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The Top 10 Lessons of a Reference Based Pricer

On February 16, 2016
By Jason Davis

Where to gather to discuss reference based pricing (RBP), you will have three opinions.

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Montanile Changes Subrogation – How Will You Respond?

On January 27, 2016

Take Your Money and Run!
Montanile Changes Subrogation – How Will You Respond?

On January 20, 2016, The Supreme Court of the United States decided in favor of the plan participant in the case of Montanile v. Board of Trustees of the National Elevator Industry Health Benefit Plan (Click here to read the decision). The Supreme Court held that the Plan could not recover from Montanile, the plan participant, after he received a third party settlement and spent the money.

Third party recovery just got much more difficult.

If benefit plans don’t have air-tight language, and if they fail to proactively intervene before a plan participant spends settlement proceeds, the Supreme Court has indicated that the benefit plan is left with no recourse. For this reason, those without substantial resources dedicated to the pursuit will have a much more difficult time ensuring that their clients’ rights are enforced.

Please join The Phia Group for a free webinar on Tuesday, February 2nd, at 1:00pm (EST), where we will describe the Montanile case, its impact, and how it changes everything.

ERISA Plan Cannot Recover Settlement Funds That Have Been Spent

On January 25, 2016
MyHealthGuide Source: William H. Payne IV and René E. Thorne

Case: Montanile v. Board of Trustees of the National Elevator Industry Health Benefit Plan, Supreme Court Ruling

The U.S. Supreme Court has narrowed, ever so slightly, the ever-changing definition of “appropriate equitable relief” under ERISA Section 502(a)(3). In the above case, Montanile, the high court addressed whether a plan fiduciary can recover medical payments made on behalf of a participant when the plan fiduciary has not identified third-party settlement funds still in the participant’s possession at the time the plan fiduciary asserts its reimbursement claim.

On 1/20/2016, the Supreme Court held in an 8-1 ruling that when a plan participant has spent — on nontraceable items such as fees for services or travel — all the settlement proceeds that could have been used to reimburse the plan, the plan fiduciary may not reach the participant’s other assets as a broader means of recovery.

Case Background

The facts of Montanile were mostly undisputed by the parties. Plaintiff, Board of Trustees of the National Elevator Industry Health Benefit Plan (the “Plan”), was an employee welfare benefit plan, which reserved for itself in its summary plan description (SPD) “a right to first reimbursement out of any recovery.” Montanile, a plan participant, was injured in a car accident, and the Plan paid out more than $120,000 in medical expenses on his behalf.

Meanwhile, Montanile retained counsel to pursue personal injury damages and ultimately settled for $500,000. When the Plan attempted to enforce its right to reimbursement and subsequent negotiations broke down, Montanile’s attorney notified the Plan that he would distribute the settlement funds to Montanile unless the Plan objected within 14 days. After the Plan failed to respond by the deadline, the funds were distributed to Montanile. The Plan then waited six months before suing under Section 502(a)(3)(B) of ERISA to enforce an equitable lien on the settlement funds, during which time Montanile spent most of the proceeds.

District Court Ruling

The district court in Montanile was facing a situation where restitution could theoretically expose Montanile’s general assets to a judgment: the third party settlement funds earmarked to reimburse medical expenses paid by the Plan had either been spent or comingled by Montanile by the time the Plan filed suit. Acknowledging the lack of Eleventh Circuit authority on point, the district court found that the Plan had a right to reimbursement on the grounds that “a beneficiary’s dissipation of assets is immaterial when a fiduciary asserts an equitable lien by agreement.” The Eleventh Circuit easily affirmed the decision in Montanile relying on its recent holding in AirTran Airways, Inc. v. Elem, 767 F.3d 1192 (11th Cir. 2014).

