Holding Treatment Bills Pending Settlement of Claim vs. Billing Health Insurance: Prudent Practice or Potential Disaster?

By Adler Giersch ps

In today’s economic-health care landscape, providers are looking for ways to lessen the financial impact of insurers’ relentless cost containment measures aimed at reducing reimbursement for services. One area that providers are looking at anew is the handling of treatment bills for patients with traumatic injuries. In this context, a frequent question we respond to concerns the legality of a health care provider’s decision to hold treatment bills pending a third-party settlement seeking 100% payment of the bills versus billing the patient’s health insurer contemporaneously with treatment and accepting a significantly reduced reimbursement rate.

Many providers appear unaware of the legalities surrounding holding the treatment bills until settlement, particularly where the provider has a contract with the health insurer. We continue to receive inquiries on the subject on a regular basis.

To add further confusion to the mix and a sense of urgency to address these issues, we recently learned that another personal injury firm may be disseminating erroneous information on this topic, potentially creating disastrous consequences for the health care provider who relies on that information. In an effort to help health care providers avoid inadvertently violating contracts and Washington law, please read on.

If a provider has a participating provider contract with a patient’s insurer, health insurance must be billed rather than holding the bill for third-party settlement. Failure to do so can result in breach of contract with the insurer, violation of the Health Insurance False Claim Act, criminal prosecution and disciplinary action.

Coordination of insurance benefits for victims of negligent injuries is vital for access to health care and maximization of physical and financial recovery. A provider may unwittingly misapprehend his or her obligations and rights in different insurance contexts, resulting in loss of benefits for the patient and potential legal and financial consequences for the provider of services.

Where there is Personal Injury Protection (PIP) coverage on an automobile policy or MedPay on auto or homeowners policy, the contract of insurance is strictly between the patient and the insurance company. A PIP or MedPay carrier may require certain documentation, such as records and bills, in order to determine the relationship of rendered care to the covered event. However, the carrier has no contractual recourse against the health care provider for non-compliance. The detriment falls on the insured and the provider can collect charges directly from the patient, even where PIP or MedPay is available.

When there is a third party claim, no PIP coverage, and no health insurance, a provider may collect charges for medical care directly from the patient. The provider may also use a Contractual Guarantee of Payment or the Washington lien statute, RCW 60.44, to help secure payment from the proceeds of a third-party settlement. This is an effective way to provide patients access to health care while maintaining some security while holding bills. Liens and Guarantees of Payments are discussed in depth in this publication and are available on our Web site, www.adlergiersch.com.

Health insurance is a highly regulated scheme and may present pitfalls to the unwary provider. Many providers choose to enter into participating provider contracts with major health insurers. This provides a pool of potential patients who will choose a provider on their plan. It also provides a structured, relatively reliable revenue stream for treatment of patients on these plans. The compromise for the provider is, however, agreement to designated plan rates for services. This requires the provider to write off a certain portion of the charges for plan-insured patients.

Health insurance participating provider contracts are subject to the terms set out in the provider contract as well as to Washington regulation. Of particular importance to a participating provider are the regulations in WAC 284-43. These regulations set out mandatory contract provisions and obligations. These regulations are mandatory and may not be modified.

The purpose of this chapter is to establish uniform regulatory standards for health carriers and to create minimum standards for health plans that ensure consumer access to the health care services promised in these health plans.

WAC 284-43-100.

The achieve this end, providers are prohibited from collecting covered charges from patients. A provider may only collect non-covered charges, such as deductibles and co-pays, directly from a patient. WAC 284-43-320 requires a participating provider contract to contain the following language:

(2) Each participating provider and participating facility contract shall contain the following provisions or variations approved by the commissioner:

(a) “[Name of provider or facility] hereby agrees that in no event, including, but not limited to nonpayment by [name of carrier], [name of carrier’s] insolvency, or breach of this contract shall [name of provider or facility] bill, charge, collect a deposit from, seek compensation, remuneration, or reimbursement from, or have any recourse against a covered person or person acting on their behalf, other than [name of carrier], for services provided pursuant to this contract. This provision shall not prohibit collection of [deductibles, copayments, coinsurance, and/or noncovered services], which have not otherwise been paid by a primary or secondary carrier in accordance with regulatory standards for coordination of benefits, from covered persons in accordance with the terms of the covered person’s health plan.”

WAC 284-43-320(2)(a).

This means that, if a provider has a contract with the carrier of a patient, it is a violation of the provider contract to collect anything but deductibles, co-pays or non-covered services from the patient. Violation of this provision is addressed in this same regulation:

(3) The contract shall inform participating providers and facilities that willfully collecting or attempting to collect an amount from a covered person knowing that collection to be in violation of the participating provider or facility contract constitutes a class C felony under RCW 48.80.030(5).

WAC 284-43-320(3) (emphasis added).

RCW 48.80.030(5) is a provision of the Health Care False Claim Act and states:

(5) No provider shall willfully collect or attempt to collect an amount from an insured knowing that to be in violation of an agreement or contract with a health care payor to which the provider is a party.

(6) A person who violates this section is guilty of a class C felony punishable under chapter 9A.20 RCW.

The Health Care False Claim Act requires that, if a provider is convicted under the act, the prosecutor shall provide written notification to the regulatory or disciplinary agency. The disciplinary board may then investigate and take disciplinary action against the provider. RCW 48.80.060.

Finally, violation of the WAC provisions could result in revocation or non-renewal of the contract by the carrier for breach of contract. The provider then loses the benefits of such a contract: a pool of potential patients and predictable revenue stream.

Inquiry to the Office of the Insurance Commissioner confirms that the provisions required in WAC 284-43 are not optional. The contract may not be modified to get around these provisions.

Providers should review and be familiar with all provisions of contracts entered into with insurance carriers to avoid unintended consequences. Insurance carriers should provide support to assist the provider in determining his or her rights and obligations under the contract.

Coordinating benefits on behalf of an injured person is vital to secure access to care, secure fair recovery and ensure that all involved in a patient’s care are properly reimbursed. We at Adler Giersch, ps can assist your patients and you with the maze of insurance coordination to achieve these ends.