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Legal Update
Surviving an Insurer's Termination
Keith Shiner, Lorin Patterson
Publish Date: September 4, 2008

It's a situation that's becoming more and more common: Surgeons who belong to managed care preferred provider panels, but who operate their ASC largely on an out-of-network basis, face payors who react to that combination by booting the physician-investors from their PPO panels. Here's what to do if an insurer terminates you.

1. Call your lawyer. Do so as soon as you receive a termination notice. Your lawyer will be able to identify and explain your rights under the participation agreement and applicable state and federal laws — don't depend on the insurer to do so — prepare an effective appeal, and address issues of timing and document access.

2. Get a complete copy of your agreement if you don't have one. Despite some insurers' reluctance to issue it, you're entitled to a copy. Document your efforts if your requests are refused. Review the language carefully, comparing it to the reasons cited in the termination letter and seeking any requirement that the insurer respect your sound medical judgment and patients' choice.

3. Respond early when possible. Insurers will often notify you at least once before they send a termination letter. Make sure you respond to correct any factual errors, identify referrals made through patient choice and explain medical judgments that may have determined the surgery's venue. This is also an opportunity to ask questions — such as how the insurer would have you respond when patients exercise their right to choose out-of-network providers — even if the company doesn't respond. Contacting your legal counsel at this point may, in fact, prevent the arrival of a termination letter.

4. Check your appeal rights and request appeal. Your appeal rights — which are specified in your agreement and the termination letter — will likely be rooted in state law, but they may give the insurer considerable discretion in how they can be exercised. Typically, appeals must be requested within a limited time period or else they are forfeited. Your legal counsel can help to prepare your appeal, whether it's conducted by telephone or in person (which may offer a better chance to communicate your position).

5. Review state law. In addition to your agreement, there may be important aspects of state law to consider. For instance, while most agreements require certain efforts to refer in-network, there is often no requirement to refer all of your patients in-network, and patients may request a particular facility. Since some states guarantee patient choice rights, an insurer that takes the position that any out-of-network referral is a breach of contract is violating both the agreement and state law.

6. Preserve your paper trail. In order to mount a challenge, you'll need to document why you haven't violated the agreement and why termination is unjustified. In the above example, it would be important to demonstrate your efforts, the patient's request and any resulting communication with the insurer. We've seen letters to physicians appealing termination in which insurers offer not to carry out their threats if the physicians agree to refer all future patients in-network. As an attempt to amend an agreement beyond the bounds of applicable law, such a letter can be useful evidence.

7. Review identified cases. A termination for referring too many patients out-of-network should identify which patients were referred and when. Review your files to identify the reasons for referral: Patient request? Patient convenience? A medical determination? The availability of suitable staff or equipment? Document and include these reasons in your appeal. Ideally, you'll have written requests from patients that include acknowledgments that out-of-network referrals may include additional costs. That will put insurers in the difficult position of attempting to terminate your participation for actions permitted by your agreement and paid for with increased premiums by your patients.

8. Monitor patient communications. An insurer must notify patients of your termination from their panels. But be alert for any communications that are premature, misleading or simply wrong — such as reporting your termination before the appeal period has lapsed or seeming to suggest that it was due to competency issues — that can confuse patients and disrupt relationships before the situation can be explained. Your lawyer can contact the insurer and communicate directly to your patients to avoid or react to these situations.

9. Evaluate your contract status. In some instances, termination is threatened as a participating provider refers patients to an ASC that is negotiating with the insurer to become an in-network facility. If that's the case, it's often productive to negotiate a global settlement that will result in the dismissal of the threatened termination and the execution of an acceptable network agreement for the facility.

10. Consider the big picture. If your provider agreement is terminated, you may be tempted to sue the insurer for disrupting your practice and costing you patients. But working "within the system" to pursue an appeal may well be the better course of action, as a lawsuit to regain what you've lost will be expensive and time-consuming. The big picture issue here is the contract status of the ASC that's receiving your referrals. An aggressive appeal can often result in the successful negotiation of a network agreement for the facility.

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