Kaiser Must Pay for|Out-of-Network Care

SAN FRANCISCO (CN) - Kaiser is obligated to pay for out-of-network medical care based on physicians' "binding" determination that a patient needed emergency stabilization, a federal judge ruled.

Kaiser disputed a bill from Chino Valley Medical Center for emergency services provided to a health plan member on May 7, 2011. The patient presented with high blood pressure and a headache, and the attending physician declared him "unstable for transfer" and did not clear him for transport to a Kaiser hospital until May 8.

Kaiser refused to pay medical expenses charged on May 8, claiming the Medicare patient was stable on May 7 and should have been transported then.

"Per our physician review, the member was clinically stable for transfer in-plan after evaluation and treatment in the emergency room," Kaiser said in its Dec. 1, 2014 federal complaint. "We did not authorize the hospital to provide the post-stabilization inpatient care received after that."

But Chino Valley said U.S. Health and Human Services Secretary Sylvia Mathews Burwell interprets federal regulations to mean that costs for medical care given to out-of-network patients - up to the point a physician deems the patient has been stabilized - must be paid by the patient's health care plan.

Kaiser disagreed, and sued the HHS Secretary.

Chino Valley appealed Kaiser's denial of payment to Maximus Federal Services, a private contractor that reviews Medicare disputes. Maximus denied the appeal, agreeing with Kaiser that the patient should have been deemed stable enough for transport on May 7.

Chino Valley then took the dispute to an administrative law judge, which upheld the Maximus decision, prompting the hospital to take the issue to the Medicare Appeals Council, which held that Kaiser "must pay for the enrollee's care until her treating physician determined that she was stable and could safely be transferred."

The Medicare Appeals Council found that under federal regulation, "The physician treating the enrollee must decide when the enrollee may be considered stabilized for transfer or discharge, and that decision is binding on the Medicare Advantage Organization," which in this case is Kaiser.

The council's decision reflected the HHS's and Secretary Burwell's final decision, prompting Kaiser to file the Dec. 1, 2014 federal lawsuit.

Kaiser asked the court to review the decision, arguing that Burwell and the agency misinterpreted the regulation and are not entitled to deference.

Burwell said the court "must give substantial deference to an agency's interpretation of its own regulations."

U.S. District Judge Edward Chen on Monday upheld the council's decision, finding the agency is entitled to deference in its interpretation of its own regulation.

"Kaiser's attempt to distinguish between medical transfer and financial responsibility in interpreting the stability requirement of 42 C.F.R. § 422.113(b)(3) ignores 'the obvious fact that transfer disputes between the MAO [Medicare Advantage organization] and the out-of-network emergency provider ... will invariably be based on concerns about payment," he wrote in a 21-page order. "Once an enrollee's emergency medical condition stabilizes, the MA's financial responsibility for out-of-network services that are not authorized becomes very limited. Accordingly, the secretary's interpretation of the regulations is neither plainly erroneous nor inconsistent with the regulation or governing statutes: It is well within the bounds of reasonable interpretation."

Chen also addressed concerns that out-of-network hospitals could be taking advantage of that interpretation to Kaiser's detriment.

"Although the court recognizes the serious policy concerns raised by Kaiser about perverse financial incentives for a provider to prolong medical emergency status at the expense of MAOs, the court cannot conclude that the agency's interpretation of existing regulations and governing statute is unreasonable," he said. "Kaiser's concerns are thus better addressed to the regulatory process and/or Congress."

Chen also rejected Kaiser's claim that its due process rights were violated.

"In this case ... there is not cognizable property interest because the government is regulating Medicare funding it provides," Chen wrote. "Participation in the Medicare program is a voluntary undertaking. The federal government pays Kaiser a flat fee per enrollee, which means that Kaiser assumes the risk of providing covered services to the beneficiary."

He denied Kaiser's request for summary judgment and granted Secretary Burwell's cross-motion for summary judgment.

Kaiser attorneys Craig De Recat, Gregory Pimstone and Joanna McCallum of Manatt Phelps & Phillips, in Los Angeles, were at trial Wednesday and not available for comment.

Health and Human Services did not return a phone call Wednesday afternoon.

Part C Medicare

Medicare is a federal medical insurance program for the elderly and disabled. The program is administered by the Secretary of Health and Human Services through the agency's Centers for Medicare & Medicaid Services.

Part C of the three-part program allows enrollees to participate in the Medicare Advantage program. Under the program, eligible individuals may receive Medicare benefits through Medicare Advantage Organizations, which includes HMO plans such as Kaiser's.

The part C HMO plans are "capitated" plans, meaning the federal government pays the plans a flat fee per enrollee and the HMO then arranges for or pays providers for the services.

The capitated plans appear to have generated some concern about the potential for MOAs to intentionally short-change patients on care to keep medical costs low and revenue high and, conversely, about out-of-network hospitals and physicians who have a financial interest in providing, and prolonging, health care service to MAO patients.

Subscribe to Closing Arguments

Sign up for new weekly newsletter Closing Arguments to get the latest about ongoing trials, major litigation and hot cases and rulings in courthouses around the U.S. and the world.

Email *

Submit