimbursement. Unless the LOA specifically forbids it, either the hospital or the insurer is free to have informal discussions, use arbitration, or go to the courts to settle any disputes that may arise.

Hospitals should make sure LOAs do not include the same type of disadvantageous limits and deadlines typically found in an HSA that benefit the payor but can hurt the provider. Our experience at SAC tells us that agreements which establish multiple level appeals, mandatory meet-and-confer sessions, and require arbitrations are less efficient and lead to more delays in resolution than filing a lawsuit. So if the LOA must include an agreement on how to resolve a resolution dispute, make sure it also allows for litigation without any hoops to jump through. Also, it is important to make sure the LOA clearly defines where the dispute may be filed.

Try to put in a provision indicating any dispute must be heard in your home state and pursuant to the laws of your home state. That will avoid procedural fighting if you ever need to file a lawsuit to get reimbursement.

LOAs can be very helpful in obtaining prompt payment concessions, in establishing an acceptable rate of reimbursement, and in providing for efficient resolution of disputes. Hospitals and other healthcare providers should use them to their advantage.

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The High Stakes of Good Patient Care Good hospitals generally try to insure that their patients have the broadest scope of medical services as well as top quality treatment. To help them do this, many offer relocation and other financial assistance packages to highly qualified doctors and specialists they want to have available to their patients.

Let’s say that Hospital X, for example, wants to improve its expertise in cardiology. The hospital decides that the best way to do this is to recruit a highly qualified specialist in cardiology who happens to live in another state. In order to persuade the cardiologist to pull up roots and join its medical staff, the hospital may offer the doctor a “start up” loan package to help cover the costs for relocation and to establish a practice in a new community.

This loan, like any other, would require the doctor to sign a loan agreement with the hospital. The loan payments would likely be made periodically, perhaps monthly, with the cardiologist obligated to repay the loan funds after some time, usually a year or more. The cardiologist is usually required to also maintain a practice within the hospital’s service area for several years. In the event the cardiologist relocates out of the hospital’s service area before the loan is repaid, the doctor would be required to immediately repay any balance to the hospital.

But what happens if the cardiologist does, in fact, move out of the service area before the contractual term expires or before the loan is paid off? The good news is that the hospital can aggressively seek recovery from the cardiologist or any other physician that breaches a financial assistance agreement. But to prevail, the hospital needs to ensure that these types of agreements are outlined with a clear and concise contract that includes a promissory note signed by the physician.

The hospital can achieve this by, first, having expert legal representation in the drafting of these types of contractual documents, preferably with attorneys who understand the intricacies of the health care system. The second is representation by competent and aggressive litigators in the event the hospital needs to sue the doctor for breaches of the agreement, whether due to relocation or nonpayment for some other reason.

By taking a few simple steps to protect themselves, hospitals can feel confident in offering recruitment incentives to the best medical talent that will ultimately benefit consumers – their patients.

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Don’t Let LOAs and MOUs Create More Problems than They Solve The law of unintended consequences says that by solving one problem, we often end up with a new one that may be even worse than the one we just solved.

This unfortunately happens all too frequently to hospitals and other healthcare providers who enter into special agreements with payors for health care services.

These special agreements are called Letters of Agreement (LOA) or Memoranda of Understanding (MOU).

Typically, hospitals use these agreements when they do not have hospital services contracts (HSA) in place to obtain an agreed upon reimbursement rate from a healthcare payor. Payment for services, usually emergency services, provided in the absence of an agreed upon reimbursement rate are usually delayed and disputed by payors. As a result, hospitals will enter these agreements in a good faith attempt to reduce the number of disputes over reimbursement and to ensure prompt payment of the appropriate and necessary costs of providing medical care to patients. But these agreements, no matter how well intentioned, often backfire if they are not worded correctly.

In our work with LOAs and MOUs, we have seen that the most common problem is ambiguous language, especially surrounding reimbursement rates. Language such as “75 percent of billed charges” is usually acceptable. However, language such as “75 percent of the reasonable and customary charges” does the exact opposite of what a hospital or healthcare provider intended and creates disputes over what is considered reasonable and customary. With wording of “75 percent of billed charges,” the percentage is determined from the actual billed charges.

