DaVita Case Post #2: What The Amy’s Kitchen Dismissal Means For Your Business

DaVita Case Post #2: What the Amy’s Kitchen Dismissal Means for Your Business

This is the second in a series of posts on the DaVita and related dialysis sector litigation. The first post is available here

Intro:

As noted in my previous post, the DaVita cases are all principally based on the Medicare Secondary Payor Act (“MSP”), a complicated set of statutes, lengthy regulations, and a few key cases which apply specifically to payment of dialysis benefits by employment-based health plans. In Amy’s Kitchen, DaVita’s theory was that the MSP was violated because the plan (1) carved dialysis benefits out from provider network coverage, thus discriminating against members who had end-stage renal disease (“ESRD”), and (2) allegedly paid dialysis benefits at “Medicare-based rates.” The court decided in favor of the plan on the first issue, but did not reach the second issue because it found DaVita had no “standing” to sue on that basis. Both decisions are important for understanding what the Amy’s Kitchen dismissal means.  

Why?

The holding that the MSP is not violated by carving dialysis benefits out from a plan’s provider network (such as a preferred provider organization, or “PPO”), and that paying dialysis benefits differently from other types of claim is not prohibited discrimination, matters because all too often PPOs and other networks are unable to negotiate reasonable discounts from dialysis provider charges. This holding gives plans added assurance that a well-designed dialysis carve, as an alternative to a PPO discount, is a legally acceptable cost containment solution.  

The holding that DaVita didn’t have “standing” to sue for other claims is important because of the MSP issues it didn’t answer. The dismissal on these grounds was principally based on an interpretation of the assignment of benefits from the patient to DaVita. This is a standard form all DaVita patients sign – and in general, is a kind of form almost all providers have their patients sign – which authorizes DaVita to file claims and collect payments directly from their plan. This form also authorizes DaVita to bring legal actions related to benefits against the plan, and these were the terms in question in Amy’s Kitchen. The court found that the assignment form did not in fact authorize DaVita to sue for the alleged violation of the MSP by paying claims at “Medicare-based rate.” The court therefore did not decide whether that kind of payment in fact would violate the MSP.

Since the motion to dismiss came so early in the case, the court in Amy’s Kitchen didn’t have any information about whether or not the plan actually did pay claims at “Medicare-based rates.” The fact is, however, that Renalogic’s methodology does not use Medicare rates as a reference point or basis for determining payment recommendations. Despite DaVita’s allegations, then, this issue simply is not presented for plans using Renalogic for cost containment.

What’s Next?:

It is very likely that DaVita used the same assignment forms in all cases as it did in Amy’s Kitchen, so the courts in these cases may very well follow the decision in Amy’s Kitchen and dismiss without deciding the MSP issues. If so, the MSP issues will remain very much “alive,” and a vulnerability for plans implementing dialysis cost containment.

Renalogic

Renalogic (formerly DCC, Inc.), headquartered in Phoenix, AZ, was founded in 2002 as a specialty dialysis cost-containment company to help clients understand the unique market dynamics in the dialysis provider community. The company has evolved to become a comprehensive provider of data-driven, end-to-end chronic kidney disease (CKD) care and cost management programs for the self-insured industry. Renalogic’s professional team includes leaders in healthcare administration, care management, legal specialists in ERISA and healthcare law, contract negotiation, payer/provider negotiation, and clinical experts.