Marcus Aurelius is a plan member of the Imperial group health plan. Imperial has contracted with Augustan, a preferred provider network or “PPO”.
Augustan has in place a managed care contract with a wide variety of physicians and hospitals. Under the contact, the providers agree to accept a discounted rate in exchange for steerage of patients by inclusion of the providers in the Augustan network that will be promoted to group health plans and claims administrators.
Imperial is impressed with the array of providers included in the Augustan network. The charge for participation in the network is a part of the base cost of Imperial’s group health plan, but the cost seems well worth it in view of the savings to Imperial and its group health plan members.
Marcus is involved in a personal injury accident in which he is not at fault. The at fault driver has a minimum limits liability policy in place with Chariot Insurance of Rome, Georgia.
(Stay with me here – this is the important part.) The Rome General Hospital submits a bill to Marcus. Rome General is a member of the Augustan network. Under the network contract, Rome General only gets 50 cents on the dollar.
Rome General refuses to bill the Imperial plan and insists that its bill be paid in its full amount from the personal injury settlement from Chariot Insurance. Since Rome General is billing the liability carrier, it contends that it is not subject to the network discount.
Marcus’ personal injury attorney argues that Rome General cannot opportunistically set aside its network contractual obligations.
Who is legally correct?
This is a common scenario. Yet, there are few reported cases addressing this issue.
The South Dakota Supreme Court saw this as a matter of third party contract in Jennings v. Rapid City Reg’l Hosp., Inc., 2011 SD 50, 802 N.W.2d 918, 2011 S.D. LEXIS 106 (2011). Under this view, the plan members are intended third party beneficiaries of the managed care contract between (in our hypo) Imperial and Augustan. I agree.
Remember, in almost every case the provider has obtained an assignment of benefits. So a further question is whether a provider, having asked for and received an assignment, may neglect to file for benefits as the plan member would reasonably assume was the purpose of the assignment.
In a good number of cases, the provider will ultimately learn that the liability insurance is not available. If that occurs after the time for filing a timely claim on the plan, who is liable for the provider’s bill? May the provider both take an assignment and negligently fail to file a claim — and then turn on the plan member for full payment?
In many cases, the provider learns too late that no liability insurance is available to pay the medical bills in full — who bears the risk of the delay in filing the medical services claim with the plan? The health care provider should bear the risk of loss if its calculus of optimum reimbursement is in error.
Furthermore, Rome General has liability exposure for its attempt to collect a “debt” that is essentially “written off” under its managed care agreement. See, e.g., Gianetti v. Fortis Ins. Co., 2007 Conn. Super. LEXIS 838 (Conn. Super. Ct. Mar. 29, 2007). The most likely theory is the state unfair business practices statute, but tort theories might be applicable as well.
I have noticed that pain therapy clinics, chiropractors and orthopedic practices are some of the worst offenders in this category, but they are not alone. The issues are complicated and it appears that few lawyers have an interest in taking up the issue.
Note: A particularly unfortunate situation occurs when the provider learns that the liability settlement is insufficient for payment of the medical bills. At that point, the provider will turn back to the patient for payment. In many cases, the patient-plan member can no longer get the plan to pay since the time period for submitting claims has expired. It would seem that the provider, having obtained an assignment of benefits from the patient (typically, anyway), should be foreclosed from holding the patient accountable for non-payment when the provider failed to submit the bills to the plan. The wording of the assignment documents would be a factor in this situation, however.