In contrast, with the wording of “75 percent of the reasonable and customary charges,” a determination first has to be made as to what these charges are. After that is done (usually through litigation), then 75 percent of that amount is what is owed.

Another potential landmine is negotiating an agreement with a person who does not have authority to bind the payor. We see this defense a lot. The agreement is signed and is favorable to the provider, but the payor then says that the person who signed it on behalf their company did not have authority to enter into the agreement. An easy fix is to make sure the agreement indicates that the person signing has authority to do so.

Finally, the agreements should also be very specific about the length of the LOA or MOU by providing a clear start and end date. Also, if the agreement is covering services for a specific condition, then the agreement should be clear on that and specify that it ends when the care for the specified condition ends. Doing so will insure that the hospital is paid appropriately and in a timely manner.

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Don’t Fall for the “I’m Ju All too often, a hospital does everything it is supposed to do to ensure that it will be paid for the medical treatment it provides a patient. It verifies that the patient has active coverage and available benefits; it obtains an authorization from the health insurance provider to treat the patient; it renders medically necessary, often life-saving care; and it submits in a timely manner a bill that contains all of the information required to get paid for its services. Then something goes wrong.

Usually, the bill is submitted to a middleman called a Third Party Administrator (TPA). A TPA has many variations, but, in a nutshell, it is a company that the health insurance company hires to manage the millions of claims that hospitals submit for payment every year. The TPA has access to the agreements between the hospital and the insurance company, the patient’s health plan documents, and other pricing information that is necessary to determine the amount of reimbursement due to the hospital. The TPA is responsible for reviewing the claim to make sure it is “clean” or complete, pricing the claim according to the contract and the patient’s plan, and then submitting a request for payment to the health plan or insurer that holds the funds to pay the claim. Sometimes, their responsibility also includes verifying the patient’s coverage and eligibility, and authorizing treatment. More often than not, the TPA’s reimbursement determination mirrors the hospital’s expectation of payment.

Yet, after the TPA sends the request for payment on to the insurer who holds the purse strings, the claim is denied (in whole or in part) because the insurer disagrees with the pricing determination made by the TPA. The TPA then sends an explanation of payment to the hospital indicating what portion of the claim was paid, what portion was denied, and why. The reasons for denial are numerous and varied—from non-covered services and contractual rate disputes to limitations on the authorization obtained and irregularities in the insurance application. The list goes on and on.

When this happens, the hospital’s first step is to send an appeal to the TPA, requesting that the decision be reconsidered and the expected payment be made. The TPA’s most likely response to this appeal will be “all we do is price the claim.” The TPA will argue that its hands are tied, and if the insurer decides not to pay, the hospital’s only recourse is to go after the insurer.

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ust the Pricer” Defense Not so fast! This is not always the case and there are several situations under which the TPA can still be found liable to the hospital. It is important that hospitals understand these and know how to move forward to ensure they are reimbursed either by the TPA or the insurance company depending on the case.

The first is usually based on the contract. In certain types of contractual arrangements, the hospital has a direct contract with the TPA, and the TPA has a separate contract with the insurer. Usually, the hospital’s contract with the TPA will make it clear that the TPA is not the responsible payor. Nevertheless, there is often language included in those contracts that requires the TPA to use its best efforts to make the insurer pay. So the TPA simply throwing its hands up and saying “I have no responsibility to you, hospital” just won’t cut it. At least one arbitrator has ruled that such language puts an unavoidable burden on the TPA to take actual steps to make the insurer fulfill its payment responsibility to the hospital. In other words, the TPA must present concrete evidence of the ways in which it attempted to persuade the insurer to reimburse the hospital in the manner expected. That may be in the form of follow up letters, telephone calls or other outreach. Failing to make any effort except to send the pricing determination on to the insurer has been found to be insufficient, and the TPA can be liable for damages to the hospital as a result.

