BLUE CROSS AND BLUE SHIELD ASSOCIATION 44 th

BLUE CROSS AND BLUE SHIELD ASSOCIATION 44 th Annual Lawyers Conference Emerging Trends In Non-Participating Provider Litigation Friday, May 14, 2010 Cavender C. Kimble and Leigh Anne Hodge BALCH & BINGHAM LLP 1901 Sixth Avenue North, Suite 1500 Birmingham, AL 35203 Phone: (205) 251 -8100 1

EMERGING TRENDS IN NON-PARTICIPATING PROVIDER PAYMENT DISPUTES 2

Litigation Drivers • Economic Woes • Decreasing Provider Reimbursement • Consumerism 3

Current Themes in Provider Payment Disputes • Out-of-Network Reimbursement • Balance Billing • Assignment of Benefits • Third Party Vendor Billing 4

OUT-OF-NETWORK REIMBURSEMENT 5

OUT-OF-NETWORK REIMBURSEMENT Billed Charges vs. UCR or Allowed Amount 6

OUT-OF-NETWORK REIMBURSEMENT Provider Theories • Quantum Meruit • Unjust Enrichment • Third-Party Beneficiary • ERISA Benefits (Third-Party Beneficiary) • Unfair and Deceptive Trade Practices 7

OUT-OF-NETWORK REIMBURSEMENT • What amount is “Reasonable? ” • “Reasonableness” is Benchmark. 8

OUT-OF-NETWORK REIMBURSEMENT THE INGENIX SAGA 9

OUT-OF-NETWORK REIMBURSEMENT Chronology • February 2008 – New York State AG Andrew Cuomo launched investigation • June 18, 2009 – Completion of Settlement Agreements – Assurances of Discontinuance signed by United. Health and other payors 10

OUT-OF-NETWORK REIMBURSEMENT Cuomo Sound Bites • Ingenix is a “scheme by health insurers to defraud customers by manipulating reimbursement rates. ” • “By distorting the ‘reasonable and customary’ rate, . . . insurers were able to keep their reimbursements artificially low and force patients to absorb a higher share of the costs. ” 11

OUT-OF-NETWORK REIMBURSEMENT Products of Ingenix Investigations • The Consumer Reimbursement System is Code Blue – http: //www. aapmr. org/zdocs/hpl/NYAttry. Gen. Rpt 01 1309. pdf 12

OUT-OF-NETWORK REIMBURSEMENT Products of Ingenix Investigation • $100 million paid by insurance companies executing Assurances 13

OUT-OF-NETWORK REIMBURSEMENT Products of Ingenix Investigation • U. S. Senate Committee on Commerce, Science, and Transportation – March 2009 Hearings on Deceptive Health Industry Trade Practices http: //commerce. senate. gov/public/index. cfm? p=H earings&Content. Type_id=14 f 995 b 9 -dfa 5 -407 a 9 d 35 -56 cc 7152 a 7 ed&Group_id=b 06 c 39 af-e 0334 cba-9221 de 668 ca 1978 a&Month. Display=3&Year. Display=20 09&Label_id= 14

OUT-OF-NETWORK REIMBURSEMENT Litigation Spawned by Ingenix • Franco v. Connecticut General Life Ins. Co. , 2: 07 -CV-D 6039 (D. N. J. ) (Complaint Dec. 20, 2007). – Putative Class of Providers and Subscribers – Alleged ERISA, Sherman Act, RICO and state law claims arising of payor’s UCR determinations based upon Ingenix database. 15

OUT-OF-NETWORK REIMBURSEMENT RECENT OUT-OF-NETWORK REIMBURSEMENT LITIGATION 16

OUT-OF-NETWORK REIMBURSEMENT “Reasonableness” = The Amount the Provider is Paid • Spectrum Health v. Good Samaritan Employees Ass’n Trust Fund, No. 08 CV 182, 2008 WL 5216025 (W. D. Mich. Dec. 11, 2008)(In ERISA case, payor’s determination of R&C charge was arbitrary and capricious). • -Payor’s reliance on 90 th percentile using Physicians’ Fee Reference (PFR) was reasonable. • However, Payor did not properly apply PFR to geographic area as required by Plan. 17

OUT-OF-NETWORK REIMBURSEMENT Fair Market Value = “Reasonableness” • Baker County Med. Services, Inc. v. Aetna Health Mgt. , LLC, No. 1 D 08 -0067, 2010 WL 624192 (Fla. Dist. Ct. App. Feb. 24, 2010). – Court considered relevant factors • Reimbursement from other commercial payors • Contracted rates with other HMOs • Worker’s Compensation Payments • Private Pay • Charity Care 18

