Ninth Circuit Rejects Dialysis Provider’s MSP Disparate Impact Claim Leading to Circuit Split and Confusion for Group Health Plans

As mentioned in an earlier article, a recent decision from the Sixth Circuit Court of Appeals suggested that commonly seen limitations and restrictions on dialysis treatment benefits in group health plans, namely treating all dialysis providers as “out-of-network” or capping dialysis benefits at Medicare-based rates, may violate the ESRD non-differentiation provisions of the Medicare Secondary Payer Act (“MSP Act”).

The issue has been made less clear by a conflicting decision issued by the Ninth Circuit in DaVita Inc. v. Amy’s Kitchen Inc., this month. The Ninth Circuit case involved the same dialysis provider arguing that similar practices as those challenged in the Sixth Circuit case, namely the plan’s elimination of in-network coverage for dialysis and reducing reimbursement for the treatment, violated the MSP Act’s protections for individuals with ESRD because, even though the plan’s provisions applied the same to all dialysis patients, they had a disparate impact on patients with ESRD who have an ongoing need for dialysis treatment.

Siding with Amy’s Kitchen and the district court on appeal, the Ninth Circuit affirmed the lower court’s decision to dismiss the MSP claims, holding that while the MSP Act bars health plans from treating individuals with ESRD differently than to those who do not have ESRD, it does not bar dialysis provisions that apply even-handedly and merely have a disproportionate effect on individuals with ESRD. The Court specifically noted its disagreement with the Sixth Circuit in DaVita Inc. et al. v. Marietta Memorial Hospital, et al., in reaching its ultimate decision.

While the conflicting decisions are currently limited to their respective circuits (the Sixth Circuit’s jurisdiction covers MI, TN, KY, and OH, while the Ninth Circuit’s jurisdiction covers CA, WA, AZ, AK, ID, MT, NV, OR and HI), the circuit split brings confusion to group health plans around the country that use similar design features to contain the costs of participants’ dialysis. Employers who have similar provisions in their group health plans may want to reassess these design features given the uncertainty regarding this issue and potential risk of noncompliance with the MSP Act. Research and Compliance will continue to monitor this situation and will provide updates regarding similar litigation as the updates become available.

This document is provided for general information purposes only and should not be considered legal or tax advice or legal or tax opinion on any specific facts or circumstances. Readers are urged to consult their legal counsel and tax advisor concerning any legal or tax questions that may arise.

Interested in learning more? Connect with us today: