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Lawsuit: Virginia Mason Memorial health plan discriminates against kidney failure patients

YAKIMA, Wash. - A kidney dialysis provider is suing Virginia Mason Memorial hospital over claims its employee health plan discriminates against patients with kidney failure. 

The provider, DaVita, Inc, says the hospital’s plan pays less for kidney dialysis for patients with diagnosed end-stage renal disease — ERSD — than other patients receiving the same treatment. 

“This is not only illegal, it is unsustainable and unfair,” DaVita says in a lawsuit filed in the U.S. District Court for the Eastern District of Washington. 

Lawsuit alleges hospital plan violates federal law 

The Social Security Act in 1972 provided that ERSD patients are entitled to Medicare regardless of age or financial status and become eligible to receive those benefits three months after their diagnosis. 

The lawsuit says this change lead private insurers to push ERSD patients off their insurance and on to Medicare, leaving the federal government bearing the brunt of ERSD treatment costs. 

To fix that, the lawsuit says legislators enacted the Medicare Secondary Payer Act, which makes private insurers the primary payers and Medicare the secondary payer for the first 30 months an ERSD patient is eligible. 

The law prohibits insurers from taking that eligibility into account or changing insurance coverage because a patient could be getting help from Medicare, according to the lawsuit.  

DaVita says the hospital violates both those provisions with a caveat included in all employee health care plans. 

The plan says when a member is eligible for Medicare, “the plan will pay claims for ESRD services at 125% of the then current Medicare allowable.” 

That means when an ERSD becomes eligible for Medicare — regardless of whether they actually enroll and receive benefits — their insurance stops paying them full benefits afforded to other dialysis patients. 

“This discriminatory plan design leaves Medicare-eligible ESRD individuals facing enormous additional payment obligations not faced by others on the plan,” the lawsuit said. 

KAPP-KVEW reached out to Virginia Mason Memorial hospital representatives for this story, who declined to comment on ongoing litigation. 

However, in court documents, the hospital acknowledges the plan pays claims for ESRD services at 125% of the Medicare allowable when patients become eligible, but denies any wrongdoing.  

DaVita says at least one patient received “worse treatment” under plan 

DaVita’s main argument stems from one of the patients enrolled in the hospital plan who receives dialysis from one of its 118 treatment facilities in Washington state. 

The lawsuit says that the patient began kidney dialysis with DaVita in 2016 and that for the first three months, the hospital plan reimbursed the provider appropriately. 

But when the fourth month came and the patient became eligible to receive Medicare benefits, those payments decreased to 125% of the Medicare allowable. 

Because of this decrease, DaVita argues the hospital plan grossly underpaid the provider for its services and that the hospital owes it $1.7 million for 20 months of dialysis treatments.  

DaVita says the patient in question dropped the plan and switched to Medicare as the primary payer with 10 months remaining in the coordination period and argues he switched because he was unsatisfied with his coverage under the primary plan.  

In the lawsuit, DaVita is asking for double damages — essentially $3.4 million — on behalf of both the company and the patient. 

Court documents filed by hospital says DaVita complaint is invalid 

In court documents, the hospital says DaVita’s claim is invalid because Medicare itself has to suffer damages in order for a provider to sue under the Medicare Secondary Payer Act.  

Because Medicare didn’t pay primary for services, the hospital argues that burden wasn’t met. 

In court documents, the hospital says the claim is invalid because DaVita didn’t try to work out issues administratively before filing the lawsuit.  

The plan allowed providers to ask to be reimbursed at a higher percentage, which they say in court filings DaVita didn’t do.  

“It is apparent by the remedy sought that DaVita is concerned with a billing dispute with the plan, as there are no damages to [the patient] or to Medicare,” the hospital said in court documents.  


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