Managing Accident Claims: Avoiding Legal Disaster

2014 AAHAM Annual National Institute

San Diego, California

October 15-17, 2014

DISCLAIMER - This publication is designed to provide general information in regard to the subject matter covered. It is provided with the understanding that the publisher is not engaged in rendering legal or other professional services. Although prepared by individuals experienced in the medical reimbursement industry, this publication should not be utilized as a substitute for professional services in specific situations. Although the individuals who prepared the publication may be legal professionals individually, such individuals are not presenting the information covered herein as legal experts in the medical reimbursement industry. If legal advice or other assistance is required, the services of a professional should be sought.

Chad Powers, Esq. Vice President, General Counsel

Medical Reimbursements of America, Inc. 6840 Carothers Parkway, Suite 150 Franklin, TN 37067

Presentation Learning Objectives: • To gain insights to avoid legal issues while optimizing the reimbursements

available to hospitals for accident claims. • To understand the challenges hospitals face in managing the unique financial

class of Accident Claims. • To study real-life examples of legal violations and damages incurred in recent

years. • To educate, enlighten, and engage Business and Financial professionals to

consider and review their current processes and learn how to properly manage Accident Claims.

Presentation Overview: • Introduction

Types of insurance • Not All Automobile Insurance is the Same

What is No-Fault insurance? What is Liability insurance?

• Coordination of Payment – Why it is important to differentiate Pitfalls of contract language and clauses Review class action lawsuits

• Medicare Secondary Payer – as it pertains to Accident Claims • Conclusion • Q & A

RECENT NEWS:

Types of Insurance related to Accident Claims:

• Med Pay (No-Fault)

• PIP (No-Fault)

• Workers’ Compensation

• Commercial Health Insurance (e.g., BCBS, Cigna, UHC)

• Government Health Insurance (e.g., Medicare, Medicaid, TRICARE)

• Liability Insurance

• Under/Un-insured Motorist Coverage

Not all automobile insurance is treated the same: No-Fault vs. Liability

No-Fault Insurance

No-Fault Insurance:

• No-Fault Insurance (e.g. Med Pay or PIP) is “first party” coverage;

• Pays regardless of fault;

• Pays the cost of necessary medical care received as a result of an accident

Automobile Med Pay- driver, family members, passengers

Homeowners’ Med Pay- guests, not homeowners/residents

Premises Med Pay- guests, patrons, members

Anyone with No-Fault insurance injured in an automobile related accident. For example:

• Driver

• Passengers – related or unrelated – in the insured driver’s vehicle

• A person driving the insured driver’s vehicle

• Pedestrians with Med Pay in their car insurance policy

Types of No-Fault Insurance:

• Medical Payments Insurance (“Med Pay”):

• An optional coverage under most automobile insurance policies. This coverage pays for health care costs regardless of who has been assigned fault.

• Personal Injury Protection (“PIP”):

• A compulsory coverage in true “No Fault States.” This coverage may pay for medical expenses, lost wages, and more.

• Florida • Hawaii • Kansas • Kentucky • Massachusetts • Michigan • Minnesota • New Jersey • New York • North Dakota • Pennsylvania • South Carolina • Texas • Utah

Liability Insurance

Liability (At-Fault insurance): • Liability insurance protects the

insured from damage the insured does to others or to property in an accident.

• May cover: medical expenses, lost wages, pain and suffering, and attorney’s fees.

• If Patient is found “at-fault” or if fault cannot be determined, liability will not cover Patient’s medical expenses

Who does liability cover?

• Insures the “injuring” party from…

• … the “injured” party’s damages claim.

State Liability Insurance Requirements: • Most states require minimum liability coverage.

TENNESSEE:

• Compulsory Coverage (25/50/15): • Bodily injury: $25,000 per person and $50,000 per accident. • Property: $15,000.

No-Fault vs. Liability Coverage:

• Liability insurance differs from other insurance policies or plans . . .

• In the case of other types of insurance . . ., i.e. no-fault insurance, group health plans and workers’ compensation, the insurance has a contractual obligation to pay for medical services provided to the covered person.

• Liability insurance, however, has a contractual obligation to compensate the alleged tortfeasor for any damages the alleged tortfeasor must pay to an injured party.