Supreme Court Ruling

In the Supreme Court, the issue became whether spending settlement funds could destroy the enforcement of a lien. Justice Thomas, writing for the majority, explained that:
• “… where a defendant has already spent proceeds that are subject to reimbursement — a restitution claim may only be asserted where funds or property in the defendant’s possession are clearly traceable back to the proceeds that were subject to reimbursement and, where such traceable funds or property exist, the plan can create and enforce an equitable lien over such funds or property.”
Rejecting the Plan’s arguments that ERISA’s general objectives, concepts of fairness and the fact that the equitable lien was by agreement – by virtue of being set forth the in SPD – justified a recoupment, Justice Thomas clarified that enforcing an equitable lien over a participant’s general assets is not “typically available” relief under the principles of equity.
The majority remanded the case back to the district court to determine “how much dissipation there was” and whether Montanile mixed the settlement funds with his general assets. So, there is still some possibility of recovery by the Plan.
Plan Should Have Acted More Expeditiously To Secure Funds

From a public policy and legal theory perspective, the broad question put to the Court in Montanile — what is “appropriate equitable relief”? — was unlikely to spawn a new “tracing” rule for all types of reimbursement claims. Instead, the Montanile decision demonstrates that all but one of the justices — Justice Ginsburg, who dissented in the case — are unwilling to turn ERISA Section 502(a)(3) into a damages free-for-all.
At the end of the decision, Justice Thomas explained that the Plan should have acted more expeditiously to secure the settlement proceeds before they were dissipated. That statement is the complete scope of Montanile: equitable tracing rules for plan reimbursement remain in place and plans need to act promptly if they want to be repaid.

What Does the Montanile Decision Mean to Plan Fiduciaries?
A narrow decision of this nature has two practical impacts for plan fiduciaries.
• First, SPDs should include language that puts participants on notice of the plan’s reimbursement rights in the case of a tort recovery and the obligation of participants to guard and not spend any medical expense funds received in a tort recovery that may be subject to the plan’s claim for reimbursement.
• Second, plan fiduciaries must anticipate the need to enforce and monitor the plan’s subrogation rights when plan assets are paid related to personal injury scenarios and should establish administrative procedures to carry out such enforcement and monitoring.
As an example of the importance of the second point, in AirTran, the plan only learned of the defendants’ full recovery — $425,000 instead of $25,000 — by accident when the defendants put a copy of the wrong check in the mail! It is incumbent upon plans to communicate with all parties in a tort suit, calendar important deadlines, and consult with outside counsel when third-party settlement funds are on the horizon.
Please follow this link to a comprehensive Jackson Lewis article concerning Montanile:

How to Proactively Manage Self-Funded Employer Health Plans Recommendations by a Hospital Legal Advisor

On January 25, 2016
MyHealthGuide Source: Emily M. Scott

As more patients join self-funded plans, hospitals face new challenges regarding billing and collection.

The Chargemaster Challenge

The increase in self-funded employer health plans has triggered an unintended consequence for hospitals with respect to payment for services: a rise in patients considered “self-pay” or “uninsured” by hospital billing departments. With the exception of large employers like Boeing or Wal-Mart, self-funded plans rarely contract directly with providers. In the absence of a contractual agreement, hospitals routinely charge patients enrolled in self-funded plans according to the prices established in the hospital’s chargemaster or charge description master — the comprehensive price directory of goods, services and procedures that can be billed by the facility.

Each hospital has its own unique chargemaster, and prices can — and usually do — vary greatly. A hospital’s chargemaster typically serves as the starting point for price negotiations with commercial insurance companies and government payers. Because of their size and bargaining power, these payers are able to secure rates significantly more favorable than those listed on the chargemaster for the goods and services hospitals provide to their members.

The Role of Third-Party Administrators

Because chargemaster rates are higher than most negotiated contract rates, employers with self-funded plans often hire third-party administrators to analyze hospital bills and assign repriced costs — much lower than the chargemaster rates — to each service and supply. The employer then pays the hospital bill at the repriced cost determined by the administrator, calling it “reasonable” payment for the hospital’s services. However, these payments typically cover only a fraction of the patient’s total hospital bill.

