Category Archives: Denial of Benefits

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.

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.