“Appeals court upholds hospital discount program”
A federal appeals court has ruled that hospitals may continue a widespread practice used to entice patients outside their insurance networks by offering them discounts for paying their medical bills in advance.
The 5th U.S. Circuit Court of Appeals, reversing a 2012 court decision issued in Houston, upheld North Cypress Medical Center’s discount payment program. The 175-bed physician-owned hospital offered more than 8,000 out-of-network patients covered by Connecticut insurer Cigna an option of paying upfront for their care at lower in-network rates without attempting to later collect the remainder of what was owed.
In 2008, Cigna stopped reimbursing part or all medical claims North Cypress filed, arguing the discount program threatened its business model to reduce insurance plan expenses.
The 5th Circuit court, based in New Orleans, found North Cypress “properly engaged in a discount system,” said J. Douglas Sutter, attorney for the hospital that opened in 2007. “It’s helpful to offer discounts because you don’t have to chase people down” after treatment. “Hospitals don’t like suing patients for payment.”
The court also struck Cigna’s counterclaim, seeking $25 million from North Cypress, Sutter said.
Cigna officials declined to comment about the decision, citing pending litigation.
The appellate court ruled that each of the thousands of claims in dispute between Cigna and North Cypress must be heard in U.S. District Court, said Dallas attorney Andrew Cookingham, who was familiar with the case.
“It will be an incredibly burdensome issue to go through,” he said. “Cigna will have to prove their case claim by claim.”
Typically, insured patients seeking care from out-of-network providers are required to pay 40 percent of costs after meeting their deductibles. Insurers pay the remaining 60 percent.
North Cypress’ “prompt-pay” program allowed patients to pay less than the 40 percent they owed, while billing Cigna for their 60 percent share of the costs, which the insurer decided not to pay in full. North Cypress sued the insurer, saying Cigna breached contracts and violated federal law.
In court filings, the insurer argued North Cypress’ reimbursement claims exceeded normal charges and therefore were not covered under its plans. Also, Cigna said its patients wouldn’t be motivated to see an in-network provider if they could pay the same rate for an out-of-network provider.
The earlier ruling by the district court dismissed North Cypress’ claims, which concerned health care providers. Hospitals could have been forced to drop their discount programs or could have been pushed to join insurer networks and receive low reimbursement rates to ensure receiving insurers’ reimbursements for services, Cookingham said.
The appellate court ruling, issued this week, preserves hospitals’ flexibility to negotiate with patients to ensure some level of payment, rather than try to collect what is owed after treatment, Cookingham said.
“Patients may need flexibility to work out payments or a discount,” he said. “Insurers still are going to be watching this very closely. Hospitals still should be very careful on the discounting they do.”