LIABILITY INSURANCE

PATIENT HOSPITAL

LIABLE 3rd PARTY

NO-FAULT

Assignment of Benefits

Hospital Lien* From

Patient

Reimbursement – 3 ways:

* Where applicable

Coordination of Payment: Billing No-Fault Primary to Health

• Florida • Hawaii • Kansas • Kentucky • Massachusetts • Michigan • Minnesota • New Jersey • New York • North Dakota • Pennsylvania • Utah

2012 NAIC COB Model Regulation: Section 3, sub. (K)(3): • “Plan” includes . . . The medical benefits coverage in automobile “no

fault” . . . type contracts. Section 6, sub. (B)(1): • When a person is covered by two (2) or more plans, the rules for

determining the order of benefit payments are as follows . . . • . . . A plan that does not contain order of benefit determination

provisions that are consistent with this regulation is always the primary plan unless the provisions of both plans, regardless of the provisions of this paragraph, state that the complying plan is primary.

Tennessee Rules and Regulations, Chapter 0780-01: Tenn. Comp. R. & Regs. 0780-01-53-.02(1)(e): • “‘Plan’ may include the medical benefits coverage in group-type, and individual

automobile ‘nofault’ and traditional automobile “fault“ type contracts.” Tenn. Comp. R. & Regs. 0780-01-53-.03(4): • “General. When there is a basis for a claim under This Plan and another Plan, This

Plan is a Secondary Plan which has its benefits determined after those of the other Plan, unless:

(i) the other plan has rules coordinating its benefits with those of This Plan; and (ii) both those rules and This Plan's rules, in subparagraph (2) below, require that This Plan's benefits be determined before those of the other Plan.”

Coordination of Payment: Billing Liability Primary to Health

RECENT NEWS:

Express Contract: No-Fault insurance has a

contractual obligation to pay for medical services provided to

Patient.

Express Contract: Liability Insurance has

a contractual obligation to

compensate 3rd Party for damages 3rd Party must pay to Patient.

Quasi-contract : Hospital has rendered services and Patient is

obligated to pay for them.

Express Contract: Health Insurance has

a contract with Patient and Hospital.

NO-FAULT INSURANCE

LIABILITY INSURANCE

PATIENT HOSPITAL

LIABLE 3rd PARTY

HEALTH INSURANCE

LIABILITY INSURANCE

Contract Relationships:

› Patient agrees to join insurance “network” Insurance company

agrees to pay for medical treatment.

› Hospital agrees to accept payment from Insurance company as payment in full and agrees to only bill Insurance for payment.

PATIENT HOSPITAL

LIABILITY INSURANCE

Neither Patient nor Hospital have a

contractual relationship with Liability Insurance.

Contract Language – Health Insurance:

Sample Contract Language – BCBS:

• Hold Harmless: “Providers hereby agree that in no event, including, but not limited to nonpayment by Plan, Plan insolvency or breach of this Agreement, shall Provider bill, charge, collect a deposit from, seek compensation, remuneration or reimbursement from, or have any other recourse against Member or persons other than Plan acting on their behalf

for services provided pursuant to this Agreement.” http://www.anthem.com/provider/nv/f5/s5/t1/pw_b130897.pdf

Additional Arguments: • “Third Party Beneficiary”:

• Patient is a Third Party Beneficiary (“TPB”) of the contract between Hospital and Patient’s commercial health insurance (“Payer”). A TPB of such a contract is entitled to enforce the contract and sue for damages for its breach. By refusing to submit his medical bills to Payer, Hospital is depriving Patient of the benefits of the discounts and other provisions of the negotiated agreement between Hospital and Payer.

• “Interference with Contract”: • Refusing to submit billed charges to Payer for payment may constitute

tortious interference with Patient’s contract with Payer. Patient had the foresight to purchase health insurance coverage to protect him in the event he was injured or became ill with the expectation that Payer would cover his medical expenses. Patient has paid premiums to obtain that insurance coverage. By refusing to submit billed charges to Payer, Hospital is depriving Patient of the benefits of his contract with Payer.

Wisconsin – Dorr v. Sacred Heart Hospital

• Recently, MRA has encountered a number of attorneys nationwide citing this case. The attorneys argue that Dorr prohibits contracted providers from pursuing the patient’s liability action when the patient has commercial insurance.

Attorneys argue its application to HMO and PPO contracts.

