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Beware of the Consequences: Payers Take Legal Action Against SUD Treatment Facilities for Inducement

December 14, 2023



In the wake of the COVID-19 pandemic, a troubling trend has emerged in the Behavioral Health Market. Payers and regulatory bodies have significantly increased their scrutiny of healthcare providers engaging in inducement practices related to patient financial responsibility (PFR).

The importance of inducement compliance became crystal clear on November 14, 2023, when a major national Payer filed a lawsuit worth hundreds of millions of dollars against nine (9) SUD treatment facilities. Among the allegations were:

1. Fraud: The Defendants were accused of committing insurance fraud by waiving the cost-sharing
     responsibilities that members were obligated to bear under their insurance plans.

2. Intentional Interference with Economic/Contractual Relationship: The Payer's health benefit plans had
     contractual obligations for members to pay deductibles, copays, or coinsurance. The Payer argued that the
     Defendants intentionally interfered with these contracts by providing financial incentives and other
     considerations to induce the Payer's members to seek treatment with them.

3. Violations of Business and Professional Code Section 17200: The Defendants were charged with violating
     California Unfair Competition Law, as their business practices ran afoul of various regulations, including but
     not limited to:

  • Eliminating Kickbacks in Recovery Act (EKRA)
  • Health Care Fraud Statute
  • RICO

The Payer involved in this lawsuit is not merely seeking restitution; they are pursuing 'punitive and exemplary damages in an amount to punish Defendants and deter other persons similarly situated from engaging in similar
conduct in the future.'  Remarkably, the lawsuit also named the billing company responsible for providing billing and claims management services as a co-Defendant.

The implications of this lawsuit are profound. Healthcare providers must take inducement claims and potential accusations from Payers and enforcement agencies with utmost seriousness. The stakes are high, and the
repercussions are severe.

Here are some of the critical industry best practices that Providers must adhere to if they want to safeguard their reputation and financial stability:

  1. Develop and Document Your Patient Financial Management Strategy and Standard Operating Procedures (SOPs): A well-defined strategy and documented procedures are crucial for ensuring transparency and compliance in patient financial management.

  2. Create Data-Driven, Good Faith PFR Estimates:  Every patient admission should involve the creation of a data-driven good-faith estimate of patient financial responsibility. This demonstrates a commitment to fair and accurate billing.

  3. Establish a Multi-Channel Digital Payment Infrastructure:  Make it easy for patients to fulfill their PFR obligations by setting up a comprehensive digital payments system. This investment showcases your commitment to patient convenience and financial transparency.

  4. Implement a Data-Driven Patient Financial Management System: Automation is key to maintaining compliance and reducing the risk of inducement claims. Automate workflows for patient engagement, payment program enrollment and inducement compliance.

  5. Utilize Executive Dashboards: Keep a close eye on key performance indicators (KPIs) related to inducement compliance. Executive dashboards help your monitor and measure your adherence to industry best practices.

Timing is of the essence, particularly because many patient health plans reset their deductibles on January 1st. As up to 25% of your revenue may depend on Patient Financial Responsibility, patient financial management is now as critical as revenue cycle management. Ignoring these best practices could lead to severe legal and financial consequences. 

Industry data shows that most Behavioral Health executives don't even realize they are out of compliance.  A lack of education and subject matter experts within their organizations has allowed non-compliant and even illegal practices to be normalized over time. Do not let your organization become the next target of regulatory enforcement or a Payer's lawsuit. Act now to protect your business and reputation. Schedule a meeting today to discuss with the patient financial management experts.

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