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March 31, 2020

COVID-19: DFS Instructs Insurance Issuers to Suspend Certain Requirements for Hospitals, Other Inpatient Service Providers

On March 20, the NYS Department of Financial Services (DFS) issued Insurance Circular Letter No. 8, which advises insurance issuers1 to suspend certain utilization review and notification requirements. The suspensions are in place for at least 90 days from the date of the letter, with the length of time being subject to further evaluation as the COVID-19 situation continues to develop.

Summary

According to Insurance Circular Letter No. 8, to allow hospitals to focus on patient care rather than administrative tasks, the following are suspended or tolled until at least June 18:

  1. Review for Scheduled Surgeries or Admissions: Issuers should suspend preauthorization review for scheduled surgeries or admissions at hospitals for 90 days from the date of the DFS’ letter. The suspension is subject to further evaluation throughout the COVID-19 response. Hospitals are directed to use best efforts to provide issuers with 48 hours’ notice of a hospital admission. Issuers are allowed to retrospectively review these services when reviews resume.
  2. Concurrent Review for Inpatient Services: Issuers are advised to suspend concurrent review for inpatient hospital services. Again, issuers may retrospectively review these services when reviews resume.
  3. Retrospective Review for Inpatient and Emergency Services: Issuers are advised to suspend retrospective review for inpatient hospital services and emergency services provided at in-network hospitals. Additionally, issuers should pay claims from in-network hospitals that are otherwise eligible for payment without first completing medical necessity reviews of the claims. Beginning 90 days after the date of the letter (unless extended by the DFS), issuers may, to the extent necessary, request information needed to perform a retrospective review, reconcile claims, and make any payment adjustments.
    Notably, in-network hospitals that accept payment for these claims should not enforce any contractual limitations on retrospective review or overpayment recovery’s permissibility, and issuers should be given an additional 90 days to complete these reviews and recoveries once retrospective review is resumed. Importantly, the DFS letter reminds issuers that the “prudent layperson” standard applies to retrospective review of emergency services, and the circumstances surrounding the COVID-19 pandemic should be taken into consideration when claims are reviewed.
  4. Preauthorization for Home Health Care: Issuers should suspend preauthorization requirements for home care services following an inpatient hospital admission to allow hospitals to discharge patients to lower levels of care when medically appropriate. Home health care services may be reviewed for medical necessity concurrently or retrospectively. Notably, there are no changes to plan of care requirements except to the extent that telehealth and verbal orders will meet any requirements during the COVID-19 emergency.
  5. Preauthorization for In-Network Inpatient Rehabilitation: Issuers should suspend preauthorization requirements for inpatient rehab services following a hospital admission. Again, this suspension is intended to allow hospitals to discharge patients to lower levels of care when medically appropriate. The issuer can require the rehab or skilled nursing facility to provide it with notice of the admission, and the services can be reviewed for medical necessity on a concurrent or retrospective basis.
  6. Out-of-Network Inpatient Rehabilitation Requirements: In instances where an in-network inpatient rehab cannot accept the insured, the out-of-network facility should use best efforts to provide notice to the issuer within 48 hours of admission, and a payment rate should be negotiated within 48 hours of the notification. In instances where an agreement on rates cannot be reached, issuers should reimburse for Medicaid managed care enrollees at the Medicaid benchmark rate, and, for those covered under individual or group policies or contracts, the lesser of the prevailing in-network rate or the Medicare reimbursement rate for the services.
  7. Inpatient Substance-Use Disorder Treatment and Mental Health Services: Although permissible preauthorization and concurrent review for inpatient substance-use treatment and mental health services is already limited, issuers should, to the extent that it is required following a hospital admission, suspend preauthorization.
  8. Notification of Emergency Hospital Admissions: For hospitals and issuers that have contractual agreements regarding notification requirements, hospitals should use best efforts to continue to provide these notifications. In instances where there is no contractual notification agreement, the DFS has encouraged hospitals to use best efforts to provide notifications of emergency admissions to issuers as long as the notification requirements are not overly burdensome. Issuers are directed to not require medical records to be submitted as part of the notification and should not impose financial penalties on hospitals for failing to provide notification due to COVID-19-related staffing issues.
  9. Internal and External Appeal Timeframes: The timeframes for hospitals to submit an internal or external appeal—generally 45 and 60 days from receipt of notice, respectively—should be considered tolled for 90 days from the date of the DFS’ letter.
  10. Audits of Payments and Overpayment Recovery: Issuers should suspend all non-essential audits of hospital payments for the duration of the COVID-19 state of emergency. The 24-month time limit on overpayment recovery should be tolled as well as any other time limit agreed upon between the hospital and issuer.
  11. Prompt Payment and Timely Claims Submission: The letter advises that the DFS is aware of possible issues that may affect the timely submission and payment of claims due to COVID-19. As such, the situation is being monitored by the DFS, and additional guidance may be provided in the future.
  12. Third-Party Administrators: In an effort to ensure that hospitals are able to direct resources to patient care, the DFS strongly encourages third-party administrators licensed by the department as independent adjusters to apply the circular letter’s provisions to their administrative services arrangements with self-funded plans.

Implications

The suspensions and waivers identified by the DFS have a variety of notable impacts on hospitals. Although hospitals are relieved of many of the administrative hurdles faced on a regular basis, hospitals should remember that issuers are not left without any options for reconsidering payment of claims, as issuers may later perform retrospective reviews.  
Additionally, in-network hospitals that accept payment on certain claims may be barred from enforcing limitations on retrospective review or overpayment recovery found in contractual agreements. Hospitals should also take particular note of the extensions of time to appeal payments as well as for issuers to perform certain audits. Inpatient rehab providers and skilled nursing facilities should also be aware of the impacts of these waivers, especially in instances where a facility is considered out of network. Importantly, the failure to reach an agreement with an issuer on payment for services may result in certain minimum payment requirements being applied.

Finally (and critically), all providers impacted by the DFS Insurance Circular Letter No. 8 should be cognizant of the letter’s use of the word “should” rather than “must” or “shall.” As such, many of the waivers contained in the letter may be seen as merely recommendations for issuers rather than explicit requirements that must be abided. Additionally, despite these more lenient standards, providers should take care to not deviate from using sound medical judgment or best practices in determining authorization for services.
 

If you have any questions regarding the content of this alert, please contact Dena DeFazio, associate, at ddefazio@barclaydamon.com or another member of the firm’s Health Care & Health and Human Services Practice Area. 

We have a specific team of Barclay Damon attorneys who are actively working on assessing regulatory, legislative, and other governmental updates related to COVID-19 and who are prepared to assist clients. You can reach our COVID-19 Response Team at COVID-19ResponseTeam@barclaydamon.com.
 


[1]The letter applies to the following issuers: Insurers authorized to write accident and health insurance in New York State; Article 43 corporations; health maintenance organizations (HMOs); student health plans certified pursuant to Insurance Law § 1124; municipal cooperative health benefit plans; and prepaid health services plans. Additionally, the letter also applies to independent agents performing utilization review under contract with such issuers as well as licensed independent adjusters.

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