DaVita, Inc. v. Marietta Mem’l Hosp. Emp. Health Benefit Plan, 2020 WL 6054607 (6th Cir. 2020)
A dialysis provider (on its own behalf and in its role as a patient’s assignee) sued the employer/ plan administrator and the TPA of a self-insured health plan, challenging the plan’s classification of all dialysis providers as “out-of-network,” resulting in a lower reimbursement rate for them than for other medical providers. The provider argued that the plan’s treatment of dialysis providers amounted to discrimination against participants with end-stage renal disease (ESRD) in violation of the Medicare Secondary Payer (MSP) rules, under which group health plans may not “take into account” a participant’s ESRD-based Medicare eligibility or “differentiate” in the benefits provided to individuals with ESRD and other individuals covered under the plan. The provider acknowledged that the plan provision applied equally to all covered individuals receiving dialysis—including those without ESRD or ineligible for Medicare. However, the provider argued that the lower reimbursement rate had a disparate impact on individuals with ESRD, who comprise a disproportionately large number of those receiving dialysis. The trial court rejected the disparate impact argument and dismissed the claim (see our Checkpoint article).
The appellate court reversed the trial court’s decision and sent the case back for further proceedings, holding that the MSP antidiscrimination provisions prohibit conduct beyond the express differential treatment of individuals with ESRD. The court observed that the rule against differentiating in benefits prohibits both express discrimination based on an individual’s ESRD status and indirect discrimination based on an individual’s ESRD-specific need for renal dialysis. In this case, the provider had plausibly alleged that the plan violated the rule by targeting the primary treatment that individuals with ESRD need almost exclusively and with far greater frequency than the few non-ESRD dialysis patients. Furthermore, the MSP “take into account” prohibition supported the provider’s argument that unlawful discrimination against individuals with ESRD may occur even if the plan does not explicitly single these individuals out for different treatment. The court pointed out that if the provider could show a “near-perfect overlap” between the plan’s Medicare-entitled ESRD patients and all dialysis patients, it might be able to demonstrate that Medicare-entitled individuals are subject to reduced benefits in violation of the MSP “take into account” rule.
EBIA Comment: This case could have significant implications for health plans trying to cap the costs of dialysis treatments. A similar case brought by the same provider is currently on appeal to the Ninth Circuit (see our Checkpoint article). Health plans and their advisors should keep a close watch as these cases move through the courts. For more information, see EBIA’s Group Health Plan Mandates manual at Sections XXIV.A (“What Are the Medicare Secondary Payer (MSP) Requirements and Who Must Comply?”), XXIV.C (“Overview of Medicare”), and XXIV.H (“MSP Requirements: ESRD-Based Medicare Eligibility or Entitlement”). See also EBIA’s Self-Insured Health Plans manual at Section XXV.C (“Coordination of Benefits With Medicare, TRICARE, and Medicaid”).
Contributing Editors: EBIA Staff.