By: Jon Jablon, Esq.

It’s renewal season once again, and you know what that means: time for health plans to make decisions about vendors, pay ment models, and other things that help contain costs while maintaining robust benefits! One important choice that plans need to make is about dialysis. Specifically, when the plan uses a PPO network to price and pay claims, what does that mean for dialysis claims, which are of course some of the most expensive and marked-up claims of them all?

Many plans choose to go the rough of “carving out” dialysis claims, or paying them at a different rate than other claims. That’s fine in theory, but it can become a problem depending on how the network views it. Most networks, in fact, do not contractually require their providers to allow such a carve-out, instead permitting providers to file grievances or even sue a health plan that has paid less than the network rate, regardless of how reasonable the plan’s payment might have been.

This is an issue we see all the time, actually. A health plan is subject to a network contract, but determines that the dialysis facility has billed somewhere in the neighborhood of eight to fifteen times what the plan deems reasonable, so the health plan pays its stated benefits of 150% of Medicare (or similar amount), and closes its books. Unfortunately, when the employer has signed a contract to pay the provider more than that amount, providers often push back – and as many of us have seen first-hand, dialysis providers often tend to not shy away from that fight. The plan may only technically owe 150% of Medicare (again, just for example), but the employer owes the network rate. The important takeaway here is that in general, network contracts simply don’t care what the plan document says. They are separate, parallel, simultaneous promises to pay different amounts; the employer promises to pay a provider X via the network contract, but the plan document promises to pay Y for the dialysis claim. When a provider is promised two amounts, you’d better believe the provider is going to seek to enforce the higher amount – especially for dialysis claims, when the contractual rate is often so much higher than the plan’s carved-out rate!

Just a couple of weeks ago we encountered this classic issue yet again. In fact, this particular dialysis provider was actually getting ready to sue quite a few employers for contractual underpayments, but our client wisely chose a proactive settlement approach once the provider began to push back against the plan’s initial payment. The provider’s attorney told us candidly that the provider, like the plan, would very much prefer to just settle the matter out of court. That’s the prevailing mentality; the vast majority of plans and providers ultimately settle claim disputes out of court. Part of it is that the provider, like the plan, would prefer to avoid the expenses related to protracted legal battles – but part of it is that providers are not stupid; dialysis providers in particular know full well that their charges are insanely high and arbitrary, and litigation would that pricing into the public eye.

This blog post is certainly not meant to suggest that a health plan should blindly pay claims for fear of a fight. This is, however, designed to caution health plans and TPAs about what could happen – and what your rights likely are – in the event a health plan chooses not to pay a contractually-promised rate for dialysis (or other) services. Contractual interpretation can be a long, drawn-out fight; at the end of the day, a health plan will need to make a calculated decision regarding whether this uphill battle, and potentially going to court, is worth the risk; some major factors to consider are who the provider is, the amount at stake, and the employer’s risk tolerance.