Over the last few months hospitals have been receiving letters from certain insurance companies advising hospital administrators of a “change in policy” which will take effect in the earlier half of this year. Specifically, the change in policy is an attempt by the provider to unilaterally amend the terms of the hospital/insurance provider contract, placing stricter notice requirements on the hospital of in-network patient coverage and requiring hospitals to notify providers within one business day of admission in order to obtain insurance coverage.
If such notice requirements were to take effect, insurance providers could deny hospitals payment and reimbursement of expenses based on a strict timing factor. This change in policy could reduce the amount that insurance providers are required to pay a hospital for its services solely based on this requirement. It is not based on medical necessity; rather it is a purely administrative requirement which is unduly burdensome on hospitals.
Hospital administrators and legal counsel faced with such notices must address the letter in a way to best preserve the interests of the hospital at no expense to the type or quality of patient services provided. Unfortunately, the undersigned has found little to no statutory or regulatory authority to help resolve this issue, and state insurance and health care agencies have offered little guidance on this matter. Although the New Jersey Hospital Association is aware of the letters insurance providers are sending out, they have not yet commented on how the “change in policy” is being addressed.
The inevitable question arises, “Are hospitals bound by the new notice requirements as of the effective date in the letter?” Since state governmental departments and agencies thus far do not regulate the notice requirements, the answer lies in the agreement between the hospital and insurance provider as a matter of contract law. The Healthcare Association of New York State (“HANYS”) confirmed the contractual implications of such a policy advising that the terms of the contract should govern the effectiveness of the notice. On Friday, January 13, 2012, HANYS hosted a WebEx for members to discuss an insurance provider’s new admission notification policy.
As a practical matter, it may not be possible for hospital administrators to notify insurance providers within one day of patient admission. For example, the patient may be unable to provide the name of their insurance provider. Patients who are incompetent, unconscious, or in a comatose state will not be able to provide such information. Additionally, the insurance coverage for a newborn may not readily be determined. The proposed policy change may offer terms to account for such complications, for example, which provide that if a patient is unable to provide coverage information within the specified period of time, the hospital must call as soon as it becomes aware of the patient’s insurance coverage and provide an explanation for such late notification. The proposed changes are vague, at best, as to whether a hospital will be reimbursed even if the late notification is reasonable and justifiable under the circumstances.
This is not the first time insurance providers have attempted to impose such a strict notification policy. The most recent example occurred in November 2009 when UnitedHealthcare attempted to modify the policy with all hospitals under contract requiring notification of admission anywhere from twenty four to seventy two hours. The change in policy was set to take effect on January 19, 2010. However, the hospitals and hospital associations pushed-back. In a letter dated March 18, 2010, UnitedHealthcare notified hospital administrators that it decided not to proceed with the change in policy it announced in November 2009.
This matter should be approached from a purely contractual standpoint. The provisions of the contract between the hospital and the insurance provider will dictate the effectiveness of the new “change in policy” and will also dictate any subsequent action the hospital should take. Once the contract is reviewed, an immediate response should be provided based upon the contract terms. In many cases, despite the contractual provisions, silence on an issue may be construed as acceptance of the new terms. Therefore, an immediate response to these terms would be prudent.
Notice requirements in the agreement may provide hospitals with a way to timely reject proposed amendments to the agreement. For example, the insurance provider may be able to modify the policies at any time; however, for example, if the proposed policy change constitutes a “material change” or has a “material financial impact” upon the hospital (or similar language concerning the level of materiality), the hospital may respond in writing within a specified time period explaining such adverse effect that change would have on the hospital.
Many contracts have an “entire agreement” provision which prohibits modification of the agreement unilaterally by one party without being signed in writing by the party. In such case, this notice requirement by the insurance provider may not be effective. Agreements may also include a policy section which may provide some insight as to the effectiveness of any notice requirements. These policies are sometimes found attached as an exhibit to the agreement and often may give the insurance provider the right to add, remove, or alter the policies by giving notice to the hospital. A hospital’s failure to comply with the new form of policy would then be considered a breach of the agreement.
The issues raised above call into question the validity of the change and whether the policies materially alter the intent of the parties thereby rendering the alteration unenforceable. The policies should be carefully analyzed in light of the remainder of the agreement to determine where the line should be drawn between an adjustment to the “policies” and a change which affects the underlying intent of the parties to the agreement.
Accordingly, the effectiveness of such a “change in policy” is generally determined by the contract between the hospital and insurance provider. A properly drafted contract can prevent such admission notice requirements from taking effect without the consent of the hospital. First, the notice terms should be addressed clearly in the agreement. Second, the policy sections must be specifically tailored to meet the needs of both parties. Third, material amendments must be specifically defined. Absent any federal or state laws or regulations governing notice requirements, the contract will determine whether such a change is enforceable. This recent issue is one of many that arise in hospital and insurance provider contracts. A reevaluation and second look at the agreement will help determine what rights each party has and how to proceed under circumstances such as those illustrated herein.
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