Quarterly Newsletter - suMMer eDItION 2013 - #8

IS POLICY RESCISSION THE END OF THE STORY FOR THE HOSPITAL?

By Michael S. Robinson, Esq.

Healthcare providers often encounter the unfortunate situation where the patient’s health plan retroactively

rescinds coverage after the care has been provided. Although the patient may have had a lengthy and expensive stay at the hospital, the health plan may cite to misrepresentations in the patient’s insurance application which it did not discover until after the patient’s stay. The patient, of course, generally has little or no ability to pay from his or her own funds. Under these circumstances, does the hospital have any options for obtaining payment? Or must the hospital simply accept this as yet another “write off” while it struggles to maintain its balance sheet in today’s challenging economic environment?

The answer is that the hospital does have legal recourse against the payor, if some legal hurdles can be overcome. Here at SAC, we recently obtained a large settlement for a prominent Northern California provider under just these circumstances. The case involved an out-of-state patient who was referred to the hospital by the patient’s physician after being diagnosed with a tumor. Prior to admission, the hospital confirmed the patient’s health plan would be accessing the hospital’s contract with a healthcare network. The patient was admitted, underwent life-saving surgery to remove the tumor, and then remained in the ICU for several weeks until being discharged to another facility for rehabilitation.

Even after the network contractual discount was factored in, the hospital’s expected payment for the treatment totaled several hundred thousand dollars. It thus came as quite a shock when the health plan informed the hospital several months later that no payment was being made. The plan stated the patient’s coverage had been retroactively rescinded after the plan reviewed the patient’s medical records from other providers and concluded the patient did not make a full disclosure to obtain coverage.

What Options Do the Hospitals Have

By Annie Chang, Esq.

In 2009, Aetna was sued and accused of systematically underpaying physicians and other clinicians who were out-of-network providers. Out-of-network providers should “push” for full billed charges where they rendered emergency services or have obtained verification and authorization for medically necessary services and have not entered into a letter of agreement or memorandum of understanding. The full billed charges should be asserted as the reasonable value of the services rendered.

The class action plaintiffs accused Aetna of setting out-of-network usual customary and reasonable rates (UCR) at artificially low levels, using a database called Ingenix (developed by United Health Group). As a result, Aetna was able to transfer the medical costs that should have been covered under Aetna’s health plan policy, to patients. In turn, this system shortchanged out-of-network providers on insurance reimbursements. After five years of haggling with medical service providers and claimants, Aetna, the third largest healthcare insurance provider in the U.S., finally agreed to $120 million settlement.

Just two days after Aetna consented to the $120 million settlement, United Health Group Inc. also agreed to a total settlement amount of $350 million over lawsuits concerning the same reimbursement issues. Both United Health Group and Aetna signed a written agreement to abandon the Ingenix database. Both insurers will develop a new independent database for calculating reimbursement rates.

Unfortunately, the use of improper bases to pay lower reimbursement rates is a common practice that prevails in the insurance industry. SAC litigates many cases to obtain appropriate reimbursement in these non-contracted situations.

SAC filed suit on behalf of the hospital, seeking the full contractual amount owed for the patient’s treatment. The health plan defended the lawsuit aggressively, filing a motion to dismiss in federal court based on preemption by the federal Employee Retirement Income Security Act of 1974 (“ERISA”). We were able to defeat the motion, by relying on federal appellate court precedent (which the attorneys at SAC helped create in past cases) and arguing the requirements of ERISA did not apply to healthcare providers seeking contractual recovery from payors.

After the health plan’s failed attempt to dismiss the case, it was willing to come to the table and explore settlement. We argued the plan had improperly engaged in post-claims underwriting by failing to complete its medical underwriting before issuing coverage, instead performing its investigation after the hospital had already rendered care. The case was complicated by the fact the patient had filed a separate lawsuit against the plan for wrongful rescission. We were able to obtain a settlement for the majority of the contractual amount owed. This was a highly favorable outcome considering the risks of litigation, including the patient’s wrongful rescission lawsuit. If the patient had lost that lawsuit, the hospital would have been faced with a judicial determination that the health plan had not acted wrongfully in rescinding the patient’s coverage. The hospital would have had practically no hope of obtaining any recovery from the plan under those circumstances.

Thus, a hospital does not necessarily have to accept a full loss if the patient’s coverage is retroactively rescinded. With aggressive and competent legal representation, a health care provider can still obtain recovery and avoid being the one left holding the bag when a plan makes its after-the-fact coverage determination.

Aetna Reaches $120 Million Settlement

Over Reimbursements

By Armineh Yousefian, Esq.

On March 13, 2013, CMS issued a ruling that addresses the policy of billing under Medicare Part B after a denial of a Part A inpatient stay as not reasonable and necessary. If a Medicare claims review contractor denies Part A as not reasonable and necessary, then Medicare policy allows the provider to bill a subsequent Part B Inpatient claim for only ancillary charges within a certain time period. This ruling gets rid of the “gray area” of reimbursement for an observation level of care.