Hospitals then find themselves in the unenviable position of billing the employer, the patient or both to recoup the balance of the patient invoice. When the patient refuses to — or cannot — pay the balance, the delinquent bills are turned over to collection agencies. Notably, many third-party administrators also assist balance-billed employers or employees with collections activity and resulting lawsuits. These lawsuits can be costly for hospitals, both in terms of legal expenses and in reputational damage.

A Proactive Approach

Hospitals can — and should — take steps to manage billing and collection for patients with self-funded health plans.

Take charge of your chargemaster. Are your prices rational and defensible? Pursuant to the 2014 guidelines issued by the Centers for Medicare & Medicaid Services, hospitals are required by the ACA to make public their standard charges for the items and services they provide. CMS has interpreted “standard charges” to mean the prices established in the chargemaster. (Some states, like Massachusetts and New Hampshire, already make such pricing information available.) A common chargemaster complaint is that the prices listed bear no relation to the actual cost, the amount usually charged or the amount hospitals actually accept from payers.

Consideration of these issues is an essential step in ensuring that chargemaster prices are rational and defensible. A chargemaster should be:
• Consistent. Track specific items in different hospital departments to ensure that prices are internally consistent. Evaluate any differences in costs throughout a health system’s various facilities and investigate the reason for the variance.
• Comparable. Compare your chargemaster prices with the acquisition costs of equipment, items, supplies and drugs. Track markups and compare those with the payments received from commercial and governmental payers. If possible, review the pricing data of your peers.
• Current. Conduct a chargemaster analysis every year. Have a team and process in place to evaluate new items as they are added, and adjust as necessary.
• Collaborative. Talk with your physicians about physician preference items, and the effect they can have on cost-per-case variability. Look for opportunities to partner with physicians to establish reliable procedure cost estimates.
Communicate with patients and with the public about your facility’s prices — before and after you provide services. If you choose to make the chargemaster available online, include a Frequently Asked Questions page explaining how to understand and use the information it contains. List the name and contact information of individuals at the hospital who can navigate the chargemaster and educate patients about potential charges.
• Provide comprehensive information about the hospital’s financial assistance plan and how to apply; offer patients assistance with eligibility determinations.
• For scheduled procedures, consider offering nonbinding cost estimates for patients who will be self-pay.”
• Describe all prompt-pay discounts, self-pay discounts, cash-only discounts, charity care and other available discounts or assistance.
• Hire and train financial counselors who can work with patients to review their itemized bills for accuracy and establish payment plans if necessary.
• Maintain a clear and comprehensible collections policy.
Empower your staff to handle self-funded plans. As you become aware of local employers with self-funded health plans, maintain an updated list of such employers that is accessible to admissions personnel. To the extent possible, have admissions personnel provide detailed information to affected patients, including a plain-language explanation of the patient’s financial responsibility for health care expenses.

Specifically, make sure patients understand that an assignment of benefits could mean balance billing after the claim is submitted to the employer (or employer’s third-party administrator) for payment. Make sure your admissions staff are trained to recognize patients with self-funded plans and are able to address patient inquiries or refer patients to financial counseling. Offer — and document the offer of — the opportunity at admission to ask questions about how patients will be billed for services. Finally, if you encounter multiple patients with the same employer, consider offering contracted prices to the self-funded plans.

To paraphrase Heraclitus of Ephesus (c. 535–475 B.C.E.), “The only constant is change.” These ancient words seem particularly applicable in today’s health care environment. As hospitals navigate the post-reform era, statutory and regulatory changes will create new challenges that call for flexible and creative solutions. Continued success — and survival — will demand that hospitals engage their staff, providers and community in ways that will allow all stakeholders to have a voice in those solutions.
About the Author

Emily M. Scott is a partner and member of the health care practice at Hirschler Fleischer in Richmond, Va.

