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May 2015

But We Didn’t Know About the Coverage! Contractual Issues Arising from Belated Discovery of Healthcare Coverage

Most consumers are generally aware that their healthcare providers must obtain some type of authorization prior to rendering non-emergency services. And even when emergency services are provided, there is a deadline to notify the health plan about the provision of such services. When these authorization requirements are not met, the health plan will often deny payment. However, one glaring issue is generally overlooked – the belated discovery of coverage. This occurs when the patient’s coverage from a certain health plan is not discovered until after admission, and very often, not until long after the patient’s discharge.

When a patient’s membership in a health plan is not discovered until later (perhaps due to other  coverage or the patient not having proof of insurance, or too ill to provide evidence of health insurance, etc.), it can raise many issues. For example is the hospital excused from seeking an authorization pursuant to the requirements of the contract? For a health plan such as Kaiser, (where hospitals must generally transfer the patient to a Kaiser facility upon stabilization), how does this affect the payment requirements?

It has been our experience here at SAC that when a contract does not address this issue of late discovery of health plan membership, the healthcare provider must often resort to “equitable” arguments, based on fairness that justifies payment based on the unique circumstances of each case.  While these arguments may persuade an arbitrator or judge to award a decision in favor of the provider, there is no guarantee of success.

Accordingly, a better approach is that providers address these issues contractually. To clarify, it is better to address the issue of a late discovery of health plan membership in a provider’s contracts with health plans.  Where there is no contract or the contract is silent in this regard, retention of experienced healthcare litigators, such as we have here at SAC, is crucial. An experienced attorney can generally consult with a hospital during the contracting stage to head off these disputes before they arise.


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