QUARTERLY NEWSLETTER - SPRING EDITION 2012 - #3

It is with deep sadness that we announce the passing of our dear friend and partner, Vince Acquisto on January 19, 2012. Vince, 71 years young, was surrounded by his loving family at the conclusion of his fulfilling life. We thank our clients for being supportive during this sad time and assure you his memory will live on at SAC. We dedi-cate this issue to Vince’s memory and his commitment to educate his clients and warn them of the many pitfalls when navigating healthcare law. Joy & George

TPA Made To Pay SAC Secures Complete Victory Against TPA After ERISA Plan Goes BankruptBy Karlene J. Rogers-Aberman, esq.In a recent arbitration proceeding filed on behalf of a Northern California hospital, SAC obtained full reimbursement plus al-most four years of accrued interest against Aetna. Aetna was the third party adminis-trator (“TPA”) of a self-funded ERISA plan which, unbeknownst to the hospital, had filed for bankruptcy protection a few months before its member sought treatment. Typically, a hospital has little recourse against a bankrupt health plan, other than to file a creditor’s claim and hope to collect a few pennies on the dollar after all of the secured claims have been paid. The plan’s TPA also often escapes liability because it is not the actual “payor” and thus has no legal or financial obligations to the provider. Not so in this instance. In a written deci-sion, the arbitrator’s written statement of decision, it was found that Aetna’s conduct was so egregious, so “negligent” and “inde-fensible,” that it owed a duty to reimburse the hospital for the losses incurred. Briefly, the ERISA plan filed for bankruptcy in late 2007. In February 2008, its plan ben-eficiary was admitted, via ambulance, to the hospital which provided medically neces-sary care and treatment until the patient’s discharge a month later. In accordance with its standard procedure, the hospital contacted Aetna, who was administering the plan, to verify coverage and obtain au-thorization. Aetna duly provided the cov-erage information and confirmed that the hospital would be paid for the entire stay at the contracted rate. The hospital was never told that the plan was in bankruptcy.After submitting its claim for payment, Aet-na reimbursed the hospital only a fraction of the amount owed. Over the next 2 years and 10 months, the hospital contacted Aet-na both through informal phone calls and

official appeals seeking to determine why the claim had been underpaid. Each time, Aetna provided vague reasons, including that the member’s plan had terminated; that it was no longer administering the self-fund-ed plan’s account; and that it was only the claims administrator and therefore had no liability to the hospital for payment. In Aet-na’s sixth and final response to the hospital in 2010, it finally stated that it was its un-derstanding that the plan had filed for bank-ruptcy, and that Aetna had “no information on how to contact them at this point.”Aetna’s Hospital Services Agreement with the hospital indicated that Aetna had no legal responsibility for payment on claims for services rendered to the plan’s mem-ber. However, it also indicated that Aetna agreed to “assist reasonably as appropriate in collecting such payments.” The arbitrator agreed with the arguments made by SAC that Aetna sought only to dodge its obliga-tions and failed to offer any assistance to the hospital in obtaining payment. Aetna, as the plan’s administrator, was at all times in the best position to know of the plan’s bankruptcy status. In fact, after the hospi-tal’s claim for payment had been pending for several months, the plan converted its Chapter 11 bankruptcy action to a Chapter 7 liquidation proceeding. Ultimately, not a single one of its 531 creditor claims were allowed.In rendering the full award plus interest in the hospital’s favor, the arbitrator acknowl-edged that had the hospital been made aware of the plan’s status, it could have made alternative arrangements with the pa-tient. Having been deprived of its ability to do so as a direct result of Aetna’s conduct, Aetna was required to make the hospital whole.SAC attorney Christopher J. Hapak litigated this matter on the hospital’s behalf.

SUCCESS STORY

VINCENT ANTHONY ACQUISTOMARCH 18, 1940 - JANUARY 19, 2012

By Karlene J. Rogers-Aberman, Esq., and Youngsam Salmon, Operations Manager

In light of the spate of security breaches and HIPAA violations we’ve seen reported recently, we wanted to take this opportunity to reassure our clients that SAC maintains strict security measures with respect to our clients’ confidential business records, in-cluding medical records and patient infor-mation.

