Lawyers for Cigna are asking a federal appeals court to reject a Houston hospital's bid to sue over withheld medical reimbursements, arguing that the provider's "prompt pay discounts" threw its cost-sharing model awry.
The North Cypress Medical Center Operating Company is appealing a Texas federal district court decision dismissing allegations that Cigna breached contracts and violated the Racketeer Influenced and Corrupt Organizations Act and Employee Retirement and Income Security Act when its Texas units withheld some $40 million in payments to the medical center in 2009.
The case shows how prompt pay discounts -- something more and hospitals are doing to get patients to pay at the point of the service -- can complicate insurer-provider network and reimbursement contracts.
The North Cypress Medical Center, a 175-bed general acute hospital opened in 2007, offers a prompt pay discount that basically lets patients pay as if they are in-network, even to patients covered by health plans that are don't have in-network contracts, like Cigna.
But Cigna viewed that practice as "a system" that "virtually eliminates patients' responsibility to pay for their medical care while still charging enormous and unjustified costs to the employers who fund the patients' plans, a practice known as 'fee-forgiving,'" as lawyers from the firm Kirkland & Ellis wrote in a brief to the Fifth Circuit Court of Appeals.
After getting billing complaints about North Cypress Medical Center from employer clients in 2008, Cigna audited the records of members who had paid the prompt discount. The insurer subsequently tied reimbursements to North Cypress Medical Center based on the co-payments of members, rather than the value of the services as stated by the hospital -- and then North Cypress's operating company sued in August 2009.
North Cypress Medical Center said that approach amounted to a form of extortion under the Racketeer Influenced and Corrupt Organizations Act, or RICO. Cigna ended up reimbursing the hospital about $7 million for the patients with prompt pay discounts, which was about $40 million short of the billable amount, North Cypress argues.
U.S. District Judge Keith Ellison dismissed the RICO in 2011, on the grounds that North Cypress failed to show how Cigna was operating a racketeering "enterprise," and dismissed claims under ERISA, on the grounds that the hospital lacked standing because patients did not suffer as a result of Cigna's reimbursement drawdown.
Even though North Cypress and Cigna signed an in-network contract in July 2012, the hospital is pressing onto the Fifth Circuit Court of Appeals, hoping it will reconsider its standing to collect that $40 million under ERISA, RICO and discount (but not then in-network) contracts secured with Cigna through third-party vendors.
In a brief filed July 23 with the appeals court, Cigna's lawyers say the district court largely ruled correctly on all those issues -- dismissing the RICO and ERISA allegations, and holding that Cigna's reduction in payments after the prompt pay discounts was within their contracts.
They also wrote that North Cypress Medical Center's use of prompt pay discounts at times has threatened the viability of consumer cost sharing -- a part of almost all insurance, but increasingly emphasized in high-deductible health plans that aim for "consumer-driven" cost control, with patients comparing prices for medical procedures at area providers.
"Cigna-administered plans expressly require members to pay their cost-sharing responsibility," they wrote. "If NCMC sends Cigna a claim form listing its purported 'charges' for a service or supply, but NCMC never intends to bill or collect the patient's full cost-sharing responsibility, and the patient does not so pay, the patient has not satisfied his obligations under the plan, and Cigna is not required to reimburse the
patient for the provider's purported 'charges.' Indeed, it would make no sense for the plan to reimburse the patient (by making payment to NCMC) for expenses the patient never actually incurred."