Another way a TPA can be found liable to the hospital is usually based on “equity”—or fairness. In another case, the hospital called the TPA to verify benefits and coverage, the TPA gave the hospital the go-ahead to treat the patient, but failed to tell the hospital that the payor health plan had filed for bankruptcy several months earlier. The TPA’s defense was merely “we are not the ones financially responsible, and we don’t have the money to pay you.” At best the hospital could file a claim with the bankruptcy court and maybe recover ten cents on the dollar for its services. The arbitrator ruled that the TPA’s response was unacceptable and held that the TPA was fully responsible to the hospital for full payment (plus interest) on the claim.

In this situation, the hospital successfully stated a claim for misrepresentation, as the hospital relied on the information provided by the TPA when it decided to treat the patient. Had the TPA not given incorrect information to the hospital, the hospital would have attempted to make other payment arrangements with the patient before it rendered the treatment, not after, when it was left holding the bag.

Just because the TPA doesn’t hold the purse strings doesn’t necessarily mean it has no responsibilities to the hospital. The pricing agent can still be liable for damages where it avoids its contractual obligation to ensure the hospital gets paid, or where it is negligent (i.e., careless) in providing accurate information to the treating facility.

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Dealing with the RAC Me

Conventional wisdom supports the theory that when the government steps in to try and solve one problem, it usually ends up creating new ones. A perfect example of this “rule of unintended consequences” is what happened when the Federal Government introduced Recovery Audit Contractors (RACs) to better regulate payments to hospitals for medical services rendered to Medicare patients.

The stated mission of the RAC program was to“identify and correct” improper Medicare payments. This means that they were required to utilize “efficient detection” methods to determine whether claims for health care services provided to Medicare beneficiaries were overpaid or underpaid. If the claims were overpaid, the government would recoup the payment from the hospital and if the hospitals were underpaid, the government would pay the hospital. (For more information, please visit http://www.cms.gov/Research-Statistics-Data-andSystems/Monitoring-Programs/Medicare-FFS-Compliance-Programs/RecoveryAudit-Program/). Sounds simple enough.

From the government’s point-of-view, the program worked brilliantly with nearly $2.4 billion recouped from hospitals during the first nine months of 2013 alone.

The problem for hospitals, of course, is that many of these recoupments were neither justified nor supportable. So hospitals and other healthcare providers are now in the unenviable position of having to work to either recover payments that were taken back by challenging the validity of the RAC audit results or trying to stop the take-backs before they happen. In short, the RAC process has resulted in a series of additional hurdles hospitals must now overcome to ensure they are properly compensated for the medically necessary services they provide to Medicare patients.

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edicare Appeals Logjam Hospitals are now faced with battling a burdensome and time-consuming appeals process to either stop the Medicare payment ‘claw-back’ from happening or to appeal for a reinstatement of the ‘claw-back’ that has already occurred. The process includes a two level written appeals process and a hearing before an Administrative Law Judge (ALJ). These ALJ hearings offer the best opportunity for providers to prevail on their previously denied RAC appeals because it is the first time in the appeals process that the claims are evaluated by an impartial person. But as late as May 2014, there was a backlog of nearly 480,000 RAC appeals cases waiting for adjudication before an ALJ. As of this writing, it can take up to six months to get a hearing scheduled on a Judge’s calendar. This long wait leaves billions of dollars in provider revenue within the administrative system rather than with the providers of the medical services.

As lengthy as the six month wait may be, it is going to get even longer since the Centers for Medicare & Medicaid Services (CMS) has said that it will suspend RAC’s ability to request documents related to claims review as well as halt all ALJ appeals until CMS obtains new RAC contracts. As soon as this moratorium is lifted, the waiting line for an ALJ could easily stretch to as long as three years.

But there may a light at the end of the tunnel for hospitals and other healthcare providers. The American Hospital Association (AHA) has sued the U.S. Department of Health and Human Services on the grounds the lengthy RAC appeals process is prejudicial to providers. The AHA hopes the court will mandate statutory deadlines for timely review of Medicare claims denials. In the meantime, we have news that this light may be brightening. CMS recently announced a “Hospital Appeals Settlement” for fee for service denials based on patient status reviews for admissions prior to October 1, 2013. CMS is offering an administrative agreement to any provider willing to withdraw its pending appeals in exchange for timely partial payment (68% of the net allowable amount).

SAC is currently assisting its clients in evaluating the propriety of accepting this offer as opposed to continuing to trudge through the appeals process.

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