It is SAC’s policy to comply with the Health Insurance Portability and Accountability Act (HIPAA); the Health Information Technology Act (HITECH); the F.T.C.’s Red Flag Rules, and all other applicable rules, statutes and regulations. As such, SAC has in place appropriate administrative, technical and physical safeguards to protect the integrity, confidentiality and availability of both paper and electronic protected health information (EPHI) received from SAC’s clients and handled by SAC’s employees and other covered entities or personnel.The following are just a few examples of a comprehensive security system in place at SAC:• Quarterly analysis of SAC’s firewalled

computer network is performed by a qualified information technology com-pany to identify and remedy detected security vulnerabilities;

• Regular audits are undertaken pertain-ing to user activity, modifications to our system software and to ensure that data integrity is maintained;

• Electronic transmission of EPHI is pro-tected by the use of passwords and encryption measures, and all inbound and outbound email passes through spam and virus filtering software;

• In furtherance of its goal of becoming a completely “paperless” environment, SAC scans all incoming and outgoing paper documents into its secure net-work servers. The paper documents are then placed in a dedicated, se-

SAC SECURE

SAC Takes Security Seriously

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• Protective orders, confidentiality agreements, or other arrangements are entered into with opposing coun-sel to limit disclosure of private patient information during the course of litiga-tion. Adversarial counsel who inad-vertently violate HIPAA rules are im-mediately notified and advised to take corrective action;

• All SAC employees with access to EPHI are required to adhere to all applicable laws, inclusive of HIPAA, HITECH and Red Flag mandates. Violation of any laws is subject to dis-ciplinary action, including termination.

SAC is dedicated to security. Feel free to contact us for more information regarding our policy.

cured space for retrieval by a qualified document shredding service;

• Confidentiality agreements are execut-ed with contracted vendors who pro-vide on-site services or are otherwise exposed to client information;

• Specific contingency plans and correc-tive measures are in place in the event of emergencies or the inadvertent re-lease of EPHI;

• Employees logged into our data man-agement systems are automatically logged off after a predetermined period of inactivity;

• Security cameras are installed through-out SAC’s offices;

plaint with DMHC (Department of Managed Health Care).

AUDIT RIGHTSAnother pet peeve is clear definition in con-tracts of how health plans conduct an audit. Gone are the days when providers could refuse to allow an audit unless the claim was paid at least 90% and the audit took place at the provider’s place of business. Today most providers are facing one-sided claim audits being conducted away from the hospital’s business office by health-plan vendors receiving a % of monies recovered during the audit creating major conflict of interest. These audits stall reimbursement for the claim and have no time limits for completion.

THE SOLUTIONA contract requires consistency of terms for both parties. Calendar days for appeals and requesting an overpayment refund should match; likewise dispute resolution process / procedure should be consistent and provide adequate time for both parties to assert their rights. It is clear what con-stitutes a calendar day and it is far easier to calculate the due date. Business days should not be used in contract language as it presents more challenges to meeting timely submissions and appeals of claims. The provider should negotiate clear terms for how, where and when an audit occurs. Contract language should require a claim be paid prior to any audit taking place and the provider needs to agree to reimburse the plan any money owed, that is not in dispute within a reasonable time after the audit has taken place; it should be improper for any plan to deduct alleged overpayment from other patients or multiple gross remit-tances.

THOSE PESKY DEFINITIONSSmall changes to the wording in health plan agreements can make a world of difference. Here are a few to get peeved about.

CALENDAR DAYS VS. BUSINESS DAYSMost health plan contracts state that a pro-vider has “X” amount of “calendar” days to submit a claim or file an appeal. Failure to comply with these contractual time limits can result in a non-payment to the hospi-tal. Many of these requirements range from 45 to 90 calendar days for submission of a dispute, despite the fact the California Code of Procedures, Title 28 section 1300(d)(1) states that health plans may allow at least 365 calendar days for an appeal.I’m annoyed that health plans place differ-ent time limits on appeals, paying claims, disputed claim or even legal action. Why is that important? Often the plan states they have 30 or 45 “business” days and only the number 30/45 of days registers in the mind of the provider. 60 to 76 calendar days is more accurate since that is how long a health plan will take to review a claim and render a written decision. Once you include Federal Holidays, it may take as long as 80+ days. The breach of the timely appeal creates ex-tremely harsh penalties for providers. A late appeal submission results in non-payment to the provider. If a health plan fails to com-ply with their time limits, they are slapped with a small interest payment. Many health plans ignore paying the penalty and pro-viders are left filing a legal action or com-

Security - CONT’D

In memory of his father, Chuck Acquisto has written this edition’s “Pet Peeves”

By Karlene J. Rogers-Aberman, esq.

Back in our inaugural issue (Fall Issue 2011 #1), we reported on California’s overly expansive implementation of the Rogers Amendment. As was discussed in that article, the California Hospital Association (“CHA”) had filed a federal lawsuit to ad-dress the issues affecting providers as a result of California’s broad interpretation of the federal statute. Among other things, the lawsuit sought to invalidate the Califor-nia Rogers Amendment in its entirety. The CHA’s lawsuit was put on hold so that the United States Supreme Court could first de-cide whether a provider even has a legal right to seek the kind of relief described in the lawsuit.

On February 22, 2012, in a case entitled Douglas v. Independent Living Centers, the Supreme Court issued a ruling which will allow the CHA’s lawsuit to proceed. In a 5 to 4 decision, the Supreme Court held that beneficiaries and providers could sue the Centers for Medicare and Medicaid Services (“CMS”) under the Administrative Procedures Act to challenge CMS’ approval of significant cuts to Medi-Cal rates, which it had done without first obtaining federal approval.

Based on the ruling in Douglas, the CHA should now be able to proceed with its law-suit under the Administrative Procedures Act. The Supreme Court’s ruling also did not foreclose the possibility that provid-ers could also sue under the Supremacy Clause of the U.S. Constitution, on the grounds that various aspects of California’s version of the Rogers Amendment are pre-empted by federal law.

The Douglas case was remanded to the 9th Circuit Court for further proceedings. We will report further on the ultimate outcome of that case in a future issue.

Rogers Amendment UpdateSupreme Court Issues Ruling That Providers Have Standing to Challenge Medicaid Rate Cuts

tory of success, we were able to negotiate a settlement without the negative conditions originally offered.

Do you have any hobbies or interests outside of work?I am an LA boy through and through. I live and die with the Dodgers and the Lakers, and my main interest outside of work and family, is early Hollywood. Anyone can tell by looking in my office that silent movies are my main interest; especially Lon Chaney, comedies by Charlie Chaplin, Laurel and Hardy, and the greatest of them all- Buster Keaton. This years’ crop of Oscar worthy films were quite a treat as they include The Artist and Hugo.

Do you have family and/or pets you’d like to tell us about?I am blessed with a very happy and healthy family. My lovely wife Michelle is a legal secretary with a firm in Century City as well as being a CAbi consultant which allows her to interact with people on fashion is-sues. She is the biggest Bruce Springsteen fan alive. My daughter Kimberly is in love with Johnny Depp and the Beatles, and is studying to be a make up artist in the film industry. She would love to be a contestant on “Face Off”, and is entirely too interest-ed in horror movies for her own good. My youngest daughter Katie, is 7 and studies piano, loves to sing and wants someday to be cast as Elphaba in “Wicked”. My father also lives with us. He is 89 years old and religiously follows the Lakers, especially Kobe, and his Dodgers.

Do you have any guilty pleasure television shows, movies or other activities to tell us about?I love my Kindle. I was lucky enough to be given one by the firm a few years ago and I now cannot live without it. My two favorite Kindle Books are a biography of the great Sandy Koufax and Tap Room Tales by our very own Charles Acquisto. Growing in LA. in the 1960’s, Koufax was THE MAN. As far as I am concerned, he still is.

What are your favorite foods? Colors? Other favorites?My favorite foods used to be Jersey Mike’s subs, Tommy’s hamburgers, and Nathan’s hot dogs. Then I smartened up and lost 65 pounds. Now I really appreciate eating healthy foods and maintaining a healthy lifestyle. I find a creative outlet in coming up with low calorie nutritional foods that actu-ally taste good. I also gave up diet soda in favor of iced tea, and whenever I discuss this switch, I get a look of disapproval from Barry, the poster boy for Diet Coke.

Q: What is the difference between the Medi-care RAC Results letter and the Demand let-ter/First Request, how do we tell them apart? A: They are both issued with generic cover letters with attached “detailed” findings for one or more patients or claims. The Results letters however, contain de-tailed medical necessity (or other) rationale documenting why HDI (RAC contractor for California) thinks Medicare overpaid a particular claim. The “details” attached to a Demand letter/First Request only identify claims which are being “tagged” for take-back, without providing any specific reason. It also provides the information of appeal rights and to prevent a recoupment, an ap-peal must be filed within 30 days of the date of the letter (allowing 5 days for mailing). Q: Must we file an appeal after we receive the Results letters from HDI? A: First, to clarify - although from the pro-vider’s perspective the correspondence from HDI certainly looks like an argument to appeal – it really provides an opportunity for a discussion. It will prevent a take back only if a provider is successful in changing HDI’s initial determination that the claim was overpaid. There has been success in overturning an initial determination how-ever the percentage is low. It may not be a cost benefit to do a rebuttal / discussion submission. The time to formally appeal is after the receipt of the demand letter.In other words, engaging in discussion with HDI (RAC) may be helpful, but only a timely appeal to Medicare prevents the take back from happening. Q: How do we clock the deadline to file first level appeal to Palmetto (QIC)? A: The “clock runs” from the date on the Demand letter/First Request letter with a rebuttable presumption, the Demand is re-ceived within 5 days). Typically, the day af-ter the Demand date, Medicare also issues the “infamous” RAD N432, a “tag” to alert the provider that if an appeal is not filed within 30 days, a recoupment will occur. If an appeal (a Request for Redetermination) is filed within 30 days after the Demand, the repayment will not occur while the account appeals.The deadline to appeal must be clocked not from the HDI’S “Final Results” denying a “request for discussion” but from the De-mand from Palmetto.

