Yesterday’s Louisiana appellate court ruling against Coventry’s First Health work comp network is a major blow to comp insurers, employers, and networks in Louisiana, with potential impact in other states as well.
The ruling is here.
The court’s finding supported a lower court’s ruling affirming a state statute requiring PPOs to provide injured workers with PPO identity cards or give notice to providers 30 days before taking discounts. While Coventry will appeal to the state Supreme Court, the appellate court ruled against almost all of Coventry’s arguments, making this an uphill battle for the nation’s biggest work comp managed care firm. I’d also note that the decision itself takes Coventry’s legal team to task for failings to accurately cite evidence in its written appeal, stating the “failure to provide record citations suggests that many of these assignments were interposed only for purposes of delay and confusion.”
Ouch. (no pun intended)
While the finding may be bad enough, the size of the penalty is stunning – Coventry will have to pay $262 million – $2000 for each of the “131,024 instances in the past 10 years when it discounted providers’ charges below the state workers’ compensation fee schedule.” (WorkCompCentral)
Some workers comp networks decided early on to avoid doing business at all in LA; MedRisk (HSA client) left the state after the initial ruling against Coventry along with several other PPO and specialty networks.
Implications
For Coventry, it doesn’t look good. While I’ve taken the company to task in the past for what I perceive to be missteps, and some would argue that they should have pulled out long ago, it’s hard to fault Coventry for believing they could conduct business in LA as they do in most other states, by contracting with providers to deliver discounted care to workers comp claimants. The additional notice requirements in Louisiana are unique to that state; in retrospect all networks should have picked up on this nuance, but in retrospect we all would have sold our stocks two months ago…
It doesn’t look good for employers in Louisiana either. As MedRisk’s General Counsel, Darrell Demoss noted in the WorkCompCentral piece, WCRI data suggests comp medical costs are significantly higher in Louisiana than in other states. Now that the ruling has been upheld, expect insurers and managed care organizations to avoid the state completely in fear that they too could be nailed by class-action suit.
On a national basis, this ruling will likely cause many network vendors and insurers to stop and very carefully review each state’s laws and regulations pertaining to networks, with compliance staffs tasked with doubly ensuring their contracts comply with the letter and spirit of each jurisdiction’s rules and regs. That’s not a bad thing, as it’s a heck of a lot cheaper to pay attorneys and compliance staff than a $262 million penalty.
What does this mean for you?
Sorry, but bad news on a Friday – and a holiday Friday at that.
Except if you’re a comp provider in LA.
Thanks to WorkCompCentral for the heads up.
Jul
2
As a Practice Administator, I’m delighted to learn that in Louisiana, the courts may finally have forced the needed change (i.e, get the discount networks to leave town). Here’s hoping it leads to quality care, and that adjusters will be free to chose the BEST doctor, not be forced to chose the CHEAPEST.
First, do you think this has anything to do with Obamacare reaching further into healthcare? I mean workers’ comp was until now the last bastion of reasonable reimbursement. This could be the beginning of the end of our already threatened healthcare system. Forget about the fact that this is workers’ comp… Basically they are saying provider contracts that were signed BY THE PROVIDERS are void. Didn’t the providers sign them? Could the courts be interfering in commerce?
LA has always been a difficult state to work in in any occupation. Lots of government interference and money under the table. In my eyes, only a few places in the country are more corrupt (IL, DC, NJ to name a few). Healthcare costs are sure to increase in LA and around the country as a result, further burdening employers and the economy. With double dip recession, high unemployment, BP oil disaster and a multitude of other factors, the landscape of life in LA will be reshaped forever. It’s just more fuel on the fire and the government (Obama administration & Courts) is fanning the flames.
Looking elsewhere in the country, here in AZ Big Blue is King of the networks for “health” and providers almost have to participate to maintain any volume. But the providers are forced to participate in the workers’ comp network or they are not allowed to participate in any other programs. That network provides the deepest discounts in WC in the state… around 50%. Other networks offer discounts a little below that mark but don’t force participation (Foundation, Aetna, ???). I think you might see something like LA in AZ very soon… especially since the LA verdict. And with the State Fund going private… There is huge potential for big changes, and sooner than later.
Will – welcome to MCM.
I don’t think this has anything to do with health reform. This case has been pending for five years, and is based on a specific statute unique to LA.
The plaintiffs’ case appears to be based on that statute, and the court decision (unanimous at the appellate court) simply affirms that state statute is superior to contract language.
While there are many problems with our healthcare system, I don’t see this as any harbinger of doom, nor is it related to national health policy.
Finally, I’m not sure what ‘fire’ you are referring to, nor can I see how President Obama is ‘fanning the flames’.
Paduda