California Court of Appeal Decision Highlights Importance of Technical Details in Billing Practices and Managed Care Agreements

King & Spalding

Hospitals and other health care providers work hard to eliminate billing and coding errors, but mistakes still happen. When those mistakes occur, health plans sometimes try to capitalize on the error by using it as a basis to deny a claim. A recent decision from the California Court of Appeal, San Jose Neurospine v. Aetna Health of California, Inc., 45 Cal. App. 5th 953 (2020), rejected a health plan’s argument that a provider’s technical error doomed the provider’s ability to obtain payment, and held the miscoded bill was not a proper basis for the health plan to ignore facts and avoid payment. In the case, there was a strong factual record demonstrating the health plan was on notice of the mistake, but not all disputes will have such clear-cut facts. The case is a reminder that providers do not necessarily have to accept a health plan’s technical denial, as providers have remedies available to them in litigation. It is also a reminder to providers to stay diligent with their billing and coding practices and consider preemptively addressing how a provider can remedy a technical error and obtain payment, without having to resort to litigation.

San Jose Neurospine v. Aetna Health of California, Inc.

The decision’s first two sentences capture the spirit of the court’s opinion and set the stage for the decision in the provider’s favor: “It has been said the law is based on technicalities. But technicalities that ignore legislation, common sense, and fairness, the law abhors.” In the case, the patient went to a hospital emergency room with “excruciating back pain.” The emergency room physician brought in the surgeon from San Jose Neurospine, who performed emergency lumbar microdiscectomy surgery on the patient the same day.

San Jose Neurospine initially submitted two claims for the surgeon’s services to the patient’s health plan, Aetna, but the claims incorrectly cited non-emergency CPT codes, which were associated with lower reimbursement amounts than emergency CPT codes. San Jose Neurospine referenced “ER” three times on the corrected billing claim form, and sent an appeal letter expressly requesting reimbursement for “underpayments on an emergency surgery case.” Despite San Jose Neurospine’s efforts, Aetna refused to provide reimbursement for anything other than the “non-emergency surgery” per the CPT coding. The trial court granted Aetna’s motion for summary judgment, reasoning that: “If the doctor doesn’t submit the correct coding on a health insurance claim, he doesn’t get paid for it.”

The Court of Appeal reversed, finding there were triable issues regarding whether San Jose Neurospine’s bills and its appeal letter put Aetna on notice that the patient received emergency services. The court explained the proper inquiry under Health and Safety Code section 1371.4, subdivision (c) is whether Aetna reasonably determined that emergency services were never performed, and only then could Aetna deny the claim. Thus, “where the health care service plan knows that emergency services were in fact provided, a coding mistake on a billing claim does not automatically excuse or terminate its duty to pay for the services[.]”

The court noted that Aetna never refuted that San Jose Neurospine actually provided emergency services and never provided an alternative meaning of the well-known abbreviation “ER” that appeared on the corrected bill. In contrast, San Jose Neurospine produced declarations and deposition testimony supporting its contention that it provided emergency services. The court concluded summary judgment was improper because a trier of fact could reasonably infer that Aetna either 1) was on notice that San Jose Neurospine provided emergency services, or 2) ignored San Jose Neurospine’s evidence and denied reimbursement based solely on incorrect billing codes.

Significance of San Jose Neurospine.

The important takeaway for providers from San Jose Neurospine is that providers should consider getting ahead of these disputes during the negotiations of the next managed care agreement with health plans. Specifically, providers may want to propose language for resolving technical errors with a streamlined process for both payers’ refund requests and providers’ claims. Managed care agreements sometimes include clauses that require the provider to submit amended claims as necessary, but rarely specifically provide for a process to resolve simple errors and oversights. A strong record like the one in San Jose Neurospine will not always be there to show the health plan had notice of the mistake after the fact, so providers should protect themselves as much as possible by giving themselves explicit contractual rights to fix these mistakes before litigation is necessary.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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