Einiger & Associates

New York Healthcare Law

Facility Fee Reimbursementby Scott Einiger, Esq.

The information presented in this article is intended for educational purposes only and does not constitute legal advice. In cases of specific legal questions, always contact an attorney.

A major trend in the health care industry is the recent challenge by various insurers to the reimbursement of facility fee charges for the office-based surgical practice (OBSP). (An OBSP is an office-based surgical practice in a physician’s office. This type of facility is different from an Article 28 facility and/or facilities certified through Medicare.)

Insurance companies had routinely reimbursed OBSPs for facility fee charges and professional services, which resulted in substantial savings normally associated with hospital surgeries. Now, however, insurance companies are using Article 28 as a barrier for reimbursement and have “reinvented” policies to state that only Article 28 facilities are entitled to payment for facility fees thus opening the door for refund demands.

The last year or so marks the escalation of the insurance companies’ attempt to seek “overpayment” demands based upon the rationale that OBSPs did not properly receive facility fees. Significantly, no New York State regulation or body of case law prohibits an OBSP from charging and receiving a facility fee. It is our opinion that whether to reimburse a facility fee for an OBSP is a contractual negotiation between provider and patient or provider and managed care plan if the provider is a participating provider. As such, the insurance carriers have articulated no valid justification to date for prohibiting an OBSP from receiving a facility fee.

As compelling as the contract argument is the estoppel argument where OBSPs have received no prior notification or ever been made aware that the insurance carriers seemingly have a policy excluding OBSPs (until many years after payments were made) from obtaining reimbursement for facility fees. So long as the OBSPs never held themselves out to be anything other than an OBSP, and submitted documentation in good faith for facility fees and were paid accordingly, there should be no bar to recovery. To date, no documents have ever been supplied to OBSPs (that we represent) by the carriers indicating that they were ever notified that reimbursement was only allowed for Article 28 facilities.

Our position has been conveyed to the General Counsel to the New York State Medical Society who has endorsed the position taken by this firm that this is a contract negotiation between the parties and that these OBSPs have relied on the prior reimbursement from the insurers, provided all the adequate documentation of their status as an OBSP, and that insurers are now stopped from re-claiming monies from OBSPs.

Insurance carriers fail to realize that the same medical procedures, including facility charges, cost significantly less when performed in an outpatient medical office. [1] It is clear that the movement of health services away from inpatient facilities to outpatient facilities and private offices creates a cost benefit to the insurance carriers by enabling them to pay out much lower fees to OBSPs. Refusing to pay the facility fees to such offices is clearly against the financial interests of the insurers. The reduced fee would also benefit patients/enrollees as well.

In the cases cited, the OBSPs plainly notified the carriers that they were accredited by various accrediting organizations such as the Accreditation Association for Ambulatory Health Care, Inc. (AAAHC) and the American Association for Accreditation of Ambulatory Surgical Facilities, Inc. (AAAASF). These accrediting bodies have stringent guidelines and regulations in order to uphold the health and safety standards of such outpatient facilities. The benefits of accreditation to an insurance carrier are, among other things, an assurance of quality and maintenance of standards of excellence by the OBSP.

Notably, the AAAASF has articulated that “most of the major insurance carriers recognize our accreditation certification and provide payment for facility charges to those that have AAAASF Accreditation.” Currently, Texas, Nevada, Florida and California recognize accreditation by AAAASF in lieu of state licensure for ambulatory care facilities. AAAASF has also recognized that the majority of agreements to pay facility fees are a product of contractual negotiation between provider and insurers.

Additionally, consultation with experts in the field and the statutory guidelines also reveals that OBSPs may bill for facility fees on an UB 92 form (despite certain carriers’ protestations that only Article 28 facilities may use such a form). Indeed, a UB 92 form is recognized as a universal form with no limitations on what types of entities may use it.

In sum, OBSPs should assert their entitlement to prior monies that carriers have paid and now seek recoupment. OBSPs that have acted in good faith in enlightening carriers of their status and that have submitted appropriate claims should not be penalized by the carriers’ newly crafted and convenient policy to recoup monies previously paid. Indeed, there is no case or statutory law upon which carriers can premise this eleventh-hour policy based upon Article 28 status. It is telling that carriers have not, as they cannot, produce any dated documents, when asked, detailing this supposed policy. However, it is also an effort by the carrier to create new rules of the road for future payment and put OBSPs on notice that they will not pay these fees on a going-forward basis. OBSPs will now be compelled to either negotiate payment of the facility fees or collect the monies directly from the patient. This re-formulated payment structure, which is driven by the carriers, will not benefit the patients or the carrier in the long run, as it only seeks to increase the patient’s costs if the patient pays out of pocket, or compel the patients to seek an in-patient procedure, leading to higher costs for the carrier.

Ultimately, this problem might be addressed by the legislature. Until then, if your office is an OBSP and intends on charging a facility fee, it is recommended to follow practices that clearly convey the circumstances of your practice so that they cannot be disputed after the fact.
Contributors to this article include:
[1] The American Association for Accreditation of Ambulatory Surgical Facilities, Inc. (“AAAASF”) has noted that ambulatory surgery has significantly reduced facility costs and that “[c]urrent studies indicate that specialty facility costs are approximately one–third (1/3) of hospital costs for the same procedure.”

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