Supreme Court Opens Door to Limiting Reimbursement Rates for Outpatient Dialysis Treatment

On June 21, 2022, the U.S. Supreme Court published a decision in Marietta Memorial Hospital Employee Health Benefit Plan v. DaVita Inc, which may attract the attention of plan sponsors of self-funded group health plans wishing to limit reimbursement rates for outpatient kidney dialysis treatment.  Marietta involved a challenge by DaVita, one of the nation’s largest providers of outpatient dialysis services, to the limited reimbursement rates under the Marietta Memorial Hospital Employee Health Benefit Plan (the “Plan”) for dialysis treatment.  Specifically, DaVita argued that the Plan’s practice of reimbursing dialysis treatment at a lower rate than other outpatient items and services (specifically, a percentage of the Medicare reimbursement rates) violated the Medicare Secondary Payer Act’s (“MSPA”) anti-discrimination provisions related to coverage for End-Stage Renal Disease (“ESRD”).

The Supreme Court’s decision held that the Sixth Circuit erred in its determination that limited payments for outpatient dialysis treatment had a disparate impact on individuals with ESRD.  The Supreme Court also held that the Plan did not violate the MSPA because it: (1) does not differentiate in the benefits it provides to participants who need outpatient dialysis, regardless of whether the participant was diagnosed with ESRD; and (2) does not take into account whether an individual is entitled to or eligible for Medicare.

Background

Medicare provides coverage to individuals with ESRD, without regard to such individuals’ age or disability status.  Since the MSPA was signed into law, group health plans have had to provide primary, or first-payer coverage, for treatments related to ESRD, including dialysis treatment, if the plan covers such treatments for the first 30 months of the individual’s ESRD diagnosis.  The MSPA also imposes two additional requirements on plans related to coverage for dialysis treatment:

1. A plan “may not differentiate in the benefits it provides between individuals having [ESRD] and other individuals covered by such plan on the basis of the existence of [ESRD], the need for renal dialysis or in any other manner.” In other words, a plan cannot discriminate against an individual with ESRD in terms of the benefits the plan provides.
2. A plan may not take into account, for purposes of coverage that will be provided, whether an individual is eligible for Medicare due to having ESRD.

In Marietta, DaVita brought suit against the Plan alleging that the Plan’s low reimbursement rate for outpatient dialysis services violated the MSPA because it was intended to force individuals onto Medicare in order to avoid higher costs for such services, and because the reimbursement rate adversely impacted individuals with ESRD.

The District Court sided with the Plan and dismissed the case.  The Sixth Circuit reversed the District Court’s decision and held that the MSPA authorized disparate impact liability against a plan not only for expressly discriminating against individuals with ESRD, but also when a coverage scheme created a disparate impact to such individuals.

The Issue

The ultimate issue before the Supreme Court was whether uniformly reimbursing costs related to outpatient dialysis treatment for all participants in a group health plan at a rate lower than that of other outpatient items or services violates the MSPA’s rules prohibiting discrimination in coverage based on whether an individual has ESRD.

The Decision

The Supreme Court held that a reimbursement rate that is uniformly applicable to all participants in a group health plan, whether or not they have ESRD, does not violate the MSPA.  The Court went on to explain that, based on its plain text, the MSPA does not impose liability for disparate impacts to individuals who have ESRD, it only imposes liability when benefits themselves are discriminatory based on the existence of ESRD.

In Marietta, the Plan applied the reimbursement rate for outpatient dialysis treatment to every participant in the Plan, regardless of whether the dialysis was being administered due to ESRD or some other reason.  Thus, the Supreme Court concluded that the Plan does not differentiate in the benefits it provides between participants who have ESRD and those who do not.  The Court used the same reasoning to conclude that the Plan did not take into account individuals’ eligibility for Medicare in providing outpatient dialysis benefits—i.e., every participant, regardless of their Medicare eligibility status, was covered at the exact same rate.

Conclusion

Based on the Supreme Court’s decision in Marietta, other group health plans may now follow the lead of the Marietta Memorial Hospital Employee Health Benefit Plan.  In other words, based on the Supreme Court’s decision, group health plans may explore excluding outpatient dialysis as an in-network benefit or, at least, changing the reimbursement rate for out-of-network providers of outpatient dialysis services.  This appears to be a permissible practice if the reimbursement rate is uniform and applies to all participants, regardless of an ESRD diagnosis.  This may, however, only be possible for self-funded group health plans.

If you have any questions, please contact the authors or another member of the Miller Johnson employee benefits practice group.