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High Court Rules for Hospital Health Plan in Kidney Care Fight (1)

June 21, 2022, 2:09 PMUpdated: June 21, 2022, 3:37 PM

The Supreme Court Tuesday sided with an Ohio hospital’s employee health plan in a dispute over how much it pays for kidney dialysis.

In a 7-2 decision, the justices said Marietta Memorial Hospital and its employee health plan aren’t discriminating against patients with end-stage renal disease (ESRD) by paying less for dialysis than other treatments because they’re providing the same coverage for all kidney-care patients.

In delivering the opinion of the court, Justice Brett Kavanaugh said the Marietta Plan provides the same benefits, including the same outpatient dialysis benefits, to individuals with and without end-stage renal disease.

“Indeed, DaVita does not dispute that the Plan’s terms apply uniformly to all Plan participants. Therefore, the Plan does not ‘differentiate in the benefits it provides between individuals’ with and without end-stage renal disease,” he said.

DaVita Inc. sued the hospital for treating dialysis providers as “out-of-network” and reimbursing them at the lowest level rate. The stakes in this case were high for company, which has been struggling with shares of DVA down 20% in the past 12 months. DaVita argued the hospital is violating the Medicare Secondary Payer Act (MSPA), which prohibits health plans from differentiating between the benefits offered to people with ESRD and those offered to people without it and from taking into account the fact that people with kidney failure may be eligible for Medicare.

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. Though Medicare can be a secondary payer to make up for what a health plan won’t pay starting three months after a diagnosis of ESRD, the patient would have to pay a monthly fee for those additional benefits.

DaVita alleged Marietta’s plan incentivized patients to switch to Medicare to avoid paying higher copays and deductibles or getting balance billed for treatments.

Marietta argued it offers the same benefits to all participants whether they’re eligible for Medicare or not and that the Medicare Secondary Payer Act doesn’t require it to pay a certain amount for treatments. The US Department of Justice, which intervened in the case in support of the hospital, told the court group health plans can uniformly limit dialysis benefits without violating the act.

In a dissenting opinion joined by Justice Sonia Sotomayor, Justice Elena Kagan said the court in its decision crafted a massive and inexplicable workaround for the MSPA.

She noted the statute instructs that a group health plan “may not differentiate in the benefits it provides between individuals having end stage renal disease and other individuals covered by such plan on the basis of the existence of end stage renal disease, the need for renal dialysis, or in any other manner. “

“The majority holds that the plan here does not so ‘differentiate’ because it draws distinctions only between dialysis and other treatments—not between individuals with end stage renal disease and individuals without it,” Kagan said. “That conclusion flies in the face of both common sense and the statutory text.”

The case is Marietta Mem’t Hosp. Emp. Health Benefit Plan v. DaVita, Inc., U.S., No. 20-1641.

(Updates with additional details throughout)

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

To contact the editor responsible for this story: Brent Bierman at bbierman@bloomberglaw.com