Saving Stop-Loss - Protecting a Key Self-Funding Ingredient in a Hostile World

On January 19, 2016

Stop-loss is vital to the self-funded marketplace, and for good reason – because catastrophic claims can bankrupt an employer in the blink of an eye. Not all is well in the land of stop-loss, however, as forces – both internal and external – conspire against stop-loss carriers. Regulators, fearing the impact self-funded adverse selection may have on PPACA exchanges seek to eliminate self-funding by striking at stop-loss. Meanwhile, many will attest that some stop-loss carriers have taken a more heavy handed approach to cost containment. There are different types of carriers and MGUs in the marketplace, with varying attitudes toward discretion, plan language, bill auditors, caps on payable amounts, and many other aspects of a reinsurance arrangement that can be the difference between being able to comfortably self-fund a health plan and being forced into the fully-insured market.

Thank you for joining The Phia Group’s legal team on Tuesday, January 19, 2016, as they provided first-hand insight into the self-funded market’s reliance on stop-loss and threats to that industry, including what TPAs and brokers should look for – and look out for – when advising health plan sponsors regarding stop-loss options.

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Secrets to Making Reference-based Pricing Work

On January 18, 2016
MyHealthGuide Source: Adam Russo, Esq.,1/14/2016, Thompson Information Services Blog

In order for reference-based pricing (RBP) to work, health plan sponsors should do it in a way that involves implementing best practices for cost analysis, claim repricing, plan design, patient advocacy (including balance billing protection when necessary), and member education.

Ways to Make RBP Succeed

Employers, administrators, brokers and courts have begun to realize that determining the value of a health care service must involve something more than considering only a provider’s billed charges. More and more courts are accepting evidence based on the reasonable and customary value of the claims and not what the facility actually billed.

A health care provider’s billed price for particular services is not necessarily representative of either the cost of providing those services or their market value. The reasonable value of services (to be used to set the RBP payment your plan will pay) must consider evidence of the full range of fees that hospitals charge and actually accept as payment from private payers, Medicare or patients themselves.

Since Medicare reimbursement is almost universally accepted in the market, paying any willing provider the Medicare rate plus a percentage is an objectively reasonable approach to providing the broadest possible provider access for RBP plan participants. The problem is that these same facilities have been getting so much more than this from large insurers and networks for so long.

Toss Out the Red Herring

Since U.S. Department of Labor issued frequently asked questions on RBP in 2014, the argument was made that RBP must be illegal since the Affordable Care Act limits the out-of-pocket maximum that a patient can have. But the issue is that the agency wrote the ACA rule with in-network claims in mind.

Part of this confusion stems from the reality that networks have been so pervasive for so long that people cannot conceive of a world without them.

It is important to understand that a claim subject to RBP in many cases has no network and would be viewed under a typical network scenario as an out-of-network claim. Thus, according to DOL, balance billed amounts resulting from non-network claims are not included in the individual’s out-of-pocket cost limitations.

Protect Members from Balance Billing

This doesn’t make balance billing the patient desirable. The plan doesn’t want to be price gouged by facilities but also doesn’t want its patients to be balance billed. Plans have to play a balancing act, which is not easy to do.

If you are the patient, you start thinking that you are a pawn in a chess match when it comes to RBP. We repeatedly hear patients say they thought they had insurance and that getting balance billed must be a mistake. The upset patient runs to his or her HR department demanding answers, and in the end doesn’t care what the plan pays as long as he or she doesn’t get his or her credit scores ruined.

Employers typically do care about the employees’ well-being but also care about the plan’s finances. They realize that the more the plan has to pay, the pricier health insurance becomes. However, they have to balance this with understanding that balance billing is bad for business and for public relations.

Patient Advocacy Advised

The best RBP programs should have a patient advocacy process. The process should involve providers of all types. Any such negotiation would still require the plan administrator to determine any maximum payable amount within the parameters the plan defines for reasonable and appropriate reimbursement. Also, the plan administrator should be able to offer to cover any patient deductible.

Also, a comprehensive patient advocacy program will have information on providers in many service areas across the country and will help RBP plan members find providers that are unlikely to balance bill for their services.

Medical tourism is a favored aspect of RBP plans for the same reason that RBP plans are better for members who travel outside their normal service area. An RBP plan member who seeks care outside his or her regular service area is more likely to be able to find a provider that will accept RBP as payment in full.

