Third Circuit Court of Appeals Upholds Assignments

Non participating providers have been waiting for this decision for a long time.  In North Jersey Brain & Spine Center v. Aetna, Inc., the Third Circuit held that an assignment of insurance benefits to aprovider, but without explicitly giving the provider the right to file suit, nonetheless gives the provider standing to sue for these benefits under ERISA.

Aetna contended in this case, and healthcare insurer CIGNA argued in other cases, such as Franco v. Connecticut General Life Ins. Co., that a provider could only have ERISA standing if she had an assignment that gave her the right to file suit on her patient’s behalf.  Some insurers went further, contending that the assignment language must specify the causes of action that the provider could bring, as if a non-lawyer patient could know that.  Here the Third Circuit properly held: “An assignment of the right to payment logically entails the right to sue for non-payment. . . . The value of such assignments lies in the fact that providers, confident in their right to reimbursement and ability to enforce that right against insurers, can treat patients without demanding they prove their ability to pay up front.  Patients increase their access to healthcare and transfer responsibility for litigating unpaid claims to the provider, which will ordinarily be better positioned to pursue those claims.”

The Third Circuit now joins all the other circuits in this holding.  This applies to non-participating providers, that is, providers who do not participate in an insurer’s network.  Participating providers don’t need an assignment from their patients (called participants or beneficiaries under ERISA) because they have a direct action under their participating provider agreements.

Medicare and commercial health insurers are moving from the traditional fee-for service reimbursement model to “value-based payment.”

It’s coming. Both Medicare and commercial health insurers are moving from the traditional fee-for service reimbursement model to “value-based payment.” How will this fundamental change impact reimbursement to physicians, other providers, practice groups, and hospitals?

The answer, I suspect, will depend on how “value” is measured. Take a simple example. When a physician provides diabetic counseling to her patients it may well result in less need for expensive services in the future surrounding diabetes complications. The health insurer, as a result, saves money by not having to pay those claims. But how do we measure the absence of claims? And if we cannot, how can we measure “value” on an individual basis for insurance reimbursement purposes if we are using value-based payment?

The same issue arises if we think of “value” from the point of view of a set of procedures. Under fee-for-service reimbursement, insurers criticize providers for prescribing what they believe are “needless” services, because they are paid by the service. Purportedly “value-based” payment would base reimbursement not on the number of services rendered and on the total value of whatever services are rendered. All well and good, but what exactly is “value” in this context? The patient recovering? Recovering faster than average? Reimbursement to the provider cheaper than previously?

Since patients come in an infinite number of shapes, sizes, ages, medical conditions, and other variables, what possible algorithm can we develop to calculate “value” for reimbursement purposes? And if there is a bad outcome, is that the absence of value?

It seems to me the answer may be to rewrite the contracts between providers and insurers to capture precisely what must be measured by a value-based payment structure. For in-network providers, then, reimbursement levels must be commensurate with the value of the medical services performed. “Value” is a matter of negotiation and contract. Failure to reimburse results in breach of contract.

Can A Health Insurer Receive a Vaccine that Confers Lifelong Immunity from Antitrust Liability?

Imagine the following scenario: You are a medical provider and decide to sue WellPoint (now Anthem) for antitrust conspiracy violations stemming from usual, customary and reasonable (UCR) reimbursement levels or exclusive territorial allocations, or both, either individually or as part of a class of similarly situated providers.  But WellPoint argues that you can’t, because the settlement of another class action many years ago (and where the settlement agreement long expired) released those antitrust claims and – here’s the kicker – all antitrust claims you may have against WellPoint in perpetuity.  And this even though you didn’t have – and couldn’t have had – the same antitrust claims then as you have now and therefore couldn’t have brought them then.  Nor did you ever receive a class settlement notice that specified that your antitrust claims against WellPoint would be released forever.

Sounds unfair?  Sounds like an abuse of the class action procedure?  That precise issue is the subject of an extraordinary petition to the Supreme Court of the United States. In it, the Medical Association of Georgia, the California Medical Association, the Connecticut Medical Society, and three physicians ask the Supreme Court to reverse the Eleventh Circuit’s ruling that the antitrust claims are “new, overt acts within an ongoing conspiracy, rather than new claims in and of themselves.”

But that makes no sense, both factually and legally.  Factually, it wasn’t entirely an ongoing conspiracy; it was in part a new conspiracy based on new misconduct.  Legally, the Supreme Court long held that you cannot release antitrust conspiracy claims in perpetuity; to do so represents a violation of the antitrust laws because it gives a defendant antitrust immunity (which is what WellPoint is seeking for itself).  So even if it were an ongoing conspiracy it doesn’t matter.

