Managed Care Alerts
October 25, 2006
In this Issue:
HLB Launches New Online Publication
HLB Files Class Action against Blue Cross on behalf of California hospitals
Health Net agrees to cease line item review and third party repricing policies
Another reason not to enter into a “silent PPO” agreement
HLB Launches New Online Publication
Welcome to the inaugural issue of Hooper, Lundy & Bookman’s HLB Managed Care Alert.
This publication is designed to ensure that our health care provider clients are informed timely on important developments that may affect both managed care contracting and reimbursement. This publication will update you on proposed and enacted legislation and regulations, court filings and rulings, administrative action, and health plan practices.
Please pass this publication on to anyone in your organization who may benefit. We welcome your comments and questions at managedcare@health-law.com. If you received this as a forwarded e-mail and would like your own, free subscription, please contact us at the same address.
HLB Files Class Action against Blue Cross on behalf of California hospitals
On October 13, 2006, HLB filed a class action challenging Blue Cross of California’ policy of retroactively rescinding health insurance policies with members after the members receive health care services, by asserting that the members had pre-existing conditions and/or made misrepresentations on their policy applications. The complaint alleges that Blue Cross’ policy violates certain provisions of the Knox-Keene Act and the Insurance Code. [link to complaint] HLB hopes to be able to get an order over the next few months certifying a class of all affected California hospitals.
The rescission policy has become the subject of heightened exposure lately. Earlier this year, our firm filed similar lawsuits against Blue Cross, and both the DMHC and DOI opened formal investigations. A few weeks ago, the DMHC announced a $200,000 fine against Blue Cross for improperly rescinding a single patient’s policy. In response, Blue Cross promised to change its policy application forms.
HLB does not believe that the change in Blue Cross’ policies will remedy the concerns of providers, because Blue Cross has not yet agreed to cease the underlying conduct of rescinding policies after the services have been provided, or even after verifying coverage to the providers.
Following are key signs that providers may be affected by the Blue Cross rescission policy:
- claims denied for “pre-existing condition” or “no coverage;
- claims pended as “under investigation” or for “medical records review; and/or
- claims denied after having been pended for lengthy periods.
HLB encourages providers to review their claims systems to determine if they have been denied payment due to Blue Shield’s rescission practices.
HLB will keep you informed of key developments in the litigation.
Health Net agrees to cease line item review and third party repricing policies
On October 6, 2006, Health Net entered into a Consent Agreement with the California Department of Managed Health Care agreeing to cease its Line Item Review (“LIR”) and Third Party Pricing (“TPR”) practices.
Through its LIR practice, Health Net used a pre-payment editing process whereby it disallowed charges on claims paid on a percentage of charges, such as stop loss claims, on the grounds that these charges were “unbundled.”
Under its TPR practice, Health Net used a pre-payment edit process whereby it reduce the dollar value of the claims to a figure that Health Net considered to be more in line with (a) the charge amounts anticipated for those services, (b) the charge amounts allowed by the contract for those services, and/or (c) the amounts charged by comparable hospitals for the same or similar services.
HLB has challenged these practices on behalf of a number of its hospital clients. The DMHC found that these practices violated the Knox-Keene Act, including section 1300.71(o) of the California Code of Regulations.
Under the Consent Agreement, Health Net agrees to cease these practices, to re-price all hospital claims not previously resolved by settlement, arbitration or judgment with dates of service on or after January 1, 2004, without the use of the LIR or TPR practices, and to re-pay any amount due on a claim to the extent that it exceeds Health Net’s prior payment on the claim.
HLB encourages providers to review their claims systems to determine if they have been denied payment due to Health Net’s LIR or TPR practices.
Another reason not to enter into a “silent PPO” agreement
Many managed care agreements allow the health plan to sell or lease the rates in the agreement to “Other Payors.” These Other Payors may be health plans, insurance companies, third party administrators, or self-insured employers. Under these silent PPO agreements, the Other Payors are financially responsible for paying the claims.
As many providers are aware, there are many problems with these agreements. The agreements do not specify who these Other Payors are, and providers do not know whether these Other Payors are financially viable entities who will timely and accurately pay their claims. Moreover, providers do not often know whether they will be paid under a silent PPO agreement until they receive the Explanation of Benefits (“EOBs”) from the payor.
A new problem has arisen with these agreements. HLB is currently in litigation against First Health Network concerning payments by Other Payors who accessed the First Health Network. HLB, on behalf of its hospital client, initially brought suit against First Health only, because First Health repriced the claims for its Payor clients pursuant to the agreement between the hospital and First Health. First Health, however, claimed that it was not financially responsible under the agreement, and therefore the hospital named the Other Payors as parties to the lawsuit.
The Other Payors have now taken the position that they are not bound by the contract between the hospital and First Health because they are not parties to that agreement. They take this position even though their EOBs state that they are paying the hospital pursuant to the First Health contract.
In light of this development, we caution all of our clients to consider carefully whether they want to enter into these silent PPO arrangements, and, if they do, to include language in the agreement which requires the Other Payors to sign addendums to the agreement agreeing to be bound by its terms. This way, the provider will know who the Other Payors are and there will be no question that they will be bound to pay the provider pursuant to the terms of that agreement.
For additional information regarding any of the articles in this publication, please contact HLB attorneys Daron Tooch (dtooch@health-law.com) or Glenn Solomon (gsolomon@health-law.com).