• In Dorr, a Wisconsin appellate court held that a hospital lien was unenforceable even though the hospital elected not to bill the patient’s HMO insurer. Both the HMO statute and the provider agreement prohibited the hospital from charging its patients for services covered by the terms of the group contract. As such, there was no debt owed by the patient to which a hospital lien could attach.

Oklahoma – Confidential Parties:

• In 2009, a provider health system was named in a class action alleging that providers within the health system were filing liens against the patients’ liability claims rather than billing the patients’ commercial health insurance for the medical care provided to the patients.

• The parties ultimately settled the litigation. However, pursuant to the settlement, the defendant health system agreed to cease pursuing liens against liability claims for patients with commercial health insurance – unless expressly allowed by the terms of the commercial health insurance provider agreement – and to pay damages and attorneys’ fees.

California - Parnell et al. v. Adventist Health System West:

• The California Supreme Court held that a hospital seeking to assert a lien under the state's Hospital Lien Act (“HLA”) can only do so if the patient owes an underlying debt to the hospital. In this case, the patients provided "payment in full" to the hospitals, via payment from the patients’ commercial health insurance plan, thus the hospitals could not assert its lien.

• The Court acknowledged that its decision would cause hardship to hospitals that have discounted rate agreements with payors, but noted that the hospitals could always contract to preserve their right to assert liens to recover the difference between negotiated rates and the actual cost of treatment.

Louisiana – Desselle v. Acadian Ambulance Service:

• Plaintiffs’ complaint alleged that the provider breached its contracts with commercial health insurers “by attempting to collect and/or collecting from [insured patients] more than [insured patients] were legally liable.”

• The complaint also alleged violation of Louisiana’s “hold harmless” statute (LSA R.S. § 22:1874 et seq.) by “failing to file claims with [the commercial health insurers], by failing to accept payments from health insurers, by attempting to collect and collecting from patients amounts in excess of those legally owed by those patients.”

• In December 2012, the trial court ruled in favor of the plaintiffs and ordered a judgment in the amount of $17 million be paid by the provider.

Illinois – Falls v. Silver Cross Hospital and Med. Centers:

• In late January 2013, Mr. Falls filed a complaint alleging that Silver Cross refused to bill the plaintiffs’ health insurance – or in some cases refused to accept payment from the plaintiffs’ health insurance carriers – and instead filed health care liens for payment from allegedly liable third parties and/or the third parties’ insurance. Notably, the case sought to include patients that were treated at Silver Cross as far back as 2002.

• In a scathing memorandum order following Silver Cross’s motion to dismiss, the court mocked Silver Cross’s argument that filing a lien on settlement proceeds is not the same as billing the patient directly. The order concluded, “This Court will not indulge the fiction advanced by Silver Cross and its counsel.”

• The plaintiff voluntarily dismissed the case in July 2013.

Missouri – Welschmeyer v. St. Luke's: • St. Luke’s Hospital refused to accept the health insurance of

930 patients injured in auto accidents. It instead went after higher payments from car insurance settlements intended for the patients. The St. Luke’s settlement is thought to be one of the first court settlements to put an explicit stop to the repayment method.

• Per the settlement agreement: 1. The hospital is prohibited from filing liens against an

insurance settlement or seeking payment directly from the patient and instead must accept a patient’s valid health insurance. The hospital can still file a lien/bill for any patient responsibility.

2. St. Luke’s will forgive any liens not paid or collected. 3. A payout fund will be established for the benefit of patients

impacted by St. Luke’s practices. 4. Total settlement valued at over $4 million.

The Lifecycle of a Commercial Health Claim

Third Party Liability

Patient Gets Injured

Hospital Treats Patient

Med Pay | PIP Commercial

Health Insurance

ACCOUNT INVESTIGATION: The billing office staff will communicate with

patients, employers, insurance agents, adjusters, and health insurance carriers, to identify all

payers and then bill/coordinate claims as the obtained information dictates.

For all remaining balances and/or claims without primary insurance coverage(s) the billing office staff will investigate litigated claims by gathering information from the patient’s attorney, billing any applicable insurance carriers, or filing hospital liens.

Bills are submitted to the carrier with a written notice of an assignment of benefits and/or lien so as to ensure that payments are directed to

the hospital.