But that’s what the Eleventh Circuit did, and if it is not vacated by the Supreme Court the decision will have drastic consequences not only in this case but in the future.  All class action settlements against health insurers will ostensibly release antitrust (and possibly other claims) forever.  So if there’s a settlement, say, in 2015 and you have antitrust damages in 2037 you’re out of luck.  You couldn’t have sued this year for your 2037 injury but it doesn’t matter – WellPoint (and if the case is upheld other insurers) get an antitrust vaccine that confers lifelong immunity.

Here’s the passage from the petition:
The significance of the Eleventh Circuit’s decision is not limited to this case.  Rather is strips nearly one million physicians of their federal rights to challenge the continuing anticompetitive practices of many of the nation’s largest health insurers in perpetuity, as many of those insurers have entered into settlements substantially similar to WellPoint’s. . . . Finally, the decision opens the door to a new abuse of the class action, in which absent class members find that they have given up the right to challenge ongoing conspiracies forever, without receiving compensation or notice that they are doing so.

You can read the petition here, WellPoint’s brief in opposition here, and the brief in reply here.
(Axelrod & Dean LLP Co-Authored the briefs on behalf of Petitioners.)

Reimbursement of Emergency Room Services and “Triage” Fees

An old health care insurance scheme you would think would have been done away with by now has resurfaced, particularly in the context of Medicaid reimbursements.  Imagine the following scenario: a patient comes into a hospital’s emergency room complaining of chest pains.  This person is seen immediately by emergency physicians to rule out a myocardial infarction or other serious emergency condition.  It turns out that, fortunately, it was not a heart attack and the person is later released.

Further imagine the presenting patient had Medicaid, not commercial insurance.  In many states, affiliates of the same commercial health care insurers act as managed care organizations (MCOs) to administer Medicaid benefits on behalf of states.  They receive capitated payments – a fixed per insured per month fee – which may result in substantial financial incentives to under-reimburse hospitals and other providers so they can receive as much of the capitated fee for themselves.

Years ago, the old health care insurance scheme was to base emergency room reimbursement on the ultimate diagnosis and not on the initial emergency presenting symptoms – despite the substantial set of procedures necessary to rule out the emergency.  Therefore, if a patient arrived with chest pains and the ultimate diagnosis was something of a non-emergent nature, the hospital ER would not be reimbursed for any of the work required to rule out, in our case, a heart attack or other problem.

To fix this problem, courts established and eventually states codified in statutes what is called the “prudent layperson standard.”  Under this objective standard, the basis used to determine up front whether an emergency medical condition exists is when a prudent layperson (who possesses an average knowledge of health and medicine) determines that a medical condition manifests itself by acute symptoms of such severity that the absence of immediate medical attention would be expected to result in placing the health of the patient in serious jeopardy.  The standard looks to the presenting symptoms – in our hypothetical, chest pains – not what might be the ultimate diagnosis.

The “prudent layperson standard” became a requirement in commercial insurance plans and was codified in the Affordable Care Act as well.  But somehow hospital emergency rooms have been facing this serious issue once again, when MCOs who administer Medicaid reimbursements refuse to follow the prudent layperson standard and pay a small “triage” fee instead.

In many parts of the country, emergency rooms treat a substantial number of Medicaid patients.  While it may be true that some of these patients use the emergency room as their primary care source for non-emergency issues, many present with true emergency conditions.  That’s why the prudent layperson standard was established.

What should hospitals do to challenge this practice?

  1. Medicaid has a detailed administrative appeals process.  Make use of it.
  1. Each appeal must be drafted carefully and with great detail, claim by claim.
  1. Should the appeal be denied, you have further options, including litigation.


Fighting Back Against Repayment Demands and Recoupments

Health insurers often pay providers directly who have assignments from their patients and then determine months later that it paid incorrectly and demand the money back.  Sometimes this demand is accompanied by accusations of fraud and abuse on the part of the provider.  When the provider doesn’t pay, the insurer recoups the money from current payments and offsets from future payments.  In sum, all payments from the insurer stop until the full amount is paid off.

Most of the time, the provider and her staff, overwhelmed by the accusations and financial demands, either agrees to pay the money back up front, gets offset, or enters into negotiations with the insurer.

What rarely happens, though, is appealing the health insurer’s repayment demand in the first place.  In 2011, for example, only 2.25% of all of United Healthcare’s repayment determinations were appealed.

Why is that?  Well, providers didn’t think they had legal rights to challenge recoupments, and insurers took the position that providers (as compared to their patients, as plan members) had no legal rights at all.   In most cases insurers did not even give information to providers about the existence of an appeal.  Instead, they usually sent a letter stating the amount of the recoupment, and a deadline to pay.