OUT-OF-NETWORK REIMBURSEMENT Fair Market Value = “Reasonableness” • Harrison v. Blue Cross and Blue Shield of Alabama, No. 7: 08 -CV -1039 -LSC, U. S. D. C. for the Northern District of Alabama (Order of Jan. 12, 2010, Denying Class Certification). – Fact Finder must consider relevant, individualized factors in considering “reasonableness” of charges and reimbursement for Ambulance Services: • wear and tear on vehicle for mileage charges • amount of time required for treatment • severity of injuries • number and type of supplies used for treatment 19

OUT-OF-NETWORK REIMBURSEMENT Medicare Allowance ≠ “Reasonable” • Prospect Med. Group, Inc. v. Northridge Emergency Med. Group, 39 Cal. Rptr. 3 d 456 (Cal. Ct. App. 2006). 20

OUT-OF-NETWORK REIMBURSEMENT Medicare Allowance ≠ “Reasonable” • Baker County, 2010 WL 624192 at *3. – “In determining the fair market value of the services, it is appropriate to consider the amounts billed and the amounts accepted by providers with one exception. The reimbursement rates for Medicare and Medicaid are set by government agencies and cannot be said to be ‘arm’s-length. ’” 21

OUT-OF-NETWORK REIMBURSEMENT Billed Charges ≠ “Reasonable” • Victory Memorial Hosp. v. Rice, 493 N. E. 2 d 117, 119 (Ill. App. Ct. 1986). – Hospital’s costs, functions, and services must be considered. – Random sampling of hospital charges in the area all used to establish “reasonableness. ” • Greenfield v. Manor Care, Inc. , 705 So. 2 d 926, 930 -31 (Fla. Dist. Ct. App. 1997). 22

OUT-OF-NETWORK REIMBURSEMENT Defense Strategies • ERISA Preemption • ERISA claims – Failure to Exhaust Administrative Remedies • Lack of Standing 23

OUT-OF-NETWORK REIMBURSEMENT Dismissal – Failure to Exhaust • Urology Center of Georgia, LLC v. Blue Cross Blue Shield Health Plan of Georgia, Inc. , and Blue Cross and Blue Shield of Georgia, Inc. , Civil Action No: 5: 09 -CV-161, United States District Court for the Middle District of Georgia, Order of Dismissal (Mar. 4, 2010). 24

OUT-OF-NETWORK REIMBURSEMENT State Statutes 25 • Oklahoma – OKLA. STAT. ANN. tit. 36, § 6571 C. • Colorado – COLO. REV. STAT. § 10 -16 -704. • Florida – FLA. STAT. § 641. 513(5). • Utah – UTAH CODE ANN. § 31 A-22 -617(2)(b). • Maryland – MD. CODE. ANN. HEALTH-GEN. § 19 -710. 1(h). • California – CAL. CODE REGS, tit. 28 § 1300. 71(a)(3)(B).

BALANCE BILLING 26

BALANCE BILLING Areas of Heightened Litigation • Emergency Care • Hospital Based Providers 27

BALANCE BILLING Areas of Heightened Litigation • Billed Charges vs. UCR/Allowed Amount • May Non-Participating Providers Balance Bill? 28

BALANCE BILLING Provider Theories • ERISA • RICO • Sherman Act • Unfair Trade Practices • Violations of State Statutes 29

BALANCE BILLING Providers Prohibited from Balance Billing • Prospect Med. Group, Inc. v. Northridge Emergency Med. Group, 45 Cal. 4 th 497, 198 P. 3 d 86 (2009). – Balance Billing For Emergency Services is Illegal Where Provider has Recourse Against HMO – Construing Health and Safety Code § § 1340, et. seq. 30

BALANCE BILLING Recently Filed Balance Billing Class Action • Sabban v. Scripps Health, No. 37 -200900081971 (Cal. Super. Ct. ) (Complaint Jan. 26, 2009). – Putative class of subscribers sued providers of emergency services for balance billing alleging violations of California law. 31

BALANCE BILLING Providers Prohibited from Balance Billing • Joseph L. Riley Anesthesia Assocs. v. Stein and Florida Health. Care Plan, Inc. , 27 So. 3 d 140 (Fla. Dist. Ct. App. 2010). – Non-participating hospital-based anesthesiologists and other hospital-based providers may not balance bill HMO enrollees. – Construing FLA. STAT. § 641. 3154 32

