Health Plan Responsibility to Pay for Hospital Inpatient Care When Members Await Placement at Post-Acute Facilities

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Hospitals that attempt to discharge a patient to a post-acute level of care but are not able to because they cannot find an appropriate accepting facility must continue providing care if the patient cannot be safely discharged home. When hospitals are required to continue treating patients who would otherwise no longer need acute inpatient care, hospitals are required to continue to devote the same degree of acute care space and resources that were provided before these patients were ready for transfer. Hospitals expect to be reimbursed for these days at the acute care level absent an agreement with the payer to be paid at a lower rate. Medicare and fee-for-service Medicaid for most states reimburse these days at a government-set lower rate that providers must accept from these government payers as part of the overall bargain to participate in these government programs. However, in the managed care context, if the participation agreement does not set an alternative contract rate for these situations, then the standard acute care rate in the contract should apply.

Health plans sometimes take the incorrect position that they should be allowed to unilaterally pay less, or pay nothing, by arguing that it supposedly is not medically necessary or covered for a patient to stay in the acute care hospital while awaiting placement at a different level of care. Hospitals who do not timely raise issue with this improper payer position, or do not have adequate processes in place to document efforts to find placement for these patients, can lose significant amounts of money.

Hospitals typically are at the mercy of health plans who control the plan’s post-acute provider network. The plans choose how robust of a post-acute network to establish in their service area. They also control authorization determinations for transfer decisions. Conversely, health plans generally have obligations under federal and state law and/or their agreements with employers, members and providers, to coordinate care and discharge planning for their patients. Health plans must ensure that they provide an adequate network to enable reasonable access to care, including a network of post-acute facilities sufficient for their member population. Although hospitals can and often do cooperate with health plans in the process of coordinating care for post-acute care needs, this does not absolve the health plans of their primary responsibility. The term managed care means the plan will manage the care.

For example, federal Medicaid regulations specify that participating States must require that managed care organizations operating Managed Medicaid plans “implement procedures to deliver care to and coordinate services” for enrollees sufficient to“(1) [e]nsure that each enrollee has an ongoing source of care appropriate to his or her needs and a person or entity formally designated as primarily responsible for coordinating the services accessed by the enrollee,” 42 C.F.R. § 438.208(b)(1), and coordinate the services it furnishes to its enrollees “[b]etween settings of care, including appropriate discharge planning for short term and long-term hospital and institutional stays.” 42 C.F.R. § 438.208(b)(2).

Federal laws and regulations similarly provide for network adequacy in State Exchange markets. Qualified Health Plans sold on a state Exchange under the Affordable Care Act require accreditation under 45 C.F.R. § 156.275, which includes a showing of qualified network adequacy and access. Other regulations require that each Qualified Health Plan maintain a network sufficient in number and types of providers to assure all services are accessible to enrollee without unreasonable delay. 45 C.F.R. §§ 155.1050, 156.230.

Federal regulations also have standards for Medicare Advantage plans, with standards for network adequacy that can be found at 42 C.F.R. § 422.112.

Many States have similar laws and regulations imposing coordination of care and network adequacy requirements on health plans. For example, California regulation requires that basic healthcare services provided by a state-licensed health care service plans covered by the Knox-Keene Act include “coordinated discharge planning including the planning of such continuing care as may be necessary, both medically and as a means of preventing early rehospitalization.” 22 CCR, tit. 28 § 1300.67(b). These regulations also require plans to “furnish services in a manner providing continuity of care and ready referral of patients to other providers at times as may be appropriate consistent with good professional practice.” Cal. H&S Code § 1367(d). This must be done in a manner so that “[a]ll services shall be readily available at reasonable times to each enrollee.” Id. § 1367(e)(1). Other states, like New York, Texas and Florida, have their own network adequacy requirements. See, e.g., NY Pub. Health § 4403(5)(a) (requiring that any licensed health maintenance organization “maintains a network of healthcare providers adequate to meet the comprehensive health needs of its enrollees…”; Tex. Ins. Code §§ 1301.0055, 845.152 (Texas requires health insurance plans to meet network adequacy standards); Fla. Stat. § 409.975(1) (Medicaid managed care plans “must develop and maintain provider networks that meet the medical needs of their enrollees in accordance with standards established pursuant to s. 409.967(2)(c) [state statute establishing network access criteria]”).

A health plan’s failure to comply with these standards often provides hospitals with an avenue for recovery, whether through appeal, arbitration, or litigation. Without a specific contractual alternative rate for these types of acute days, there is no basis for a health plan to assert that acute care made medically necessary by the plan’s inability or unwillingness to provide for or authorize prompt transfer is not covered. State and federal standards for coordination of continued care and network access are incorporated expressly or impliedly into the health plan’s obligations under its provider agreements. Those standards can provide additional grounds for asserting a health plan breach for failure to properly pay the acute care rate when members need continuing acute care due to lack of an available post-acute option.

Any assertion by payers that acute inpatient days are not “medically necessary” because they fall under the rubric of acute administrative days should be strongly challenged. In circumstances where a patient remains inpatient while awaiting payer-approved transfer, and neither the hospital, health plan, nor treating physician believes home discharge is safe or in the best interest of the patient, the care being rendered by the hospital is medically necessary.

Some state laws even provide specific requirements in authorizing care and discharge planning that restrict discontinuing care without consulting with and getting agreement from the patient’s treating physicians. For example, California’s Health and Safety Code § 1367.01(h)(3) instructs for health care service plans, “In the case of concurrent review, care shall not be discontinued until the enrollee’s treating provider has been notified of the plan’s decision and a care plan has been agreed upon by the treating provider that is appropriate for the medical needs of the patient.”

Furthermore, the alternative to a health plan owing the acute care rate for these types of acute care days is not, as some health plans argue, that the payment rate is less or zero. On the contrary, if the provider-payer contract does not include these types of days, the alternative becomes the health plan owing reasonable and customary value for the services rendered. Therefore, hospitals can and should object when health plans attempt to pay a lower amount, or to pay nothing, if the contract does not include a rate for these services. While the patient may be ready to go to a post-acute facility, if the health plan does not have an available post-acute bed, the hospital still is required to render acute care services.

There are steps that a hospital can take to facilitate the ability to recover proper reimbursement for these type of acute care days. The hospital should document the date and source of communication with the health plan’s case management and utilization review personnel, as well as efforts to find post-acute placement for the patient. The hospital also should continue these communications even if the health plan denies authorization for further inpatient stay. And, as always, the hospital should appeal authorization denials, and payment denials, for these types of days. Although appeals are not always required by contract – and sometimes those requirements are absolved by a variety of legal doctrines that discourage futility – the potential benefits of appeals usually are worth the efforts.

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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