Before the March 2013 ruling, providers would appeal Part A denials to the Medicare Appeals Council and at hearings before Administrative Law Judges (ALJ’s). Typically, when an ALJ believed that inpatient services were not documented, they were willing to compromise by granting reimbursement for observation hours instead of Part B ancillaries only. CMS took issue with such ALJ decisions because these claims were never billed on a Part B inpatient basis. The ruling explains that ALJ Judges and the Medicare Appeals Council may only consider the originally billed Part A inpatient admission denial. Another practical consequence of the ruling is the withdrawal of denied Part A claims from the appeal process if these cases are evaluated as weak. Once there is a dismissal of the weak claim, a provider has a 180 days from the date of receipt of the

dismissal notice to rebill the claim for Part B ancillaries only. The unfortunate result of the ruling is that providers do not get reimbursed for an observation level stay even though the circumstances of the case may meet the criteria for reimbursement. CMS has now issued a new proposal (CMS-1455-P). Upon denial of a Part A claim, the proposed ruling suggests that the hospital may be paid for all Part B services that would have been reasonable and necessary had the Medicare beneficiary been treated as a hospital outpatient rather than admitted as an inpatient. A hospital may submit a Part B inpatient

George Colman - Esq. has been appointed the Chairman of the Steering Committee for a plan for Los Angeles County providers and adjacent communities that focus on the homeless and recuperative care.

Hospital administrators, doctors, and other providers of services will explore ways to use technology and outpatient clinics to reduce patient dumping and readmissions.

HOSPITALS FOCUS ON HOMELESS CARE

claim for all Part B hospital services that would have been payable to the hospital had the beneficiary originally been treated as an outpatient. This assumes that such services were reasonable and necessary, and excludes those services specifically requiring an outpatient status. Under the new policy, hospitals have an opportunity to rebill correct claims only within one year from the date of service. The CMS-1455-NR policy allowing for rebilling after one year so long as the appeals process was maintained would be discontinued.

In order to combat this restrictive new proposal, hospitals should comment on the proposed rule. Commenting by hospitals has several advantages. A strong industry reaction can sometimes persuade CMS to rethink its proposals. Even if CMS is not persuaded by hospital comments, Congress will be more likely to issue a statutory remedy if it sees hospitals have attempted to resolve this problem administratively only to be met with CMS’s refusal to compromise.

There may be a potential resolution to this ongoing problem. The Medicare Audit Improvement Act of 2013 (H.R. 1250) is a bipartisan bill addressing the critical operational problems of the RAC Program. Passage of the bill into law would supersede CMS rulings on the same subject matter such as CMS-1455-NR and the proposed CMS-1455-P. The Medicare Audit Improvement Act would establish a consolidated limit for medical record requests; improve auditor performance by implementing financial penalties and by requiring medical necessity audits to focus on widespread payment error; improve recovery auditor transparency; allow denied inpatient claims to be billed as outpatient claims when appropriate; and require physician review for Medicare denials.

Practical Consequences of the CMS Ruling on Part B Billing in Hospitals

(Ruling No. CMS-1455-NR)

“In order to combat this restrictive new proposal, hospitals should comment on the proposed rule. Commenting by hospitals has several advantages.”

“Children’s Hospital Los Angeles has been named to the Honor Roll of the best children’s hospital in the United States as ranked by U.S. News &World Report. The hospital was one of only 10 hospitals in the U.S. to make the list and the only children’s hospital in California. To qualify for the Honor Roll, a hospital must achieve exceptional scores in at least three pediatric specialties.” (California Healthfax Newsletter (June 17, 2013) in a section titled “In Brief”)

NEWS BITES

SAC ATTORNEY SHADI SHAYAN NOMINATED AS A 2013 SUPER LAWYERS RISING STAR!

SAC congratulates Shadi Shayan for being named to the 2013 list of Southern California Super Lawyers “Rising Stars.” She was nominated by her fellow peers as a top attorney under the age of 40 for her excellence in the field of healthcare law. Each year, no more than 2.5 percent of attorneys in the state are selected for this designation and honor.

About Rising Stars: Lawyers are asked to nominate the best attorneys who are 40 or under, or who have been practicing for 10 years or less. They are instructed to nominate lawyers they personally observed in action whether as opposing counsel or co-counsel, or through other firsthand courtroom observation.

George Colman joined Supervisor Mark Ridley Thomas and others at a press release disclosing $5 million from LA County to hire young people to assist them into the job market with St. Francis Medical Center being a partner in the hiring process.

NEWS BITES CONT.

PHOTO COURTESY OF ST. FRANCIS MEDICAL CENTER FOUNDATION

favorite food. I also love eating sushi and have a really hard time saying no to desserts (especially if they are covered with chocolate). Other favorites include driving in my car on a warm summer day, listening to my favorite band, Pearl Jam.

SHADI SHAYANThis quarter’s Spotlight is on attorney, Shadi Shayan.

Spotlight Q&AWhat is your area of expertise within SAC?

As a litigation attorney at SAC, I represent California health care providers in settlement negotiations, mediations, arbitrations, and state and federal civil actions against health plans, self-funded ERISA plans, government entities, and insurance companies. I am responsible for evaluating the overall merits of individual cases as well as handling all aspects of filing a lawsuit. I take pride in aggressively representing our clients to achieve the best possible results.

