Court Turns Gaze Upon Dialysis Restrictions

Last week, in a 2-1 decision, the Sixth Circuit Court of Appeals allowed DaVita Inc’s lawsuit against a health plan and its administrator to continue.  In its suit DaVita alleges the plan discriminates against patients with end-stage renal disease (“ESRD”).  Under the terms of the self-insured health plan, all dialysis providers were classified as “out-of-network,” which resulted in the providers being reimbursed at a lower rate.  DaVita argued that the “out-of-network” treatment of dialysis amounted to discrimination against plan participants with ESRD in violation of the Medicare Secondary Payer (“MSP”) rules.

Last year, a federal district court in Columbus, Ohio dismissed DaVita’s case against the Marietta Memorial Hospital Employee Health Benefit Plan and its third-party administrator, Medical Benefits Mutual Life Insurance Co (“MedBen”).  That court found that the plan’s dialysis provisions were not discriminatory because they applied equally to all plan participants.  DaVita then appealed the dismissal to the Sixth Circuit.

ERISA does not permit health plans to discriminate as to who is eligible for the plan or its benefits. In particular, plans may not discriminate based on any individual’s health factor.  In addition, the MSP rules do not permit discrimination based on the need for dialysis, having ESRD, or eligibility for Medicare.

The Sixth Circuit decided that DaVita had plausibly alleged that Marietta and MedBen had indirectly discriminated against people with ESRD and dialysis providers.  This indirect discrimination consisted of restricting reimbursement, not having any in-network providers, and auditing dialysis claims more frequently.  Marietta and MedBen argued that the MSP statutes did not support “indirect” discrimination claims.  However, the Court ruled the statute was broad enough because any dialysis patient could be potentially entitled to Medicare.

The Court stated that restricting payments under the health plan could force “Medicare into the role of primary payer” as the lower reimbursement rate had a much larger impact on individuals with ESRD, who generally are the greatest number of individuals receiving dialysis.  In its opinion the Court noted, “In short, a plan may be engaging in unlawful discrimination against individuals with ESRD even if it does not explicitly single these individuals out for differential treatment.”

As stated in the Court’s opinion, this is one of several cases that DaVita and other dialysis vendors have filed against health plans with similar plan provisions or other dialysis cost-containment provisions.  All of these cases have challenged the terms of the applicable plans under ERISA and the MSP.  To date, federal district courts have generally ruled in favor of the health plans.  With the Sixth Circuit now allowing this case to continue, plans and plan administrators should be aware that dialysis cost saving measures may need to be reviewed and changed in the future.

We will continue to monitor this developing area of law.  If you have any questions about your plan’s treatment of dialysis or any other benefits related issue, please contact any of Graydon’s employee benefits team.

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