Plan sponsors don’t want to pay beyond their RBP payment, especially if their stop-loss carrier limits its reimbursement to RBP levels. Under that circumstance, payments beyond RBP would sap the plan and not the stop-loss insurer.

Bring Providers Along

Good RBP programs have direct contracts with out-of-network facilities, and plan documents that give the plan administrator leeway to negotiate with providers.

Specifically, successful RBP plans have contracts in which out-of-network facilities agree to accept the plan’s RBP rates. At the same time, however, a readiness to negotiate claims when needed can prevent balance billing and collections. Facilities accepting the plan’s RBP rate sets off a virtuous chain of consequences: no balance, no patients being balance billed, no complaints and no scrutiny.

Further, plan language must:
1. allow for the use of RBP;
2. describe the sources of pricing data to be used by the plan; and
3. address assignment and appeals.
If those and related questions are not answered, third parties will be able to find ways to refute the plan’s payment methods. In order to do this correctly, you need to have great plan drafters, as well as experts at facilitating provider contracting and claim negotiations.

Patients must be educated about the process and understand the type of RBP practices involved. They must know whether the plan has a physician-only network or a narrow network, and what direct provider contracts exist. The plan should teach them what to do if they are balance billed, including: (1) who pays the balance and (2) what the worst case scenarios are.
Percentage of Medicare
Traditional networks have failed to stem the rising costs of health care. This has the overall effect of reducing access to health care. Further, networks have encouraged a pricing system where providers charge one thing for their services but accept an entirely different payment from plans with which they contract.

More and more plans are amending their plan language to Medicare-plus pricing if the patient goes out of network. This benefits the plan because it pays less per claim, and it does not pay the balance, because the patient chose to go outside of the network. It also doesn’t have to pay a vendor to negotiate these claims with the providers.

A typical RBP plan offers reimbursement at rates between 120 percent and 180 percent of Medicare. According to the American Hospital Association, Medicare payment, on average, covers only 86 percent of actual costs in treating Medicare patients. This means that to cover costs, providers need to receive, on average, 116 percent of Medicare payment or more.

Leverage Facilities’ Collections Issues

Last, but not least, we have to take a look at the provider’s mindset. Hospital billing departments are extremely busy these days. The problem is that they aren’t collecting a whole bunch of money. Collection of amounts that patients owe is large problem for many providers. Easing cost-sharing requirements offers a powerful incentive to providers to accept RBP, especially pricing that is well in excess of what many of those same providers receive from the Medicare and Medicaid programs.

Some hospitals and health systems are starting to review and revise their prices to make themselves more attractive to individual consumers, who increasingly experience sticker shock when they pay for services out of pocket under certain high-deductible health plans. The reality is that many hospital leaders are publicly admitting to scrutinizing their own charge masters. The master price list often just serves as the basis for rate negotiations with insurers in order to see how prices compare against the actual cost of delivering services.

As more consumers have to pay more things out of pocket, these pricing issues are gaining an increasing share of health systems’ attention. The reality is that patients are starting to buy into transparency of pricing. If you’re a patient at one facility and you go to four different hospitals and you get the same service and the bill is different, you begin to wonder why. Hospital charge masters have been widely criticized for irrational pricing. Yet hospitals and insurance companies continue to use those master price lists in some negotiations.

For many years, providers have relied on a PPO’s logo on a patient’s insurance identification card to determine a network plan’s reimbursement terms. Identification cards created for RBP plans have no PPO logo but they do contain detailed notice of the reimbursement terms stating that the payment will be based on a certain percentage above Medicare.

In Conclusion

Unlike network discounting from unrealistic gross charges, RBP plans use bottom-up pricing based on costs. Plan sponsors and drafters have a fiduciary duty to be prudent with plan assets. As more and more patients begin to look at the overall cost of care and the actual billed charges, it is getting harder for plan administrators to preach the benefits of network discounts since the bottom line is that most plan funds are coming from the contributions of members’ paychecks.
About the Author
Adam V. Russo, Esq. is the Co-Founder and Chief Executive Officer of The Phia Group LLC; an experienced provider of health care cost containment techniques offering comprehensive claims recovery, plan document and consulting services designed to control health care costs and protect plan assets. The Phia Group’s overall mission is to reduce the cost of plans through its recovery strategies, innovative technologies, legal expertise, and focused, flexible customer service.

