All too often, a hospital does everything it is supposed to do to ensure that it will be paid for the medical treatment it provides a patient. It verifies that the patient has active coverage and available benefits; it obtains an authorization from the health insurance provider to treat the patient; it renders medically necessary, often life-saving care; and it submits in a timely manner a bill that contains all of the information required to get paid for its services. Then something goes wrong.
Usually, the bill is submitted to a middleman called a Third Party Administrator (TPA). A TPA has many variations, but, in a nutshell, it is a company that the health insurance company hires to manage the millions of claims that hospitals submit for payment every year. The TPA has access to the agreements between the hospital and the insurance company, the patient’s health plan documents, and other pricing information that is necessary to determine the amount of reimbursement due to the hospital. The TPA is responsible for reviewing the claim to make sure it is “clean” or complete, pricing the claim according to the contract and the patient’s plan, and then submitting a request for payment to the health plan or insurer that holds the funds to pay the claim. Sometimes, their responsibility also includes verifying the patient’s coverage and eligibility, and authorizing treatment. More often than not, the TPA’s reimbursement determination mirrors the hospital’s expectation of payment.
Yet, after the TPA sends the request for payment on to the insurer who holds the purse strings, the claim is denied (in whole or in part) because the insurer disagrees with the pricing determination made by the TPA. The TPA then sends an explanation of payment to the hospital indicating what portion of the claim was paid, what portion was denied, and why. The reasons for denial are numerous and varied—from non-covered services and contractual rate disputes to limitations on the authorization obtained and irregularities in the insurance application. The list goes on and on.
When this happens, the hospital’s first step is to send an appeal to the TPA, requesting that the decision be reconsidered and the expected payment be made. The TPA’s most likely response to this appeal will be “all we do is price the claim.” The TPA will argue that its hands are tied, and if the insurer decides not to pay, the hospital’s only recourse is to go after the insurer.
Not so fast! This is not always the case and there are several situations under which the TPA can still be found liable to the hospital. It is important that hospitals understand these and know how to move forward to ensure they are reimbursed either by the TPA or the insurance company depending on the case.
The first is usually based on the contract. In certain types of contractual arrangements, the hospital has a direct contract with the TPA, and the TPA has a separate contract with the insurer. Usually, the hospital’s contract with the TPA will make it clear that the TPA is not the responsible payor. Nevertheless, there is often language included in those contracts that requires the TPA to use its best efforts to make the insurer pay. So the TPA simply throwing its hands up and saying “I have no responsibility to you, hospital” just won’t cut it. At least one arbitrator has ruled that such language puts an unavoidable burden on the TPA to take actual steps to make the insurer fulfill its payment responsibility to the hospital. In other words, the TPA must present concrete evidence of the ways in which it attempted to persuade the insurer to reimburse the hospital in the manner expected. That may be in the form of follow up letters, telephone calls or other outreach. Failing to make any effort except to send the pricing determination on to the insurer has been found to be insufficient, and the TPA can be liable for damages to the hospital as a result.
Another way a TPA can be found liable to the hospital is usually based on “equity”—or fairness. In another case, the hospital called the TPA to verify benefits and coverage, the TPA gave the hospital the go-ahead to treat the patient, but failed to tell the hospital that the payor health plan had filed for bankruptcy several months earlier. The TPA’s defense was merely “we are not the ones financially responsible, and we don’t have the money to pay you.” At best the hospital could file a claim with the bankruptcy court and maybe recover ten cents on the dollar for its services. The arbitrator ruled that the TPA’s response was unacceptable and held that the TPA was fully responsible to the hospital for full payment (plus interest) on the claim.
In this situation, the hospital successfully stated a claim for misrepresentation, as the hospital relied on the information provided by the TPA when it decided to treat the patient. Had the TPA not given incorrect information to the hospital, the hospital would have attempted to make other payment arrangements with the patient before it rendered the treatment, not after, when it was left holding the bag.
Just because the TPA doesn’t hold the purse strings doesn’t necessarily mean it has no responsibilities to the hospital. The pricing agent can still be liable for damages where it avoids its contractual obligation to ensure the hospital gets paid, or where it is negligent (i.e., careless) in providing accurate information to the treating facility..