BLUE CROSS AND BLUE SHIELD ASSOCIATION 44 th Annual Lawyers Conference

1. BLUE CROSS AND BLUE SHIELD ASSOCIATION 44th 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

2. EMERGING TRENDS INNON-PARTICIPATING PROVIDERPAYMENT DISPUTES

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

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

5. OUT-OF-NETWORK REIMBURSEMENT

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

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

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

9. OUT-OF-NETWORK REIMBURSEMENT THE INGENIX SAGA

10. 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 UnitedHealth and other payors

11. 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.”

12. OUT-OF-NETWORK REIMBURSEMENT Products of Ingenix Investigations • The Consumer Reimbursement System is Code Blue • http://www.aapmr.org/zdocs/hpl/NYAttryGenRpt011309.pdf

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

14. 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=Hearings&ContentType_id=14f995b9-dfa5-407a-9d35-56cc7152a7ed&Group_id=b06c39af-e033-4cba-9221-de668ca1978a&MonthDisplay=3&YearDisplay=2009&Label_id=&Label_id=

15. OUT-OF-NETWORK REIMBURSEMENT Litigation Spawned by Ingenix • Franco v. Connecticut General Life Ins. Co., 2:07-CV-D6039 (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.

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

17. OUT-OF-NETWORK REIMBURSEMENT “Reasonableness” = The Amount the Provider is Paid • Spectrum Health v. Good Samaritan Employees Ass’n Trust Fund, No. 08CV182, 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 90th percentile using Physicians’ Fee Reference (PFR) was reasonable. • However, Payor did not properly applyPFR to geographic area as required by Plan.

18. OUT-OF-NETWORK REIMBURSEMENT Fair Market Value = “Reasonableness” • Baker County Med. Services, Inc. v. Aetna Health Mgt., LLC, No. 1D08-0067, 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

19. 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

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

21. 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.’”

22. OUT-OF-NETWORK REIMBURSEMENT Billed Charges ≠ “Reasonable” • Victory Memorial Hosp. v. Rice, 493 N.E. 2d 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. 2d 926, 930-31 (Fla. Dist. Ct. App. 1997).

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

24. 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).

25. OUT-OF-NETWORK REIMBURSEMENT State Statutes • Oklahoma • OKLA. STAT. ANN. tit. 36, § 6571C. • Colorado • COLO. REV. STAT. § 10-16-704. • Florida • FLA. STAT. § 641.513(5). • Utah • UTAH CODE ANN. § 31A-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).

26. BALANCE BILLING

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

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

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

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

31. BALANCE BILLING Recently Filed Balance Billing Class Action • Sabban v. Scripps Health, No. 37-2009-00081971 (Cal. Super. Ct.) (Complaint Jan. 26, 2009). • Putative class of subscribers sued providers of emergency services for balance billing alleging violations of California law.

32. BALANCE BILLING Providers Prohibited from Balance Billing • Joseph L. Riley Anesthesia Assocs. v. Stein and Florida HealthCare Plan, Inc., 27 So. 3d 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

33. 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 UnitedHealthcare of Georgia, Inc., currently pending in the Superior Court of Richmond County, Georgia.

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

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

36. 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.

37. ASSIGNMENT OF BENEFITS

38. ASSIGNMENT OF BENEFITS Tension Traditional Public Policy Supporting theAssignability of Contractsvs.Public Interest in Controlling Health Care Costs

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

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

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

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

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

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

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

46. ASSIGNMENT OF BENEFITS Cases Voiding Anti-Assignment Clauses • Am. Med. Int’l, Inc. v. Ark. Blue Cross & Blue Shield, 773 S.W. 2d 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. 2d 648, 649 (Tex. 1999). • Enforcement of anti-assignment clause is prohibited by the Texas Insurance Code.

47. ASSIGNMENT OF BENEFITS COURTS WILL ENFORCEANTI-ASSIGNMENT CLAUSE INERISA PLANS IF THE PLAN IS CLEAR AND UNAMBIGIOUS

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

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

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