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New precedent reforms payer clawbacks

In the first such victory for a healthcare association, lawyers for a group of chiropractors want to take on several large insurers

In a fight for reforms to insurer payment practices, a watershed moment for chiropractors may give way to a stream of changes for other providers.

After more than four years of litigation and a trial late last year, Philadelphia-based Independence Blue Cross has been ordered to change its payment and recoupment practices for members of the Pennsylvania Chiropractic Association.

Lawyers for the chiropractors call it a "precedent-setting" victory, based on a new application of the Employee Retirement and Income Security Act (ERISA), and plan to pursue other insurers with the same argument.

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The Independence Blue Cross case started in 2009, when a number of chiropractic associations sued the Blue Cross and Blue Shield Association and several Blues companies, including IBC, for alleged violations of ERISA and the Racketeer Influenced and Corrupt Organizations Act.

The RICO allegations were dismissed and a number of ERISA claims were settled between the chiropractors and most of the Blues insurers, except for the dispute between the Pennsylvania Chiropractic Association and Independence Blue Cross.

At issue were recovery practices for what IBC determined to be overpayments to Pennsylvania Chiropractic Association members treating patients covered by ERISA plans, usually for large and self-funded employers.

IBC maintained that the payments stemmed from computer glitches in 2006 and 2007 and went out to PCA members who weren't authorized to provide capitated services. IBC started adjusting reimbursements to account for the overpayments, withholding payments for non-capitated services and eventually recouping $1.3 million from 472 PCA members, through a process the PCA maintained was unfair.

The PCA and its lawyers argued that IBC's recoupment notices did not include any detail of the services in question and that later, repeated attempts to appeal the decisions went nowhere -- and the federal court in Chicago largely agreed.

In March, Judge Matthew Kelley concluded that IBC's practices came "nowhere near substantial compliance with ERISA's notice and appeal requirements," and in late May issued a permanent injunction, mandating that IBC changes it practices for PCA members.

Now, when seeking repayment for previously-issued reimbursements, "IBC shall identify the specific health insurance plans applicable to each claim at issue, and differentiate between those plans which are governed by (ERISA) and those which are not," Kelly wrote.

He also laid out a new system for communicating IBC's policies and offering the change for appeals. For repayment demands from PCA members, IBC needs to include the "specific reason or reasons for the reduction in benefits," references to the applicable plan provisions, and descriptions of the procedures and time limits for appealing, including a statement of the right to bring a civil action under ERISA. PCA members subject to repayment demands under an ERISA will now have a 60 day appeal timeline.

Implications

"This decision is not only an important victory for PCA and its members, it is a significant step toward reforming recoupment practices nationwide," said Brian Hufford, a Zuckerman Spaeder LLP attorney who represented the Pennsylvania chiropractors.

Hufford and his colleagues succeeded in the case by arguing -- successfully for the first time -- that in-network providers can be treated as beneficiaries under ERISA, a law enacted in 1974 to give large employers a national regulatory system for worker benefits. .

The court concluded that Pennsylvania Chiropractic Association members can be treated as ERISA beneficiaries since the health plan "expressly designates them to receive payment directly, and those payments constitute ERISA benefits" -- an interpretation that has Hufford and his colleagues looking for other provider-payer disputes to address.

The decision is "a watershed moment for Chiropractic health professionals as we fight for fairness and transparency," Daniel Schatzberg, president of the Pennsylvania Chiropractic Association and the operator of a clinic in Media, outside Philadelphia. 

Zuckerman Spaeder represented other chiropractors in the suit that led to a settlement with several Blues companies, and is currently involved in ongoing litigation disputing similar payment issues against UnitedHealthcare, Aetna, and other insurers. The decision "gives healthcare providers a new legal weapon when facing the widespread and highly questionable insurance industry practice of reversing previously approved claims," Hufford said.

IBC has not entirely ruled out appealing the decision. "Although disagreements can take place between chiropractors and insurers over reimbursement, we believe there are appropriate avenues and guidelines for resolving such disputes, as outlined in IBC's provider claim payment manuals," Karen Godlewski, IBC public relations manager, said. "If those procedures do not provide the desired solution, a contract suit can be brought under Pennsylvania state law."