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High Court Kidney Care Ruling Creates Loophole for Health Plans

June 22, 2022, 9:35 AM

The Supreme Court has given health plans a potential road map to avoid paying the high costs that come with treating patients with end-stage kidney disease.

The court sided with an Ohio hospital’s employee health plan Tuesday in a fight over low reimbursement rates for outpatient dialysis treatments. DaVita Inc. had sued the hospital for treating dialysis providers as “out-of-network” and reimbursing them at the lowest level rate. The plan argued that its payment terms applied uniformly to all plan participants.

But in a dissent, Justice Elena Kagan warned the court was creating an end run around a law that was specifically designed to prevent health plans from pushing dialysis patients to opt into Medicare.

Health plans are prohibited from discriminating against patients with end-stage renal disease under the Medicare Secondary Payer Act (MSPA). The court ruled Marietta Memorial Hospital’s health plan wasn’t violating the law because it was providing the same benefits, including the same outpatient dialysis benefits, to all patients on dialysis whether they have kidney failure or not.

Other employer-sponsored health plans could now do the same thing, attorneys said.

The decision “suggests that if you want to offload your dialysis obligations onto Medicare, what you do is you do what Marietta did, which is to say ‘Look everybody gets the same outpatient dialysis benefit, a very low one,’ which will then, at least DaVita claims, push them onto Medicare early,” said Sean Marotta, a partner at Hogan Lovells.

DaVita Inc., which brought the initial litigation against Marietta’s health plan, said the court’s decision upends an important protection for Americans with chronic kidney failure.

“The MSPA was created to protect some of the most vulnerable patients in the healthcare system, who deserve unobstructed access to the coverage that best suits their individual health needs,” the company’s CEO, Javier Rodriguez, said in a statement. “Today’s narrow interpretation of this statute limits its ability to achieve this purpose.”

DaVita is one of the two main dialysis providers in the US.

Medicare Rate

DaVita had argued the low reimbursement rates offered under Marietta’s plan incentivized patients to switch to Medicare to avoid paying higher copays or getting balance billed for treatments.

Nearly all people with end-stage kidney disease qualify for Medicare regardless of age, but the secondary payer law requires private health plans that cover dialysis to be the primary payer of those treatments for at least 30 months after a patient is diagnosed with kidney failure. Medicare spends about $50 billion annually on treatments for patients with ESRD, the opinion said.

The Supreme Court rejected DaVita’s argument that the MSPA allows health plans to be held liable when benefit limitations have a disparate impact on certain individuals even if the benefits are the same. Writing for the majority, Justice Brett Kavanaugh said “the text of the statute cannot be read to encompass a disparate-impact theory.”

“That text requires inquiry into whether a plan provides different benefits to (i) those with end-stage renal disease and (ii) those without end-stage renal disease,” he said. “The text does not ask about ‘the effects of non-differentiating plan terms that treat all individuals equally.’”

The rate being paid by the group health plan in this case is tied to the current Medicare rate for the same services due to unique market conditions, Marietta Memorial Hospital’s attorney, John Kulewicz, said in an email.

“The evidence in the case suggests that the dialysis provider is being paid fairly and adequately under the plan for the services rendered, albeit at a rate lower than it sought in order to maximize its own profit margin through, effectively, private health plan subsidies,” said the Vorys, Sater, Seymour and Pease LLP partner.

Kulewicz argued the Supreme Court’s decision to uphold the terms of the group health plan will keep the cost of dialysis lower for the patient and maximize the resources that are available to cover other health care needs of plan members.

“We’re providing exactly the same benefits to all patients,” Kulewicz said.

Shirking Responsibility

But the court’s decision is likely to result in be widespread adoption of this practice among employers that maybe have held back, said Sara Rosenbaum, a health law professor at George Washington University.

“Dialysis is very expensive, and the federal government has built a safety-net for dialysis treatment,” she said.

How health plans ultimately respond to the court’s ruling depends on whether they take a long-term or short-term view of the health of people with kidney disease, said Jackson Williams, vice president of public policy at Dialysis Patient Citizen, a patient-led organization representing individuals with ESRD. The group filed a friend-of-the-court brief in the case in support of DaVita.

While some employer plans are working with providers to identify patients with chronic kidney disease to keep patients’ kidneys functioning until they turn 65 and move to Medicare naturally, Williams said, others are shirking their responsibility.

“There’s a sense there’s a lot of employers who are not proactive about kidney care and would be happy to get rid of patients as soon as possible,” he said.

Not all health plans will be able to do that. Marotta said only employer-sponsored plans covered by the Employee Retirement Income Security Act could do what Marietta did, since these types of plans get to choose the menu of services they cover.

“I think it creates a potential roadmap for certain plans that want to reduce the burden of their outpatient dialysis costs,” he said.

The case is Marietta Mem’l Hosp. Emp. Health Benefit Plan v. DaVita, Inc., U.S., No. 20-1641, 6/21/22.

To contact the reporter on this story: Lydia Wheeler in Washington at lwheeler@bloomberglaw.com

To contact the editors responsible for this story: Seth Stern at sstern@bloomberglaw.com; John Crawley at jcrawley@bloomberglaw.com; Cheryl Saenz at csaenz@bloombergindustry.com