Hospitals must bill health insurance first

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Trial lawyers hope a new Virginia law will put an end to a hospital billing tactic that threatened to take a bite out of accident victims’ compensation.

The General Assembly passed, and Gov. Bob McDonnell signed, a bill requiring hospitals to bill patients’ private health insurance, when available, rather than holding out for a larger payout from the proceeds of a tort claim.

“It’s the best bill I ever passed,” quipped Sen. A. Donald McEachin, D-Richmond, as he talked about Senate Bill 707 at a recent meeting of the Metro Richmond Women’s Bar Association.

Reports differed on how widespread the practice has been, but the concept is all about increasing the compensation level for medical services.

Hospitals and other medical providers typically have agreements with private health insurers to accept far less than their normal billing rates for various services. When treating an accident victim with a potential tort claim, a provider might forego sending a bill to the patient’s health insurer. Instead, the provider would count on getting paid at the full rate, or close to it, when the accident claim settled or resulted in a court judgment.

“Why take 50 cents on the dollar when you can get 100 cents by putting a lien on an attorney’s file?” was the reasoning of some hospitals, according to McEachin.

The patient would pay the price for the provider’s bid for full compensation. A hospital’s reimbursement from the tort recovery would come directly from the patient’s pocket when the settlement was divided up.

McEachin said his law office represented an accident victim who incurred nearly $500,000 in medical expenses before succumbing to his injuries. The hospital – MCV, McEachin said at a meeting of the Virginia Trial Lawyers Association last month – sought to take its compensation from the patient’s tort recovery.

The hospital eventually “relented,” McEachin said. In smaller cases, however, a high volume law practice would be hard pressed to take each provider to court to force it to accept the agreed insurance compensation, he said.

Accounts difference about the proliferation of the practice.

“We did not believe that it happened very often,” said Katharine M. Webb, senior vice president of the Virginia Hospital and Healthcare Association. “We could find only a very few cases.”

“We saw it a lot here all around Central Virginia,” said Richmond attorney Elliott M. Buckner, who represented trial lawyers in the negotiations that led to the legislation. “We heard from others around the state that it was a large problem that kept getting bigger.”

Regardless of the incidence of such deferred billing, finding a legislative solution was no easy task. McEachin introduced a bill in 2012 to block the practice. Medical providers, health insurers and trial lawyers all had something to say about it.

“In healthcare, nothing is ever simple,” said Webb.

A compromise emerged only after a series of mediation sessions involving representatives from the VTLA, the VHHA, health insurance carriers, liability carriers, doctors, chiropractors and others.

The mediation sessions were facilitated by Mark E. Rubin, executive director of governmental relations for Virginia Commonwealth University. “There were some pretty strong differences of opinion,” Rubin said.

“It was a very complicated and challenging discussion,” Webb said. “It went on all through summer and into the fall.”

Medicare and Medicaid were not part of the legislation – by statute, they are the payers of last resort under all circumstances, Webb said.

The uninsured are handled differently – the legislation deals only with situations in which health insurance coverage is in place.

Further complicating the process is the fact the contractual rules are different for different health insurers.

“We spent maybe the first couple meetings just walking through what the rules are,” Webb said.

One player at the table walked away unscathed. The state Bureau of Insurance will not have to enforce any new regulations because the new requirements for healthcare providers are in the portion of the state code that governs civil litigation, not insurance.

Covered by the new law are indemnity policies, PPOs, HMOs, the state employee insurance plan, local choice federal employee plans, and ERISA plans, according to a summary of the legislation published by Hancock, Daniel, Johnson & Nagle.

Under the law, an in-network provider “shall submit its claim” to the health insurer in accordance with the terms of the applicable provider agreement as long as the patient provides the insurance information in a timely way.

If the provider skips the health insurance claim process, the patient has no obligation for the bill, the provider has no lien against a tort recovery, and the provider has no recourse for medical expense benefits, the law says.

The patient and the health care insurer remain obligated to pay as long as the provider submits its bill in due course to the insurer.

The legislation, and a companion bill regulating assignments of benefits for medical expense payments, passed unanimously in 2013 after the summer of negotiations among stakeholders.

“Everybody gave a little and got a little,” Buckner said.

“At the end of the day we wanted to get to the right solution for people in Virginia who are injured in a car accident and for everybody responsible in some way for that person,” Webb said.