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The holdings of federal court judges can be more confusing than clarifying for providers—we like to provide our take on these rulings to make the impact on future procedures as clear as possible. In the last few weeks we’ve released an analysis of each case taken in turn, as the result for Humble Surgical Hospital, LLC (“Humble”) was so drastically different in each case and we wanted to understand why, pursuant to the courts’ rulings.

We’d like to take this opportunity to break down the actions of Humble in each of these cases and why in one case (against Cigna) Humble was awarded $11.4 million in underpaid claims and in the other case (against Aetna) Humble was ordered to pay damages of $40 million to Aetna.

In both of these cases, Humble’s billing procedure and structure came into play. Humble was a five bed outpatient surgical setting but based its billed charges on usual and customary charges using a 3,803 bed in-patient hospital as its guide. As Humble was not in-network with Aetna, no contractual rate applied and Aetna paid based on billed charges so was directly impacted by Humble’s improper rate guidelines. Further, Humble paid local physician illegal kickbacks in exchange for their referrals as opposed to physician referrals to in-network surgical centers. To entice patients into using their out-of-network surgical center as opposed to an in-network center, Humble would promise patients that their out-of-pocket expenses would be equal to or lesser than an in-network facility and would forgive any fees above and beyond the typical out of pocket. See our related blog post about fee forgiveness here for more information about this scheme and how to avoid this. As a result of Humble’s fraudulent activity, Aetna overpaid claims by approximately $20.5 million in the span of three years and Humble was ordered to pay Aetna $40 million in actual and punitive damages.

In summary:

  1. Providers and hospitals cannot pay or be paid referral fees for patient referrals
  2. Providers cannot waive patient balances deemed patient responsibility by the insurance company
  3. Providers must base their billed charges off of similarly situated providers in their geographic region

In contrast, Cigna also sued Humble in an attempt to recoup payments made to Humble on which Humble had not collected the patient’s full responsibility after labeling Humble as a “fee forgiver”. They had previously refused to pay Humble for claims on which the provider hadn’t collected the plan participant’s deductible, co-pay or co-insurance, claiming that a policy exclusion allowed them to withhold that amount from the plan, allowing Cigna not to pay that amount to the provider. The Court held that this practice was an abuse of discretion. The Court also made a specific finding of fact, determining that Cigna’s method of processing Humble’s claims was disingenuous as it clearly focused on denying Humble’s claims, not paying them, as Cigna sent Humble’s claims to their “Special Investigations Unit” and allowed the claims to sit for months without payment or investigation. Humble filed a counterclaim against Cigna for full benefits owed on 595 claims billed to Cigna—the Court ruled in their favor and awarded them all of the underpayments for the 3.5 year period during which this dispute occurred. The Court also awarded them $2.3 million in ERISA penalties.

In summary:

  1. Managed care companies cannot deny or reduce payments based on their determination that a provider is a “fee forgiver”
  2. Insurers must process claims and issue EOBs before providers and patient can know true patient responsibility
  3. Use of third party contractors (Multiplan, etc) with negotiated rates precluded the insurer from later claiming overpayment when those rates were utilized
  4. Insurers can be held responsible under ERISA for filing to respond to statutorily authorized document requests from providers

Please contact our office should you have any questions regarding the foregoing and how a label as a “fee forgiver” may affect your practice or facility.

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