Anti-Assignment Clauses Bar Provider’s ERISA Claims

On January 7, 2016
By Carmen Castro-Pagan
An out-of-network health-care provider can’t continue with her claims under the Employee Retirement Income Security Act for unpaid benefits, fiduciary breach and failure to disclose documents against four health benefit plans, the U.S. Court of Appeals for the Eleventh Circuit ruled.
In the unpublished opinions issued Dec. 29 and Dec. 30, a three-judge panel affirmed the district court’s ruling dismissing the provider’s claims, and held that the participant’s assignment of benefits to a provider was void and unenforceable because the plans’ terms included valid anti-assignment clauses.
The cases are Griffin v. Health Sys. Mgmt., Inc., 2015 BL 428919, 11th Cir., No. 15-12138, unpublished 12/29/15 ; Griffin v. Gen. Mills, Inc., 2015 BL 428915, 11th Cir., No. 15-12157, unpublished 12/29/15 ; Griffin v. Southern Co. Servs. Inc., 2015 BL 430044, 11th Cir., No. 15-12135, unpublished 12/30/15 ; Griffin v. Focus Brands, Inc., 2015 BL 429997, 11th Cir., No. 15-12137, unpublished 12/30/15 .

Issue of the Year: Reference-Based Pricing and Balance-Billing

On December 28, 2015

In 2015 the self-funded industry evolved like never before. Innovative ideas spread like wildfire, as TPAs, stop-loss carriers, employers and brokers all over the country implemented new techniques to contain costs and secure the best results. Yet, the path to savings hasn’t been an easy one to travel.

All along, The Phia Group has worked with you to resolve thousands of issues – and by far, the most misunderstood, repeated, passion-inspiring issue has been reference-based pricing, balance billing, and the role of a fiduciary when handling such an arrangement.

Thank you for joining The Phia Group’s legal team on December 15th as they discussed reference-based pricing and balance-billing from the ground up and debunked common myths associated with it. This webinar will ended the year with a comprehensive primer on reference-based pricing and balance-billing, the rights of all parties involved, and what you can do to be proactive and successfully administer a reference-based pricing program.

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Court Nixes Health Plan’s Subrogation Claim

On December 23, 2015
Posted December 22, 2015, 3:11 P.M. ET
By Carmen Castro-Pagan
A health plan isn’t entitled to reimbursement of $48,000 in medical expenses it paid on behalf of a minor beneficiary who was injured in an all-terrain vehicle accident, the U.S. District Court for the District of Arizona ruled.

In granting the beneficiary’s motion to dismiss, Judge Diane J. Humetewa ruled Dec. 17 that the plan’s reimbursement clause was unenforceable because it wasn’t included in the formal plan document, but instead was part of the summary plan description. The court further held that in light of the conflict between the plan and the SPD, the terms of the master plan controlled.
The case is Apollo Educ. Grp. Inc. v. Henry, 2015 BL 419831, D. Ariz., No. 2:15-cv-00143-DJH, 12/17/15

Less Takes More - The Phia Group Addresses the Summary of Benefits & Coverage Requirement

On December 22, 2015

Benjamin Franklin, Blaise Pascal, and Mark Twain are all credited with having said, “I would have written a shorter letter, if I’d had the time.” Unfortunately, efforts to simplify complex matters often constitute the greatest challenge. This fact of life is certainly proven by the Affordable Care Act and its requirement that health plans provide consumers with a concise document detailing, in plain language, information about plan benefits and coverage. This summary of benefits and coverage document ( or “SBC”) is meant to help consumers better understand the coverage available to them, and allow them to easily compare options by summarizing key features such as the covered benefits, cost-sharing provisions, coverage limitations and exceptions.

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