Two recent actions, one by the Office of the New York State Comptroller, and one a court decision that comes out of a New Jersey case, further highlight the need for ASCs to be very cautious in their actions relating to out-of-network payments.
First, the state of New York released its fifth report on a surgery center operating out-of-network. There, the state investigating agency determined and alleged that the center had billed over $1 million improperly and that the state should be entitled to recoup the money through its insurance plan. The basis of the claim is the concept that the surgery center was improperly waiving or reducing co-payments:
“We found that South Shore routinely waived Empire Plan members’ required out-of-pocket costs for services provided. We calculated that, as a result of this practice, United overpaid claims submitted by South Shore during our six-year audit period of at a cost of $2.7 million to the State. This practice drives up costs for the Empire Plan, since it increases the likelihood that members will use non-participating providers, such as South Shore, which generally receive higher reimbursement rates than participating providers. Furthermore, routinely waiving such costs may constitute insurance fraud.”
Here, the court explained the situation as follows:
“When United processes South Shore claims for services to Empire Plan members, it is with the understanding and belief that members are liable for a portion of the claimed amount representing their out-of-pocket obligation. Our audit found that South Shore is routinely waiving Empire Plan members’ out-of-pocket obligation. This negates the intended disincentive from using the more costly non-participating providers and thus drives up the cost of the Empire Plan to taxpayers.
“As South Shore’s intention was to waive members’ out-of-pocket costs, the amount claimed by Endoscopy should reflect this reduction, and the reimbursement by United should have been
calculated on the lower amount. United was presented with and made reimbursement calculations based on inflated claims. We calculated that, as a result, United overpaid claims submitted by South Shore during our audit period at a cost of $1,000,000 to the State.”
It further claimed that there might be possibilities of fraud and possible violations of the state insurance act. The state will now turn its investigator report over to both the payor — to encourage it to try to recoup the claims from the center — and to the New York State Department of Civil Service, in an effort to have the state examine whether to bring further actions against the surgery center.
The report also noted:
“Additionally, under the New York Penal Law, submitting an insurance claim with false information, such as an inflated charge for service, may constitute insurance fraud. In addition, waiving of out-of-pocket costs unjustly enriches the provider because the payment should be based on the provider’s
actual charge, which is the amount the provider intends to accept as payment. Finally, the New York State Insurance Department concluded that it may be a violation of the State Insurance Law, and a fraudulent billing practice, when a provider routinely waives out-of-pocket costs and accepts the amount the insurer reimburses as payment in full.
“Officials at the Department of Civil Service and the State Insurance Department are concerned about fraud in the Empire Plan. Officials are concerned that providers who waive Empire Plan members’ out-of-pocket costs are doing so intentionally, in order to benefit from the higher reimbursement rates for non-participating providers.”
The second case was brought by a plaintiff’s surgery center against the payor alleging that it had been underpaid and unpaid for numerous out-of-network claims. Here, the Court held that the surgery center had not committed fraud of any sort.
“Defendant is not only refusing payment of outstanding claims but is also affirmatively seeking disgorgement of facility fee payments previously made to Plaintiff. Defendant is also alleging that Plaintiff’s billing practices amount to a violation of the Insurance Fraud Prevention Act.
“Defendant also asserts that Plaintiff has violated the Codey Law against self-referrals. Under the Codey Law, a practitioner is precluded from referring a patient to a facility in which the practitioner has a significant beneficial interest.”
However, the court held that the surgery center had been providing services out of compliance with the Codey Law in New Jersey and that, accordingly, the insurer did not have to pay the claims allegedly owed to the surgery center.
“Accordingly, this Court finds that Plaintiff has violated the Codey Law’s ban on self-referrals, and Plaintiff is not entitled to payment on the outstanding claims. Summary Judgment is granted in favor of Defendant on this point.”
This case helps to underscore the amount of caution one must take in handling out-of-network patients and in bringing a legal action related to collecting out-of-network claims where a party itself may not have a completely defensible position to stand upon.
For out-of-network practices, it is critical that a surgery center fully disclose its practice to payors. This allows the surgery center in part to help argue that it is not operating in any sort of fraudulent manner. Then, the surgery center may still have risk of recoupment actions and, in states that do not permit waiving or discounting of co-payments at all, it may still be in violation of the law.
There are several options by which to approach out-of-network activity. In each option, it is critically important that a center and its board evaluate the risks of each option and select a strategy that is both lawful and with an understanding of potential consequences even if lawful but not completely consistent with the practice of collecting fully all co payments and deductibles.
Contact Mr. Becker at sbecker@mcguirewoods.com.