BALANCE BILLING • Do payors have a duty to monitor balance billing practices by Participating Providers? – Edith Harris v. MCG Health, Inc. , d/b/a MCG Hospital, United Healthcare Insurance Company and United. Healthcare of Georgia, Inc. , currently pending in the Superior Court of Richmond County, Georgia. 33

BALANCE BILLING MAJORITY OF STATES HAVE NO STATUTORY PROHIBITION AGAINST BALANCE BILLING 34

BALANCE BILLING Statutory Protections • New York – N. Y. INS. LAW § 3221(i)(15) – Prohibits balance billing by ambulance providers for emergency care 35

BALANCE BILLING • Florida – FLA. STAT. § 641. 3154 – No balance billing for covered services provided to HMO enrollees • Maryland – MD. CODE. ANN. , HEALTH-GEN. § 19 -710(p)(i). – No balance billing of HMO enrollees. 36

ASSIGNMENT OF BENEFITS 37

ASSIGNMENT OF BENEFITS Tension Traditional Public Policy Supporting the Assignability of Contracts vs. Public Interest in Controlling Health Care Costs 38

ASSIGNMENT OF BENEFITS Plan Benefits of Anti-Assignment Clauses • Encourages Network Participation • Controls Health Care Costs by Limiting Reimbursement to Contract Amounts 39

ASSIGNMENT OF BENEFITS MAJORITY OF COURTS HAVE UPHELD ANTI-ASSIGNMENT PROVISIONS 40

ASSIGNMENT OF BENEFITS Cases Upholding Anti-Assignment Clauses • Abraham K. Kohl v. Blue Cross & Blue Shield of Fla. , Inc. , 955 So. 2 d 1140, 1144 -45 (Fla. Dist. Ct. App. 2007). • Somerset Orthopedic Assocs. , P. A. v. Horizon Blue Cross & Blue Shield of N. J. , 785 A. 2 d 457, 461 (N. J. Super. Ct. App. Div. 2001). 41

ASSIGNMENT OF BENEFITS Cases Upholding Anti-Assignment Clauses • Parrish v. Rocky Mountain Hosp. & Med. Servs. Co. , 754 P. 2 d 1180 (Colo. Ct. App. 1988). • Obstetrics-Gynecologists v. Blue Cross & Blue Shield of Neb. , 361 N. W. 2 d. 550 (Neb. 1985). 42

ASSIGNMENT OF BENEFITS Cases Upholding Anti-Assignment Clauses • Kent Gen. Hosp. , Inc. v. Blue Cross & Blue Shield of Deli, Inc. , 442 A. 2 d 1368 (Del. 1982). • Augusta Med. Complex, Inc. v. Blue Cross of Kan. , Inc. , 634 P. 2 d 1123 (Kan. 1981). 43

ASSIGNMENT OF BENEFITS Cases Upholding Anti-Assignment Clauses • Blue Cross and Blue Shield of Alabama v. Nielsen, et al. , 714 So. 2 d 293 (Ala. 1998) (option not to honor). – Blue Cross plan exempt from statutes requiring direct payment to various classes of providers holding assignments. 44

ASSIGNMENT OF BENEFITS Cases Upholding Anti-Assignment Clauses • Kassab v. Med. Serv. Ass’n of Pa. , Inc. , 39 Pa. D. & C. 2 d 723, 725 (Pa. Ct. Comm Pl. 1966, aff’d, 230 A. 2 d 205 (Pa. 1967). – “Agreement against assignment of any right is not only valid, but essential to the continued success of the Blue Shield Plan. ” 45

ASSIGNMENT OF BENEFITS Cases Voiding Anti-Assignment Clauses • Am. Med. Int’l, Inc. v. Ark. Blue Cross & Blue Shield, 773 S. W. 2 d 831 (Ark. 1989). – As a matter of public policy, a payor may not refuse to honor an assignment of benefits. • Toranto v. Blue Cross & Blue Shield of Tex. , Inc. , 993 S. W. 2 d 648, 649 (Tex. 1999). – Enforcement of anti-assignment clause is prohibited by the Texas Insurance Code. 46

