When to consider suing an insurer for underpayment

Legal experts stress that knowing when to sue and how to build a strong case are key to whether doctors are successful.

By — Posted Feb. 25, 2013.

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For most physicians, suing an insurance company over payment issues might seem like an extreme option.

But taking shortchanging payers to court — rather than battling internal administrators — may be more beneficial than some doctors think, said Andrew H. Selesnick, a partner at Los Angeles-based Michelman & Robinson, LLP, and chair of the firm’s Health Care Law Dept.

Pursuing a legal challenge against insurers can lead to faster, fairer reimbursement, said Selesnick, who presented on the subject at the American Health Lawyers Assn.’s Physicians and Physician Organizations Law Institute meeting February in Arizona.

Knowing when to sue and how to build a strong case is key to doctors’ legal success, he said.

“Litigation is definitely an option and something that [doctors] should consider when the amounts are significant or when there’s a systematic business problem,” he said, “Either you can accept the fact that you’re going to get paid less, or you can do something about it.”

Many cases filed by individual doctors have resulted with physicians getting some, if not all, of their money back, often through out-of-court settlements, Selesnick said.

“Doctors really need to look at this from a business perspective,” Selesnick said. “Where do they want to be in one year, three years or five years? If they’re not being paid now, what makes them think that’s going to change in the future? A lot of physicians don’t consider that issue. They’re more concerned with what’s in their bank account today.”

The right time to sue

When faced with a missing bill or underpayment, doctors should consider several alternatives before suing payers, said California attorney John A. Meyers, chair of the health care law department at Ervin Cohen & Jessup, LLP. He has successfully litigated against insurers on behalf of doctors in the past.

“The question is: How much money is at stake?” he asked. “If you can meet and confer [with the payer] or have some kind of mediation, that’s probably the best solution. Sometimes you can even get it to work.”

Physicians should be mindful of what their contracts say about filing court actions, Meyers said. Some arbitration clauses preclude resolving payer disputes through the court system, he said. The provisions can require that “disputes be arbitrated and arbitration be final,” he added.

Selesnick suggested that doctors go above lower-level claims administrators to a higher representative in the organization to discuss payment complaints. “If that goes nowhere or they just ignore you, that’s when you would look at litigation as an option,” he said.

That is precisely what Florida dermatologist Steven Rosenberg, MD, chose to do in 2009 after attempting to recoup unpaid bills from Humana for more than a year, he said. Letters to the insurer seeking to resolve the claims on behalf of Dr. Rosenberg and other doctors at Palm Beach Dermatology Inc. in West Palm Beach brought no recourse. Humana contended that the practice did not obtain proper referrals before treating patients and that doctors failed to first collect payments from patients before seeking reimbursement.

Frustrated, Dr. Rosenberg, president of Palm Beach Dermatology, sued Humana in small claims court for violating Florida’s prompt-payment law. The statute requires HMOs and insurers to pay or deny all electronic claims within 90 days and paper claims within 40 days. Any claim over 120 days must be paid.

Humana eventually settled, agreeing to pay the first set of claims and the doctor’s filing fees, totaling $5,340. Shortly after filing a second suit in 2010, Dr. Rosenberg’s practice began receiving checks in the mail from Humana. Since then, the insurer has paid nearly all of the $130,000 Palm Beach Dermatology was owed, Dr. Rosenberg said. In a statement issued at the time, Humana said it had taken the appropriate steps to correct payment issues with Palm Beach Dermatology.

Three years later, the payment relationship with Humana is running much more smoothly, Dr. Rosenberg said.

“In my office, it’s certainly gotten better. We’ve had much less problems, and it appears they do have the capacity to process claims correctly,” he said.

Build a strong case

Showing how billed charges are reasonable and how they compare with the cost of similar medical procedures aids physicians in the courtroom, Selesnick said. This takes some research and conferring with payment experts.

“Did you use the dartboard method, or did you really think about what you should be charging?” he asked. “How can you support that? Do other payers reimburse at or near your [usual, reasonable and customary rate], and for how long have been people been doing that?”

Doctors should document the treatment in question thoroughly and detail any unusual circumstances of the case, Selesnick said. Compiling data about prevailing rates for doctors with the same training and qualifications also is helpful.

Depending where doctors live, state laws on prompt insurance payments could boost their cases. Nearly all states set deadlines for health plans to reimburse physicians for treating their members, but some states, like Florida, have stricter laws. California, for example, allows for further legal compensation if physicians can show a pattern of improper denial by payers.

Proving this trend means keeping detailed notes about past billing failures and underpayments.

“If they’ve been fighting for several years and nothing’s happening, we can often go back and group all of the claims together,” for the lawsuit, Selesnick said.

Physicians do not have to build their case alone, Meyers added. Consulting with an attorney who is well-versed in the procedural elements of reimbursement claims can ensure that doctors are headed in the right direction, he said.

“You can’t just go in there and say, ‘They don’t pay me timely,’ ” he said. Attorneys “want to be able to show, here’s the problem, here are the payments and here’s the damages.”

Bringing an attorney into the conversation early could lead to a multiaction suit. For instance, if other doctors have expressed similar trouble with the same insurer, attorneys can build a broader case. Selesnick said he has litigated multigroup claims on behalf of several practices.

Doctors also can contact their local or state medical society, or the American Medical Association. This can lead to larger civil actions, including several successful cases in which insurers had to pay settlements and change practices over payment issues.

Selesnick believes that more physicians should exercise their legal options when it comes to inadequate payments. A greater push against lack of payment could bring about much-needed change, he said. “If you have more physicians actively litigating against payers, it would force them to revise their payment system in favor of everybody.”

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