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Progressive Focus© Newsletter

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Volume 7, Number 4 Winter, 2006
Helping You Manage the Expectations of Managed Vision Care

In This Issue:

U.S. Court of Appeals Issues a Decision That Could Have Important Implications for Health Care Providers Nationwide

Blue Cross Blue Shield of Louisiana Told to End a Policy Many Found Egregious and Disingenuous

A recent decision in the United States Court of Appeals, Fifth Circuit (Louisiana Health Service & Indemnity Co. d/b/a/ Blue Cross and Blue Shield of Louisiana vs Rapides Healthcare System, No. 04-31114), could noticeably change the dynamics of third party care in Louisiana, and make it easier and less risky for doctors in that state and, perhaps, in others to see patients as a non-par (out-of-network) provider.

In August, Blue Cross and Blue Shield of Louisiana lost this case it had appealed from the District Court. Where previously Blue Cross had refused to honor its own Members' (patients) assignment of benefits authorizations to send payments directly to non-contracted providers, here the Court said it must honor such requests.

Par or non-par?

There are many reasons why a practitioner might see a patient on a non-par (out-of-network) basis. Perhaps the doctor had previously been a contracted provider on a health plan's panel, and now an established patient with that insurance wishes to continue seeing "their doctor." Or, perhaps, a patient with new coverage through an open- access plan elects to utilize that doctor's services even though the practice is not listed in the provider directory.

For whatever reason, the patient has exercised his or her permitted choice to obtain services from a practitioner with no contractual tie to the financially responsible third party payer. Patients understand that in going out-of-network their benefits and financial responsibility likely will be different than if they had stayed in-network. But that's each patient's choice.

Typically, the practice has the patient sign an assignment of benefits release that authorizes the insurance company or other financially responsible entity to send payment directly to the doctor. Every health care professional knows that this is an accepted practice and, in years past, it has worked with relatively few glitches. Not so anymore, however.

Increasingly I hear from and often read complaints written by doctors who have problems getting reimbursed by third party payers for services rendered to patients who choose to see the practitioners out-of-network. Unfortunately, some third party payers have been making it difficult and, in fact, financially risky for practitioners to accept assignment as an out-of-network provider.

Playing "dirty"

In fact, some third party payers have gone so far as to refuse to honor such assignment authorizations. These payers will not mail checks to non-par doctors and, instead, will send out-of-network payments only to patients (Members). Under such circumstances the doctor's staff is faced with two, potentially tricky scenarios.

Quotables

There's small choice in rotten apples.

William Shakespeare
The Taming of the Shrew

The practice can request (demand) up-front payment from the patient. Obviously determining the exact amount of the patient's financial responsibility before filing the claim could be problematic.

The practice can send a claim to the insurer and, after waiting for the payer to process the claim and send payment to the patient, bill that patient and hope the money is forthcoming.

Unfortunately, a surprising number of patients simply pocket the payer's check and refuse to turn it over to the doctor. The doctor may appeal to the payer for assistance, but as there is no contract with the payer that payer has absolutely no interest in helping the doctor collect what's due. That then leaves the practice to fight a collections battle with the patient for the money.

In recent years third party payers around the country have used this disingenuous refusal-of-assignment protocol as a means to discourage non-par claims submissions. Nobody with half a lick of sense about the realities of managed care would doubt that it's a cynical, intentional ploy designed to force doctors out of non-par status and into rigorously managed networks.

Of course joining such networks means that the practitioner must accept deeply discounted payments. And those can translate into much lower total reimbursement than might be available when services are billed on a non-par basis and the doctor can collect from the patient amounts not paid by the insurance. Certainly among the many reasons why a doctor might choose not to join a managed care network unacceptably low fees are typically at the top of the list.

What this case was all about

Louisiana has a statute in place that says payers must honor an assignment of benefits request from the patient. And in this matter before the Court Blue Cross did not dispute that its actions violated that statute. So given both of those facts, you might wonder why in the world this case even went to trial, and how it managed to get up to the United States Court of Appeals.

The relevant language of the Louisiana assignment of benefits statute reads as follows:

Itemized statement of billed services by hospitals. No insurance company, employee benefit trust, self-insurance plan, or other entity which is obligated to reimburse the individual or to pay for him or on his behalf the charges for the services rendered by the hospital shall pay those benefits to the individual when the itemized statement submitted to such entity clearly indicates that the individual's rights to those benefits have been assigned to the hospital. When any insurance plan, or other entity has notice of such assignment prior to such payment, any payment to the insured shall not release the entity from liability to the hospital to which the benefits have been assigned, nor shall such payment be a defense to any action by the hospital against the entity to collect the assigned benefits.1

1 LA. REV. STAT. ANN. §40:2010 (2004).

How (why) did BCBS ignore this? What in the world caused BCBS to act in a manner that seemingly flaunted the assignment of benefits statute?