All that should change as a series of court decisions have now made it clear that repayment determinations and recoupments fall under ERISA, which governs most commercial employer plans.  This means, for providers who are out of network, a repayment demand and recoupment are actually denials of benefits, and they have the right to notice, the right to an appeal, and the right to full and fair review of the appeal.

Are there limitations to this critical decision?  For example, say an insurer determined that the provider never provided the service to the patient in the first place, but billed for it. Ostensibly that’s fraud, right, and fraud arises under state law, not ERISA.  In Premier Health Center, P.C. v. UnitedHealth Group (D. N.J. Aug. 28, 2014), the court differentiated an insurer’s claim against a provider for fraud (which might arise under state law, not ERISA) and the procedure an insurer uses to recoup payments based on what it believes to be fraudulent activity (which does arise under ERISA).  That is, an insurer “must allow the provider the opportunity to challenge that determination in accordance with ERISA procedure, lest the determination be accepted at face value.”

And there it is.  Every accusation of fraud and abuse by an insurer was not simply an accusation but an unchallengeable, non-appealable statement of fact.  Now the tide has turned in the providers’ favor.

What is the takeaway from all this?  What should providers do when health insurers send them a repayment demand and seek to recoup payments?

  1. You do not need to pay the demanded amount upfront or over time.  Under ERISA, you have substantial appellate rights. You should make use of them.
  1. You need to determine for the payments at issue with respect to each of your patients’ plans whether you are in network or out of network with the health insurer.
  1.  Even if you are in network you may have contractual appellate rights that you should utilize.
  1. You must insist that the insurer gives you the reason for the repayment demand upfront.  Remember, a repayment demand is a denial, just like any other denial you have received.
  1. You must draft all appeals very carefully and fully.  Boilerplate appeals will receive boilerplate rejections.
  1. Should your appeals be rejected anyway, you have options to consider, including mediation, arbitration, and litigation.

The Case of the Hidden Fees

In self-funded plans under ERISA, corporations pay health care benefits themselves and, in addition often contract with a health insurer to administer the plan.  The health care insurer operates as a third-party administrator, or TPA, and is paid a fee for these administrative services.

In the case of Hi-Lex Controls, Inc. v. Blue Cross Blue Shield, 751 F.3d 740 (6th Cir. 2014), all was well and good until Blue Cross Blue Shield of Michigan (BCBSM) got greedy.  It was already receiving its administrative fee on a contractual per-employee-per-month basis.  Apparently, that wasn’t good enough.  BCBSM started to add mark ups to hospital claims, and it invented a remarkable phrase to capture the difference between the higher amount it billed to its self-funded client and the lower amount it paid to the hospital: “Retention Reallocation.”

BCBSM took these mark up fees from its self-funded client every year from 1993 until 2011 when it finally disclosed their existence for the first time.  Its client, to say the least, was not amused.  It sued BCBSM for breach of fiduciary duty and self-dealing – both violations of ERISA.  After a nine-day bench trial (there is no right to a jury trial under ERISA), the federal district court awarded more than $5 million to Hi-Lex Controls and an additional $900,000 in prejudgment interest.

But was BCBSM a fiduciary to Hi-Lex Controls?  After all, the relationship arguably was contractual in nature and BCBSM could be said to have breached its contract by charging more than the contracted-for amount.

This is the issue that is almost always at the heart of litigation under ERISA and so it is worth talking about.  A breach of contract claim would normally be preempted, meaning that ERISA would apply and not state law.  So Hi-Lex Controls could not bring a breach of contract claim here.

Since ERISA governs, there could be a claim if there were a fiduciary relationship.  This, in turn, hinges on the exercise of discretionary control.  Hi-Lex Controls proved at trial that BCBSM sometimes waived the mark up fees for some clients, meaning it exercised discretion.  As a result (and there were other technical aspects I need not describe here) the appellate court held that BCBSM was a fiduciary.

ERISA requires a duty of loyalty on the part of fiduciaries, and bars self dealing.  Affirming the lower court’s trial decision in its entirety, the Sixth Circuit’s decision is instructive for the following reasons:

First, because the case arises under an employee benefits plan, the claims must be brought under ERISA, not state law.

Second, self-funded plans should be investigating how their TPAs are administering their plans in order to take effective action against miscreants.  One option is a regular audit of fees.  A thorough review of prior conduct before hiring a TPA is also a must.

Third, even after the critical discovery of the overcharge, it took a trial to establish the necessary findings of discretion (in the ultimate irony, BCBSM sometimes did not collect the hidden fees; if it always did arguably there would not be discretion) in order to prove that BCBSM was a fiduciary and therefore that its actions were in violation of ERISA.  Plans should be prepared to move forward in this way to protect their plan assets.