Q: Why are Medi-Cal claims being denied for an invalid sterilization consent form, when we have attached the signed consent forms?A: Medi-Cal needs to see not just any con-

Your Questions Answered By Our SAC Team of Experts

RICH LOVICH

CONT’D - On Back

Our spotlight this quarter is attorney Rich Lovich. He has been with SAC since 2005 and Rich recently received the prestigious honor of being named a Super Lawyer* in January 2012. He was nominated by his peers and joins fellow SAC attorney Ellen Kamon. We are proud to highlight Rich as a member of the SAC team.

Spotlight Q&AWhat is your area of expertise within SAC?I have been a trial attorney for over 28 years, and have tried over 30 Superior Court jury trials and hundreds of binding arbitrations. Prior to joining SAC I was the managing attorney at three major insurance companies running their L.A. law offices. I supervise all trial-related case handling and serve as the lead trial attorney for the firm. I also conduct monthly lectures and exer-cises to train the attorneys on trial-related case handling. I am also charged with con-ducting file audits and evaluating attorney performance and regularly meet with the senior attorneys to conduct top to bottom reviews of files; gauging the efficiency and effectiveness of the file handling and the overall performance of the attorneys.

What one piece of sage advice can you offer to our clients that can help them in the future?The strength and weaknesses of the cas-es we handle can be related to one main thing - the level of documentation available. Our ability to succeed at trial or arbitration is only as strong as the hospital’s ability to document the actions they took to submit the claims. The stronger the documenta-tion of verification of benefits, authorization of the procedure and timely submission of claims, the better our chances are to recov-er on the claim.

Can you talk about a recent success story of yours? What was the challenge and how were you able to overcome it?Sara Frisch, a SAC associate attorney and I recently negotiated a large settle-ment with one of the largest commercial payors in the country. The most satisfying aspect was that in addition to obtaining a settlement amount that was far in excess of the amount the client was seeking, we were able to make the payor back down from an iron clad, non-negotiable condi-tion of settlement that we felt was adverse to our client’s long term interests. With our advise and the hopsital’s faith in SAC, the provider stood its ground and after a strong agruement from our team, the payor recon-sidered its position, and reinstituted settle-ment talks. They knew we were prepared to arbitrate the case, and because of our his-

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HFMA Northern California Spring ConferenceMarch 21-22, 2012Sheraton Grand Hotel - Sacramento, CA

George will be presenting on the topic of “Hospitals Suing Other Hospitals - Difficult & Other Sensitive Issues in Denial Management” on March 22

DISCLAIMER: This newsletter is for general educational and informational purposes only. You should not act upon this information without seeking your own independent professional advice.

QUARTERLY NEWSLETTERSPRING EDITION ENCLOSED

WWW.SACFIRM.COM

sent form, but specifically PM 330 form (available through the Medi-Cal website). Also check the Medi-Cal website to see if a claim satisfies an exception to the PM 330 requirement – (e.g., if the sterilization sur-gery was a result of an emergency - a hand-written and signed note by the physician documenting the nature of the emergency attached with claim is sufficient).

Q: An in-patient Medi-Cal claim is denied for an invalid sterilization consent form; we do not have one in the correct format and none of the exceptions apply, is there anything that can be done? A. If the patient was in the hospital for more than 1 day, split the claim, so that the steril-ization procedure appears only on the claim for the date of service when the procedure was performed. That claim will not get paid, however claims for the remaining days are entitled to reimbursement.

Go to sacfirm.com for more frequently asked questions by clients and exclusive web content.

Ask SAC - CONT’D

We would love to hear from you!If you have questions, comments or feedback please email us at SACReview@sacfirm.com.

QUESTIONS / COMMENTS

UPCOMING EVENTSSAC CONGRATULATES

SAC Attorneys Included in 2012 SuperLawyerTM

EditionSAC congratulates its attorneys Rich Lov-ich and Ellen Kamon for being included in the 2012 Southern California SuperLaw-yerTM edition. They were nominated by fel-low peers for their excellence in the field of healthcare law.

*About Super Lawyers:Super Lawyers is a rating service of outstanding lawyers from more than 70 practice areas who have attained a high-degree of peer recognition and professional achievement. The selection process is multi-phased and includes independent research, peer nominations and peer evaluations.