Recently many insurance companies have been auditing addiction treatment facilities. These audits can be a significant drain on facilities’ resources. They also have the potential to violate the Employee Retirement Income Security Act of 1974 (“ERISA”) and The Mental Health and Addiction Parity Act.
Typically, the insurance company will request a patient records from a facility covering a set period of time. These records will be reviewed by a psychiatrist or addictionologist hired by the insurance company as an independent auditor. The auditor will quickly review the facility’s files and compile a report that lists alleged failures on the part of the facility. The auditor’s report will form the basis for the insurance company’s takeback demand. The insurance company may refuse to pay any further claims until its takeback demand has been satisfied.
This process can be daunting and financially straining for the facility. The insurance company’s refusal to pay further claims until its takeback demand is satisfied may violate the Claims Procedure set forth in 29 CFR 2560.501-1(k)(1) under ERISA. The auditor’s report may also contain numerous errors and may flag issues that are not valid bases for a takeback demand. For example, the auditor may find that the facility failed to draft an individualized treatment plan within 24-hours of patients’ admission just because the document entitled “Treatment Plan” was dated several days after admission, overlooking the fact that several other documents dated within 24-hours of admission meet all the insurer’s Medical Necessity Criteria for an individualized treatment plan.
It is the insurance companies’ goal to intimidate facilities and attempt to settle the matter quickly, contributing to the insurer’s bottom line. Facilities should instead hire counsel to review patient files and the insurer’s auditor’s report and draft a rebuttal demand letter. Such a rebuttal demand letter, accompanied by supporting documents, can be a useful tool in reaching a fair settlement.