La. Appellate Court Rules Against Coventry Network

Tuesday, July 20, 2010 | 0

By Joe Paduda
Health Strategy Associates

The July 2 Louisiana appellate court ruling against Coventry's First Health work comp network is a major blow to comp insurers, employers, and networks in Louisiana, with potential impact in other states as well.

The court's finding supported a lower court's ruling affirming a state statute requiring preferred provider organizations to provide injured workers with PPO identity cards or give notice to providers 30 days before taking discounts. While Coventry will appeal to the state Supreme Court, the appellate court ruled against almost all of Coventry's arguments, making this an uphill battle for the nation's biggest work comp managed care firm. I'd also note that the decision itself takes Coventry's legal team to task for failings to accurately cite evidence in its written appeal, stating the "failure to provide record citations suggests that many of these assignments were interposed only for purposes of delay and confusion."

Ouch. (no pun intended)

While the finding may be bad enough, the size of the penalty is stunning Coventry will have to pay $262 million $2,000 for each of the "131,024 instances in the past 10 years when it discounted providers' charges below the state workers' compensation fee schedule." (WorkCompCentral)

Some workers comp networks decided early on to avoid doing business at all in Louisiana; MedRisk (a Health Strategies Associates client) left the state after the initial ruling against Coventry along with several other PPO and specialty networks.

Implications

For Coventry, it doesn't look good. While I've taken the company to task in the past for what I perceive to be missteps, and some would argue that they should have pulled out long ago, it's hard to fault Coventry for believing they could conduct business in Louisiana as they do in most other states, by contracting with providers to deliver discounted care to workers comp claimants. The additional notice requirements in Louisiana are unique to that state; in retrospect all networks should have picked up on this nuance, but in retrospect we all would have sold our stocks two months ago...

It doesn't look good for employers in Louisiana either. As MedRisk's General Counsel, Darrell Demoss noted in the WorkCompCentral piece, Workers Compensation Research Institute data suggests comp medical costs are significantly higher in Louisiana than in other states. Now that the ruling has been upheld, expect insurers and managed care organizations to avoid the state completely in fear that they too could be nailed by class-action suit.

On a national basis, this ruling will likely cause many network vendors and insurers to stop and very carefully review each state's laws and regulations pertaining to networks, with compliance staffs tasked with doubly ensuring their contracts comply with the letter and spirit of each jurisdiction's rules and regs. That's not a bad thing, as it's a heck of a lot cheaper to pay attorneys and compliance staff than a $262 million penalty.

What does this mean for you?

Sorry, but bad news on a Friday and a holiday Friday at that.

Except if you're a comp provider in Lousisana.

Thanks to WorkCompCentral for the heads up.

Joe Paduda is principal of Health Strategy Associates, an employer consulting firm based in Connecticut. This column was reprinted with his permission from his blog, http://www.joepaduda.com