The past year has shown a trend towards empowering providers (and even patients) in their claims against payers. And these developments should serve to bolster the position of many patients and providers, especially behavioral health providers as they raise claims against payers.
This 2014 Arizona case addressed the issue of whether a provider had the legal ability (“standing”) to sue United to receive payment for services provided to insureds. United’s role was to process claims for certain plans. Spinedex was a physical therapy provider whose patients signed a patient responsibility form and also assigned to Spindex the right to receive payment. There were different levels of benefits based on whether the patient was insured by United. Spinedex treated patients, then submitted claims to United. When claims for payment were denied, Spindex sued.
At the heart of the case was the long-standing issue of whether a provider has standing to sue for services provided to insureds of so called ERISA plans. “We are aware,” the court wrote, “of no circuit court that has accepted defendant’s argument” [that because Spinedex didn’t seek payment from a patient, the patients don’t have an “injury,” which is required for the providers to sue the payer]. Nevertheless, the court said “yes,” which opened the door to potentially a slew of such lawsuits.
North Cypress Case
On March 10, 2015, a federal appeals court in Texas denied Cigna’s summary judgment regarding out of network providers billing insureds. The case (North Cypress Medical Center v. Cigna, Case No. 12-20695, 5th Cir.) had the following factual elements (based on the court’s order):
A Houston hospital was established as a “concierge,” out of network facility
It offered its patients a “prompt pay discount” which resulted in a discount of the patients’ co insurance responsibility
The program involved the hospital discounting its charges, then applying the patient co insurance responsibility to that reduced amount
Cigna feared that the discount program would serve to undermine incentives for providers to contract with Cigna and for patients to seek care “in network.” Cigna pressured the hospital to contract with the payer. As part of Cigna’s effort to incentivize the hospital to contract with the payer, Cigna’s special investigative unit (SIU) found that the hospital was engaging in “fee forgiving” and stopped paying or paid on some enormously reduced fee basis developed by Cigna itself (regardless of the hospital’s claim). For instance, if the hospital reported a $10,000 cost of care and the out of network responsibility was 60% of the cost of out of network care, Cigna would not pay $6,000. Instead, they employed repricing agents and paid roughly $250, based on their own survey results of the cost of care.
The hospital filed suit against Cigna based on breach of contract and ERISA violations and Cigna was successful at the lower court level. The lower court’s grant of a motion for summary judgment was, however, overturned on appeal, which means that the entire matter will get to be tried in court (rather than disposed of with a motion for summary judgment as requested by Cigna).
Historically, as mentioned above, ERISA based claims have left providers with little or no recourse against payers, in part because of the provider’s lack of standing. Here, the court was not convinced that the hospital lacked standing to sue (because it had assignments of rights from some of its patients). Factually, this is a pretty simple course of events: Cigna agreed to reimburse plan member medical claims; the Cigna insured received care and assigned to the hospital their right to receive payment. The appellate court overturning the lower court judgment on the motion means that the trial court gets to opine on the standing issue, which could follow a developing trend at the federal court level of allowing providers to sue payers: ”[A] patient suffers a concrete injury if money that she is allegedly owed is not paid, regardless of whether she has directed the money to a third party for her convenience.”
Moreover, it’s interesting to note that Cigna based its refusal to pay the hospital on a unique argument that the hospital’s failure to collect copayment meant that the payer had no obligation whatsoever to pay the hospital (due to language in the patient’s plan document that the payer is not responsible for paying anything that the patient isn’t responsible for paying). This position that “If you don’t collect the copayment (or the right amount), we owe you anything” is an argument that is gaining traction in the payer industry, and unless multiple appellate courts block the argument’s progression, we’re likely to see it used more and more as a means to deny payment to providers. In that regard, the case presents a double edged sword which will cut one way or another based on the trial (and perhaps appellate) courts’ rulings on the merits.
The Texas court action is definitely one to watch, both as it relates to the standing issue and also to the merits addressed by the court (notably the “no obligation to pay” issue). These issues are pertinent to many providers, many of whom are faced with the very same argument underlying payer’s refusal to pay anything or very much in a claims assignment situation. If the Texas court position (along with the Arizona court) on the issues develops in a provider favorable way and gains traction around the country, it has the potential to seriously stabilize and support the growth of the out of network market.
New York Smacks Behavioral Health Payers
Beacon Health Options was ordered by New York state officials to pay the state a $900,000 penalty in connection with the payer’s payment policies for mental health related claims. And another New York City based insurer (EmblemHealth) entered into a settlement agreement that could have that payer refunding roughly $31 million to over three millions insureds.
Both developments arise in the context of behavioral health and against the backdrop of the federal Mental Health Parity laws. The payers were brought to task for allegedly treating coverage decisions in the mental health and addictions realm differently than they do for other medical conditions. Since 2011, for instance, New York investigators found that EmblemHealth issued 64% more denials of coverage in behavioral health cases than they did in medical cases.
This trend toward expanding the basis for provider and insured lawsuits against payers and the development of applying the federal parity laws (to the mental health/addiction treatment sector in particular), could signal a much needed rebalancing of the provider/payer dynamic, something sorely needed in the mental health industry, which is now under an onslaught of payer and regulatory scrutiny.