Well, despite what was written in the regulations, all health insurance plans issued and administered by Blue Cross in Louisiana had in their subscriber (Member) contracts a provision that said payments would be made only to contracted network providers or directly to the Member.

The Court's decision noted that the relevant language in all Blue Cross plan documents read substantially as follows:

Direct Payment to Member

1) All benefits payable by the Company [Blue Cross] under this Benefit Plan and any amendment hereto are personal to the Member and are not assignable in whole or in part by the Member. The Company has the right to make payment to a Hospital, Physician, or other Provider (instead of to the member) for Covered Services which they provided while there is in effect between the Company and any such Hospital, Physician, or other Provider an agreement calling for the Company to make payment directly to them. In the absence of an agreement for direct payment, the Company will pay to the Member and only the Member those Benefits called for herein and the Company will not recognize a member's attempted assignment to, or direction to pay, another, except as required by law.

...

3) If the Company has offered a Hospital, Physician, or other Provider an agreement for direct payment by the Company, but there is no such agreement in effect when Covered Services are rendered to a Member by such Hospital, Physician, or other Provider, the Company will not recognize a Member's attempted assignment to, or direction to pay, such Hospital, Physician, or other Provider. The Company will pay to the Member and only the Member those Benefits called for in this Benefit Plan and any amendment thereto.

Clearly such language flew in the face of the Louisiana assignment of benefits statute. So what was BCBS' position? What did they argue exempted them from compliance with the clearly worded Louisiana assignment of benefits statute?

ERISA -- What else but ERISA?

As quoted above, the contracts between Blue Cross and its Members contained language that stated: "...the Company will not recognize a member's attempted assignment to, or direction to pay, another, except as required by law."

The words "except as required by law" were an important focus of the case. Blue Cross argued that the law referred to in the words "except as required by law" is ERISA (Employee Retirement Income and Security Act), and that the state assignment of benefits statute was trumped by this federal legislation. Assuming that to be the case, BCBS argued that the no-payments-to-non-par-providers provision in its agreements with Members should be deemed as the prevailing language.

Conversely, the other side argued that "except as required by law" refers to Louisiana law -- to the assignment of benefits statute. Given that, BCBS should be required to honor a patient's request to assign benefits for direct payment to non-par providers.

Thus, as so many other third party payers have done in the past, Blue Cross was trying to shield itself behind ERISA, some of the most wide-reaching health care legislation ever concocted by Congress. While promulgated based on the best of intentions, ERISA has proven itself to be incredibly anti-provider, and it's a rare instance, indeed, when ERISA does not favor payers and work against providers.

Arguing for ERISA preemption

In what seems a rather disingenuous and almost absurd contention, Blue Cross also argued that enforcement of the Louisiana statute would impose a "double recovery" of benefits. In other words, if Blue Cross' own language obligated it to send payment to the patient (Member), and if the assignment of benefits statute required payment directly to the provider, then it would be paying twice.

But the Court did not buy that argument, instead noting:

"According to Blue Cross, it must pay benefits to a patient, in conformance with the express terms of the plan, but that such payment will not discharge liability to a provider that has been assigned the patient's benefits claim. This argument is similarly without merit. Blue Cross's obligation to pay the provider only arises if Blue Cross has notice of the assignment. If Blue Cross ignores the assignment, then it risks paying a claim twice. Failure to follow the law cannot create preemption concerns. Should Blue Cross pay a patient after receiving notice that the patient assigned her benefits claim to a hospital, Blue Cross can seek recovery from the person improperly paid (here, the patient), and Blue Cross recognizes the availability of this remedy in its plan terms, as it reserves the right to recover improper payments."

The Court finds against BCBS

Quotables

Now this is the Law of the Jungle -- as old and as true as the sky; And the Wolf that shall keep it may prosper, but the Wolf that shall break it must die.

Rudyard Kipling
The Second Jungle Book

The Court of Appeals affirmed the District Court's earlier findings. In its decision against BCBS the Court stated that in this instance ERISA did not trump the Louisiana statute. The Court also noted that while ERISA does prevent a beneficiary from assigning rights to pension benefits, nothing in ERISA prohibits the assignment of welfare benefits, including health care benefits.

Further, while the Court noted that both sides had valid arguments for what is in the best interests of the public, in this case they found that ERISA did not preempt public policy as established by the legislature.

The hospitals battling Blue Cross had opined that the ability of a patient to assign direct payment of benefits to any provider worked to the benefit of all patients, in particular to the benefit of low-income patients. On the other hand, the Court also recognized Blue Cross' contention that the ability to receive direct payments was a key incentive causing providers to join the BCBS network (albeit at reduced fees).