ASSIGNMENT OF BENEFITS COURTS WILL ENFORCE ANTI-ASSIGNMENT CLAUSE IN ERISA PLANS IF THE PLAN IS CLEAR AND UNAMBIGIOUS 47

ASSIGNMENT OF BENEFITS Cases Enforcing Anti-Assignment Clauses in ERISA Plans • Physician’s Multi-specialty Group v. Health. Care Plan of Horton Homes, Inc. , 371 F. 3 d 1291 (11 th Cir. ), cert. denied, 543 U. S. 1002 (2004). – Unambiguous anti-assignment clause consistent with Congressional intent. 48

ASSIGNMENT OF BENEFITS Cases Enforcing Anti-Assignment Clauses in ERISA Plans • Le Tourneau Lifelike Orthotics & Prosthetics, Inc. , v. Wal-Mart Stores, Inc. , 298 F. 3 d 348 (5 th Cir. 2002). – Anti-assignment clause renders assignment unenforceable, reversing District Court. 49

ASSIGNMENT OF BENEFITS Cases Enforcing Anti-Assignment Clauses in ERISA Plans • City of Hope Nat’l Med. Ctr. V. Health Plus, Inc. , 156 F. 3 d 223 (1 st Cir. 1998). – Anti-assignment clause not contrary to public policy; Congress chose to bar alienation of pension plan benefits, but not welfare plan benefits. 50

ASSIGNMENT OF BENEFITS Mandated Assignment Statutes • Tenn. Code Ann. § 56 -7 -120 – General Application: Applies to All Covered Services • Alaska Stat. § 21. 51. 120 – General Application: Applies to All Covered Services 51

Assignment of Benefits Mandated Assignment Statutes • CMS Rule: Special Rules for Ambulance Service and Emergency and Urgently Needed Services, and Maintenance and Post-Stabilization Care Services, 42 C. F. R. § 422. 113 – Applies to Emergency and Urgently Needed Services Provided to Medicare Advantage Plan members. 52

Assignment of Benefits Mandated Assignment Statutes • FLA. STAT. § 641. 513 – Applies to Emergency Services • CAL. HEALTH & SAFETY CODE § 1371. 4 – Applies to Emergency Services • 40 PA. CONS. STAT. ANN. § 991. 2116 – Applies to Emergency Services 53

Assignment of Benefits ERISA Preemption of Mandated Assignment Statute • La Health Serv. & Indem. Co. v. Rapides Healthcare Sys. , 461 F. 3 d 529 (5 th Cir. 2006), cert. denied, 549 U. S. 1279 (2007). – ERISA does not preempt Louisiana anti-assignment statute 54

THIRD PARTY VENDOR BILLING 55

Third Party Vendor Billing • Not DME • Typically involving expensive implants – Orthopedic screws, joints, devices – Cochlear implants • Facilities want to avoid front end expense • On the horizon – Engineered tissues 56

Third Party Vendor Billing Vendor Pre-Litigation Strategies • Pre-Service – Obtain letter approving medical necessity of implant directly or through surgeon • Pre-Litigation Appeals – Voluminous (30 + pages) letters to plan sponsors and plans – Threats to sue plan sponsors and members – Threats of criminal sanctions and civil fines – Multiple appeals: 7 – 8 appeals 57

Third Party Vendor Billing • Access Mediquip v. United Health Group and United Health. Care Insurance Company, CA No. 4: 09 -CV-02965 (S. D. Texas filed 9/11/09). • Allegations – Characterize themselves as out-of-network provider – Relied on misrepresentation that provider was covered – $18, 000 owed on 2, 200+ claims 58

Third Party Vendor Billing • Access Mediquip Theories – – 59 ERISA via assignment Promissory estoppel Quantum meruit Unjust enrichment

Third Party Vendor Billing Defense Strategies • Analyze contract for defenses – Was claim timely and properly submitted? – Are third party vendors covered providers for this device? – If performed at PAR facility, is implant included in global reimbursement? – Is assignment valid? – Have administrative remedies been exhausted? 60

Third Party Vendor Billing Defense Strategies – Manage discovery logistics • 2, 200+ claims involving over 400 non-party providers • Discovery regarding actual cost • Discovery from non-party providers regarding agreements with vendor 61

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Thank you. 63

Cavender C. Kimble Balch & Bingham, LLP 1901 6 th Avenue North Suite 1500 Birmingham, Alabama 35203 (205) 226 -3437 ckimble@balch. com 64 Leigh Anne Hodge Balch & Bingham, LLP 1901 6 th Avenue North Suite 1500 Birmingham, Alabama 35203 (205) 226 -8724 lhodge@balch. com