The business office staff will submit claims to

the health insurance carrier. Claims are submitted with accident details, subrogation

information, and exhaust documentation from all primary insurances.

Medicare Secondary Payer

Medicare Secondary Payer: Medicare Secondary Payer Manual, Ch. 2, Sec. 60. • Medicare is secondary to no-fault insurance even if State law or a private contract of insurance

stipulates that its benefits are secondary to Medicare benefits or otherwise limits its payments to Medicare beneficiaries.

• If services are covered under no-fault insurance, that insurance must be billed first. If the insurance does not pay all of the charges, a claim for secondary Medicare benefits can be submitted.

• Medicare can pay for services related to an accident if benefits are not available under the individual's no-fault insurance coverage because that insurance has paid maximum benefits for the accident on items or services not covered by Medicare or on non-medical items such as lost wages.

• Primary Medicare benefits cannot be paid merely because the beneficiary wants to save insurance benefits to pay for future services or for non-covered medical services or non-medical services. Since no-fault insurance benefits would be available in that situation, they must be used before Medicare can be billed.

Medicare Secondary Payer: Medicare Secondary Payer Manual, Ch. 2, Sec. 40. • Generally, providers, physicians, and other suppliers must bill liability insurance prior to the

expiration of the promptly period rather than bill Medicare. • Promptly means payment within 120 days after the earlier of: 1) the date the claim is filed with

an insurer or a lien is filed against a potential liability settlement; or 2) the date the service was furnished or, in the case of inpatient hospital services, the date of discharge) rather than bill Medicare.

• Following expiration of the promptly period, or if demonstrated (e.g., a bill/claim that had been submitted but not paid) that liability insurance will not pay during the promptly period, a provider, physician, or other supplier may either: • bill Medicare for payment and withdraw all claims/liens against the liability

insurance/beneficiary’s liability insurance settlement (liens may be maintained for services not covered by Medicare and for Medicare deductibles and coinsurance); or

• maintain all claims/liens against the liability insurance/beneficiary’s liability insurance settlement.

The Lifecycle of a Medicare Claim

Third Party Liability

Patient Gets Injured

Hospital Treats Patient

Med Pay | PIP Medicare

ACCOUNT IDENTIFICATION: Registration staff identifies the account as accident related; Patient completes MSP

Questionnaire.

The billing office staff must bill claims for which auto insurance med-pay, workers’ comp, and premises med-pay benefits are available to those carriers prior to submitting to Medicare.

The billing office staff will work claims involved in litigation to gather information needed to bill any liability insurance carriers or file hospital liens if necessary. Liability coverage MUST be billed prior to submitting claim to Medicare.

Bill submitted to Medicare as secondary payer using proper 2-part

explanation code

Putting it Together: The Lifecycle of a Claim

Third Party Liability

Patient Gets Injured

Hospital Treats Patient

Med Pay | PIP Commercial

Health Insurance

Third Party Liability

Patient Gets Injured

Hospital Treats Patient

Med Pay | PIP Medicare

Commercial Health:

Medicare:

Conclusion

Conclusion: • No-Fault insurance vs. Liability insurance:

No-Fault: o Depending on the state, an optional or compulsory coverage that

pays for health care costs regardless of who has been assigned fault. Liability:

o Generally, a compulsory coverage to compensate the at-fault party for any damages he/she must pay to an injured party.

• The “relationship” – or lack thereof – between HOSPITAL, PATIENT, and PAYER will control the proper order of payment.

• Hospital cannot pursue liability primary when patient is a commercial health plan enrollee; Hospital must pursue liability primary when patient is a Medicare beneficiary.

• Recent litigation trends indicate that courts are likely to side with insured patients when hospitals pursue liability primary to health.

QUESTIONS?

Disclaimer: This information is confidential and proprietary in nature, and may not be reproduced in whole or in part without the authorized written consent of Medical Reimbursements of America, Inc.

Chad Powers, Esq. Vice President, General Counsel Phone: (615) 850-5891 / Email: cpowers@mraresults.com

Medical Reimbursements of America (MRA): • Founded in 1999 & based in Brentwood, Tennessee • Process over $1 Billion annually in complex accident claims • Serving over 300 Hospitals across the nation • AcciClaim HFMA Peer Review Certified February 2013

Contact Information:

THANK YOU!