A Personal Remembrance of Robin Williams

It is fitting that a health care blog should take on the subject of Robin Williams’ suicide head on.  I was not aware, and I suspect most people were not aware until after his death, that Robin Williams suffered from depression of apparent long standing.  Depression is one of the last diseases that some people are still “ashamed” to have.  But clinical depression is just as organically based, that is, chemically and biologically based, as having an enlarged heart or an amputated right arm.  No one would think of keeping those conditions secret from friends and family.  But depression not only hurts. It is, needless to say, dangerous when untreated.  Maybe it’s time we understood the conduct of comics like Robin Williams and the behavior of many other people as the symptoms they may well have turned out to be – masking deep and fundamental emptiness.

I want to turn, though to a more positive personal remembrance of Robin Williams.  Many people shared their favorite Robin Williams movies.  My favorite movie of his was Awakenings, which came out in 1990.  Based on the book of the same name by one of my favorite authors, the neurologist Oliver Sacks (who later went on to write the bestseller The Man Who Mistook His Wife for a Hat) the movie was set in a Bronx hospital in 1969 where a group of patients were unable to make any voluntary movements at all.  They had been admitted as a result of the 1917-1928 encephalitis epidemic.  So there they sat, for decades, without effective treatment.  One such patient, who had apparently contracted encephalitis as a very young child, was played in the movie Robert De Niro. His mother faithfully visited her son every day.

Robin Williams played Dr. Malcom Sayer (Oliver Sacks) who realized that the absence of all voluntary movement was the result of Parkinson’s Disease – not the symptoms we’re used to seeing but Parkinson’s Disease so severe that it demonstrated that the encephalitis had likely destroyed all or a substantial portion of the neurons in the substantia nigra, the brain region where dopaminergic neurons are located. So he came up with the idea of treating his patients with L-Dopa, which had just been the subject of a 1969 article in the New England Journal of Medicine.  His patients “awoke” – thus the title of the movie.

Of course, all was not well forever.  In 1969 L-Dopa was not entirely understood. Because it is converted into dopamine not only in the central nervous system but within the peripheral nervous system it caused a host of adverse side effects (the movie featured dyskinesia) and dose resistance (what later became understood as dopamine dysregulation syndrome).

But as played by Robin Williams, Dr. Sayer was both humble in the face of victory over the hospital establishment that had initially doubted his patients could be treated, and deeply sympathetic to their individual spiritual needs when it became obvious that this treatment was not a cure after all.  They had their own unique physical and emotional needs when “awake”: to dance, to sing, to play an instrument (one of the patients was played by the famous jazz saxophonist Dexter Gordon), and to rebel and to educate in turn (De Niro’s character).  In the end, the rest of the hospital staff learn to treat the patients with equal compassion as they relapse.  Dr. Sayer continues to treat his patients who are all “frozen” and the mother of the patient played by De Niro (who never left his side) is there still, taking care of her boy.

Now, in the most tragic irony, we learn that Robin Williams had been diagnosed with Parkinson’s Disease himself and had kept it secret.  It may have been the catalyst for his suicide.  Maybe if Dr. Sayer had been at his side.

A “Manifesto”

This is my first blog for my firm, Axelrod & Dean LLP, and I thought it might make some sense to begin with what we will be trying to do here.  This is a healthcare litigation blog but I intend it to be different from the litigation blogs by healthcare law firms – at least that I’ve seen – and I read at least a dozen.

What strikes me most about these litigation blogs are two things: they seem to be aimed at lawyers, and they don’t seem to be all that interactive.

They all contain summaries of court opinions.  And that’s great.  But I’m a lawyer and frankly if an opinion is really important to me I’m not going to rely on someone else’s summary; I’m going to get the decision and read it myself.  But more importantly, if you’re not a lawyer – if you’re a doctor or head of a provider practice group or a hospital executive – I don’t think a lawyer summarizing some court opinion and leaving you to your own devices as to what it all means to your business is all that helpful to you.  What is more helpful in a blog is to get a timely understanding of how a court decision may impact your practice, and then hopefully review posts from others with similar issues.  Isn’t that what a blog is?

And that brings up the second issue I have: interactivity.  Some so-called blogs aren’t interactive at all, so readers can’t post responses and, of course, the blogger can’t interact.  A non-interactive blog is a book report.

So now that I’ve said what this blog isn’t, what is this blog specifically?

First, I intend to provide timely information about health care decisions and litigation strategy and most importantly describe how they may affect your practice.

Second, this blog is not some device simply to advertise my firm or its cases.

Third, I will encourage you to respond and I will reply.  The best outcome is for us to have a dialogue together.  You may disagree with me and, if you do I will learn from you.

Finally, on occasion and in true blog tradition, I may forgo describing cases every once in a while and just rant.

So, let us begin.