However, the Court stated that in this case "...the preemption inquiry is not resolved by or concerned with arguments of policy. ... As we conclude that Louisiana's assignment statute is not preempted by ERISA, we leave public policy decision to Louisiana's legislative body. They have chosen assignment of benefit claims over inducing hospitals to enter into Blue Cross's provider networks. Nothing in ERISA requires us to alter than choice."

Score one for the good guys!

And now what happens?

Remember that a finding in one court's jurisdiction does not automatically or necessarily apply elsewhere. So on its own this decision is not going to transform overnight the national provider-payer landscape, and this disingenuous ploy is not going to disappear in an instant. Getting paid as a non-par provider could still be a problem in your state -- at a minimum in the short term and, perhaps, for some time yet to come.

But this could be an important step to leveling the playing field in other parts of the country and with other third party payers, for a decision in one court sometimes can be used successfully to support cases argued in other jurisdictions. Therefore, if you're experiencing problems getting paid as a non-par provider you'll certainly want to find out how or if this decision can be used to leverage your position vis-à-vis any other payers who are using the same or similar disingenuous tactics to try to force you into joining their networks.

The problem has not been limited to BCBS, and it has not been limited to major medical plans. Similar problems have been reported with some vision plans that have aggressively used "strong-armed" tactics against the doctors.

So I'd recommend getting an opinion from your state society's legal counsel. The wording of your state's laws vis-à-vis ERISA is key.

Find out if this decision in the U.S. Court of Appeals might be used as leverage against any of your local payers that refuse to honor assignment of benefits authorizations. If yes, then press your state society to take an active role in getting the word out to such payers that assignment of benefits authorizations should be honored.

If your society's legal counsel opines that this decision does not offer promise in your locale then you still need to press the society -- in this case to bring pressure, perhaps even an action, on behalf of its members, or at a minimum to work with other societies in a concerted effort linking multiple health care specialties.

Recognize that third party payers typically do not change their policies -- especially provider-unfriendly ones -- unless compelled to do so. As in the circumstances described here, they have no interest in making it easier for you to get paid. In fact, on occasion they've intentionally made it more difficult. So don't expect any voluntary relief from that quarter.

Ultimately relief may need to come from the legislature, and sometimes then from the courts if a third party payer seeks to contest a law it doesn't like. Fighting to implement provider-friendly legislation can be a long and expensive process, and going to court and then through and extended appeals process is similarly problematic.

In this case BCBS was challenged by some hospitals with the resources to stand up to the insurer. But, obviously, going to court against one of the "800 lb. gorillas" likely is beyond the financial means of one or a small group of doctors. Thus, it's essential that doctors call upon their professional societies to spearhead these efforts.

Strength in numbers: Money talks

As an individual, how can you participate in the fight against tactics of the sort that were at the heart of this Louisiana case? Well, are you a member of your national and state societies? If not, maybe you should reconsider, for those societies can and should be your voices of strength -- the money and numbers that cause legislators to pay attention.

Provider-friendly legislation does not just happen. The Bills that have worked to level the managed care playing field were passed as the result of a lot of effort and time invested by health care professionals such as you. These Bills passed though the various state legislatures because doctors in those states were able to mobilize their resources effectively.

Still, even when there is provider-friendly legislation on the books, onerous law-flaunting tactics such as those described above continue because of a payer's arrogance brought on by market share dominance and fear within the provider community. The payers know that too few doctors are willing to stand up and follow Nancy Reagan's advice -- "Just say no!"

There's no doubt that BCBS would have continued with its policy of not honoring assignment had they not been forced to change. If you want to strike back against onerous protocols or laws in your state you'll have to gain the support of legislators. Change won't come about until and unless you demonstrate to your elected representatives that you have strength, purpose and resolve.

Today, more than ever, you need to participate in the political action committees sponsored by your state and national societies.

Education is what you get when you read the fine print.

Experience is what you get when you don't.

Copyright © 2003-2007, Gil Weber, MBA. No part of this newsletter may be reproduced or distributed in any form whatsoever without the author’s prior written authorization.

These materials are intended to provide useful information about the subject matter covered. The author believes that the information is as authoritative and accurate as is reasonably possible and that the sources of information used in preparation of the materials are reliable, but no assurance or warranty of completeness or accuracy is intended or given, and all warranties of any type are disclaimed.

The materials are not intended as legal advice, nor is the author engaged in rendering legal services. The materials are not intended as a replacement for individual legal or professional advice. Information contained herein is presented only for illustrative purposes, and it should not be used to establish any fees or fee schedules, nor is it intended and it should not be construed as encouraging any user of the materials to take any actions that would violate any state or federal antitrust laws, tax laws, or Medicare or Medicaid laws.

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