What one piece of sage advice can you offer to our clients that can help them in the future?

A recent trend that we are seeing in our cases is that providers and health plans are agreeing to resolve hospital disputes involving medical necessity and level of care issues through an Independent Review Organization (“IRO”). IRO’s conduct medical reviews of those claims and make binding decisions as to whether the claims should be paid by the health plan. Unfortunately, these types of agreements often limit providers by only allowing them to choose IROs from a list provided by the health plan. Further, the IRO’s decision can be binding and claims may not be further arbitrated or litigated. As a result, it is important for the provider to balance the risks and benefits of entering into such agreements when negotiating provider service contracts. Can you talk about a recent success story of yours? What was the challenge and how were you able to overcome it?

I am very fortunate to work at SAC because throughout my years here we obtained many successful verdicts and large settlements for our clients. For instance, I was recently able to obtain a large settlement involving a Stop Loss claim, where the health plan was denying payments by alleging that certain services provided by the provider were not medically necessary. With the help of our client, their well-documented records, and our in-house medical reviewers, we were able to show that the health plan authorized all the services and that the services performed were medically necessary. As a result, the health plan agreed to fully pay the claim.

Do you have any hobbies or interests outside of work?

I love discovering new music, going to concerts, reading books, watching films, and trying out new restaurants. I also love to travel. A few years ago, I was lucky enough to spend some time in Europe. I especially enjoyed my time in Santorini, Greece, where I fell in love with the culture, the Mediterranean cuisine, the red and black sanded beaches, and the radiant sunsets.

Do you have any charitable causes that interest you and events you have participated in recently?

Throughout the past ten years, I have been involved with organizations such as the ALS Association and MDA, to advocate, fundraise, and raise awareness for finding treatments and a cure for the disease Amyotrophic Lateral Sclerosis (“Lou Gehrig’s Disease”). I also fundraise for Project Angel Food, which helps prepare food for men, women, and children affected by HIV/AIDs, cancer, and other life threatening illnesses.

Do you have family and/or pets you’d like to tell us about?

I am engaged to a loving man named Allen Yeroushalmi who is a doctor of Ophthalmology. Thanks to his advice, I am extra careful about taking care of my eyes! I also have an amazing younger sister who is a psychology student at UCLA and wonderful and caring parents who live in Los Angeles.

Do you have any guilty pleasure television shows, movies or other activities to tell us about?

Some of my favorite TV shows include Mad Men, Game of Thrones, Downton Abbey, and Dexter. I never really got into watching reality TV, but sometimes I get sucked into watching Hoarders. Some of my favorite movies are Fight Club, Reality Bites, and Old School, and I never get tired of watching those movies.

What are your favorite foods? Colors? Other favorites?

When I was younger, I use to get tired of always eating Persian food at home. But as an adult, I realize that it is by far my

SAC ALERT!

By George Colman, Esq.

We understand that many providers are experiencing a “rash” of retroactive denials. Plans are deciding to change an authorization for a particular procedure (e.g. MRI) to another contracted provider within a 30 mile radius of the insured patient, because the procedure is less costly. If the plan advises the patient and not your facility, and you are unaware of the retraction there may be a basis to pursue the plan as a misrepresentation or violation of the California Health and Safety code if you do provide the services; it is also likely that the patient is liable for the services if the patient was aware of the retraction. Generally speaking, the patient may have a right, depending on the policy of insurance to contest the “new” or changed authorization since most policies allow for the insured to seek services of any contracted provider within 30 mile radius of the insured’s residence; why should the insured be required to go 29 miles away when a contracted provider may be 2 miles away from their residence. Our concern is what rights do providers have to be paid when the service is rendered after the “changed” or “new” authorization.

EXPERIENCING THE RASH?PHOTO COURTESY OF ST. FRANCIS MEDICAL CENTER FOUNDATION

info@thebiliproject.org

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). To find out more about the foundation, email:

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QUESTIONS / COMMENTS

UPCOMING EVENTS

September 8-10 2013 - HFMA Southern California & San Diego Chapter 23rd Annual Conference- Long Beach, CA

July 16, 2013 - SAC Program “The Good, The Bad & The Ugly of Managed Care Contracting”- Embassy Suites- Brea, CAThe staff at Stephenson, Acquisto & Colman recently enjoyed a fun-filled day of bowling,

music, food and team building at Montrose Party Bowl. Everyone came out a winner but there were a few stand out employees who stole the show. Check out a few photos from the day!

QUARTERLY NEWSLETTERSUMMER EDITION ENCLOSED

303 North Glenoaks BoulevardSuite 700Burbank, California 91502

SAC STAFF KNOWS HOW TO KNOCK ‘EM DOWN!

PHOTOS BY RYAN WELLS

Event will be from 7:30am-Noon and will take place in the Lower Nile Room.

Join us for a day of fun and networking as we raise funds for The Bili Project Foundation.

October 4, 2013 - 2nd Annual Vince Acquisto Memorial Golf TournamentWente Vineyards - Livermore, CARegister at www.hfma-nca.org