The Fifth Circuit recently addressed an out-of-network provider’s right to sue and whether coverage may be conditioned on collections of patient’s out of pocket costs. North Cypress Medical Ctr. Operating Co., et al. v. Cigna Healthcare, et al., No. 12-20695.
North Cypress owns and operates a hospital in Houston. It was unable to agree to a network agreement with Cigna and therefore provided services to Cigna’s member as a non-participating provider. At the time that it opened, North Cypress notified Cigna of a “prompt pay discount” policy. Cigna alleged that, under this policy, North Cypress would only bill its patients a reduced charge in exchange for prompt payment at the time the patient was discharged. Specifically, Cigna alleged that North Cypress charged its patients a discounted coinsurance based on the Medicare fee schedule, whereas the charges it submitted to Cigna for the patient’s care were several times that amount.
Because of the prompt pay discount policy, Cigna routed the claims to its special investigations unit, which delayed payment by several months. It also frequently discounted payments to North Cypress to minimal levels. Alleging that Cigna had underpaid thousands of its claims, North Cypress sued Cigna under ERISA as its patients’ assignee under each patient’s particular health benefit plan. The district court granted summary judgment in Cigna’s favor, agreeing with Cigna that North Cypress did not have standing to seek payment from Cigna under the patient’s health benefit plan because the patient was not at risk of owing North Cypress any additional payment, even if Cigna denied the claim.
The Fifth Circuit reversed. Relying heavily on the Ninth Circuit’s 2014 decision in Spinedex Physical Therapy U.S. Inc. v. United Healthcare of Ariz., Inc., 770 F.3d 1282, the Fifth Circuit explained that courts “look to the rights of the patient at the time of assignment.” It reasoned that participants have the right to be reimbursed by CIGNA for medical costs incurred at an out-of-network provider, and the fact that participants assigned that right to the hospital “does not cause [the right] to disappear.” As an express assignee of the patients’ rights, the hospital had standing to sue for underpayment of benefits. According to the Court, any argument that the hospital’s billing and discounting practices reduces or eliminates CIGNA’s payment obligations under the terms of the plans is a merits-based contention that does not affect the hospital’s standing to sue. The Fifth Circuit instructed the district court to consider that issue on remand.
This decision illustrates one of the compelling issues facing plans, insurers, administrators, out-of-network patients and providers. It remains to be seen whether this decision has cleared the way for these claims to make their way through the federal court system.