Sixth Circuit Court of Appeals, No. 04-4067, March 21, 2006

The Sixth Circuit Court of Appeals reversed a district court’s order that a health benefit plan must pay a hospital the full amount billed for services rendered to a plan beneficiary, and remanded for further proceedings.

A beneficiary of South Lorain Merchants Assn. Health & Welfare Benefit Plan and Trust (the “Plan”) was admitted to University Hospital of Cleveland (“UHC”) in 2000. For services rendered, UHC sent a bill in the amount of $195,000 to the Plan. Without notifying UHC, the Plan audited the bill and provided payment in the amount of $107,000, a reflection of both a $49,000 preferred provider network discount (“Discount”) and the audit’s finding that the charges exceeded the usual, customary and reasonable (“UCR”) amount for such services by $39,000.

UHC filed suit in the U.S. District Court for the Northern District of Ohio, seeking full payment. The district court, reviewing the Plan’s determination de novo, ordered the Plan to fully reimburse UHC, concluding that 1) the Plan was not entitled to the $49,000 Discount because the Plan failed to pay UHC’s claim within 60 days, as required by agreement; and 2) the Plan’s UCR audit was improper without at least 10 days’ notice to UHC.

On appeal, the Sixth Circuit determined that the district court should have reviewed the Plan’s determination for an abuse of discretion, rather than de novo. The court further held that, consistent with industry standard, if a claim is audited, the 60-day Discount rule does not begin to run until the audit is concluded. Thus, the Plan’s payment was timely, the $49,000 Discount was warranted, and the district court’s decision on this account was reversed.

The Sixth Circuit also held that the district court misconstrued the 10-day notice provision: it did not apply to notice of an audit, but rather to notice of a request for hospital records, if required for an audit. As the Plan’s audit of UHC’s bill did not require hospital records, the 10-day notice provision did not apply. Nonetheless, the Sixth Circuit could not verify the results of the Plan’s audit, i.e., that UHC’s bill was in excess of UCR by $39,000. Therefore, it remanded the case to the district court, instructing it to review the Plan’s audit for an abuse of discretion.

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This entry was posted by Adam V. Russo on Wednesday, January 20th, 2010 at 3:15 pm and is filed under 6th, Federal Circuits, Usual and Customary. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.