For the first time, certain health care providers in Texas must mediate fee disputes even when they have not contractually agreed to do so. The Texas Legislature has passed HB 2256, which takes effect immediately upon signature by Governor Perry. HB 2256 requires hospital-based physicians (e.g. radiologists, pathologists, anesthesiologists, emergency department physicians, and neonatologists) to participate in mandatory mediation of any fee disputes arising from the fact that the physician is not in the network of the health benefits plan covering the patient. The cost of the mediation will be shared equally by the physician and the applicable health plan.
Hospital-based physicians are often not contracted with all of the same health plans that contract with the hospital in which they practice. Consequently, patients will select an in-network hospital, only to later get a bill from an out-of-network hospital based physician whom the patient may not have even met. Since the out-of-network physician has not contracted with the health plan or the patient, the patient is liable for the physician's full billed charges, unless the parties mutually agree on a price. Efforts by the hospital-based physicians to collect the full charges to which they are entitled have caused great friction among the patient, the physician, and the contracted hospital.
Mediation Process
The new law applies only to preferred provider benefit plans (PPOs) and Texas governmental employee plans. (The law applies to governmental employee plans September 1, 2010.) The bill provides that an enrollee of a health plan can request mediation of an out-of-network claim if the amount for which the enrollee remains responsible (after payment of co-payments, deductibles, co-insurance, and any amounts offered to be paid by the health plan) is greater than $1,000. Both the health plan and the physician must participate in the mediation, while the enrollee may participate if he or she chooses. The goal of the mediation is to help the parties reach agreement on the final amounts to be paid. Although participation in the mediation is mandatory, the mediator may not decide or impose a judgment on either party. Finally, prior to the scheduled date of mediation, all parties must participate in an informal settlement conference no later than 30 days after the enrollee submits the request for mediation.
Refusal to participate in mediation by the health plan or the physician constitutes bad faith mediation, which shall be reported to the Texas Department of Insurance or the Texas Medical Board, as applicable. That licensing agency must impose an administrative penalty on the party exercising bad faith.
Unsuccessful Mediation
If the mediation process ultimately is unsuccessful, the mediator must report that fact to the Texas Department of Insurance, the Texas Medical Board, and the chief administrative law judge (ALJ). The chief ALJ then must refer the matter to a Special Judge under Chapter 151 of the Civil Practice and Remedies Code. The Special Judge in turn conducts a trial and issues a decision as to the ultimate liability of the parties. All parties equally share the Special Judge's fees.
Conclusion
How many mediations actually will occur under the law remains to be seen. It is likely that the mediator's fee for any given mediation will be at least $1,000 to $1,500, possibly more. The Special Judge's fee and related court costs also could be significant. For that reason, it is unlikely that claims will be mediated unless the balance due to the provider – after all attempts at negotiation and settlement have been exhausted – is in an amount exceeding perhaps $4,000-$5,000. Since the patient does not pay for the mediator, the incentive is on the physician and the health plan to come to a resolution acceptable to the patient. If mediation fails, however, all parties – including the patient – share the cost of the Special Judge. The overall intent of the legislation appears to be to force the parties to resolve the dispute short of the mediation process.
If you have any questions, please contact Jed Morrison at 210.978.7780 or jmorrison@jw.com or any member of the Jackson Walker L.L.P. Health Care Section.
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