As Out-of-Network Provider Litigation Continues, 2015 Published Opinions Offer Guidance to Insurers
Litigation involving out-of-network providers, meaning providers who do not have a negotiated rate agreement with the respective payer, continues to be rampant. Certain issues arise frequently in these lawsuits over whether the payers had properly paid claims. This article discusses several published decisions from 2015 that illustrate how courts across the country are handling some of these common issues.
N. Cypress Med. Ctr. Operating Co. v. Cigna Healthcare, 781 F.3d 182 (5th Cir. 2015)
North Cypress, a hospital that is out-of-network with Cigna, brought suit alleging that Cigna underpaid for services. Under the ERISA plans at issue, members were required to pay higher co-pay and coinsurance amounts when they went to an out-of-network provider, which Cigna noted incentivized patients to choose in-network providers and lowered the cost of healthcare overall. North Cypress, however, allowed Cigna members to pay co-pay and coinsurance amounts at in-network rates if they paid either up front or within a short amount of time. North Cypress did not offer a corresponding discount on the amount it billed Cigna. Because of a plan provision that excluded coverage for services for which members were not required to pay, and the fact that members were not required to pay the full out-of network co-pay and coinsurance amount, Cigna took the position that it should pay North Cypress' claims as if North Cypress billed a lesser amount that corresponded to the lesser co-pay and coinsurance rates.
Among other causes of action, North Cypress brought an ERISA claim for the alleged underpayments. The district court dismissed the ERISA claims for lack of standing, but the U.S. Court of Appeals for the Fifth Circuit disagreed. Cigna argued that North Cypress could point to no concrete injury supporting its standing to sue because: (1) North Cypress had standing, if at all, through assignments of rights it received from the plan members, and (2) the members were never at risk of higher out-of-pocket charges because North Cypress did not later charge them amounts that Cigna refused to pay. However, the Fifth Circuit reasoned that what happened to plan members after they assigned rights was not determinative: at the time members assigned rights to North Cypress, members had the right to seek payment from Cigna under the plans, which provided certain coverage for out-of-network providers. Cigna next argued that even if North Cypress had standing to bring suit, that suit failed on its merits because Cigna was not obligated to pay more than it did under the terms of the plans. The Fifth Circuit, however, remanded that issue to the district court.
Cmty. Hosp. of the Monterey Peninsula v. Aetna Life Ins. Co., --F. Supp. 3d--, No. 5:14-CV-01518-PSG, 2015 WL 4760507 (N.D. Cal. Aug. 12, 2015)
Community Hospital, a hospital that is out-of-network with Aetna, treated an Aetna insured in its emergency room on three occasions. In each instance, Community Hospital contacted Aetna, which either authorized the treatment or verified insurance eligibility. Also in each instance, Aetna paid Community Hospital less than its full billed charges for the services. Community Hospital brought suit, alleging negligent misrepresentation, breach of implied contract, and common count services rendered, among other causes of action, based on Aetna's refusal to pay the full billed charges despite the prior authorizations.
The district court held that the negligent misrepresentation claim failed because negligent misrepresentations must relate to past or existing facts, and Aetna's authorization before the services had been rendered related to what Aetna would do in the future.
The district court held that the implied contract claim also failed. While pre-service authorization calls from a provider to an insurer may form a contract, the court noted, the "dispositive issue" in this case was whether full payment was expected under that contract. The district court noted that Aetna informed Community Hospital that the patient was an "out of network admit." The court also pointed to standard practice in the insurance industry as reason that Community Hospital could not have reasonably expected payment of its full billed charges.
The district court likewise held that the common count "services rendered" claim failed. That claim requires that the defendant requested the services, and while Aetna may have authorized the treatment, the patient requested it, the court held. Because other claims not discussed here survived, however, the district court ultimately ordered that a jury must determine whether the amount that Aetna paid on the claims was reasonable.
Centro Medico Panamericano, Ltd. v. Laborers' Welfare Fund of Health & Welfare Dep't of Const. & Gen. Laborers' Dist. Council of Chicago & Vicinity, 2015 IL App (1st) 141690
Centro Medico is a surgical center that is out of network under a Laborers' Welfare plan and hence had no negotiated rate agreement. Before treating several Laborers' Welfare members, Centro Medico called Laborers' Welfare and confirmed coverage. Laborers' Welfare then paid what it calculated to be the "usual and customary charge" for the services. Centro Medico sued for promissory estoppel, claiming that Laborers' Welfare had promised to pay a fixed percentage of Centro Medico's full billed charges.
The court held that the evidence did not support Centro Medico's claim: Centro Medico's written notes from the verification calls used the phrase "usual and customary," and Laborers' Welfare had a policy of training its representatives to explain limitations in coverage. The court likewise rejected Centro Medico's argument that even if Laborers' Welfare promised to pay only usual and customary rates, Centro Medico interpreted "usual and customary" to mean its full billed charges. The court pointed to common industry practice construing the phrase's contrary plain meaning.
Conclusion
As out-of-network provider litigation continues, insurers would be wise to review recent published opinions dealing with common issues like assignment of claims from insured to provider, pre-service authorizations, and "usual and customary" charges.