Dialysis providers win victory in fight over third-party financial aid to patients

The Obama administration's last-minute effort to force dialysis providers to disclose to insurers the financial aid that they give to privately insured patients hit a roadblock as a federal judge temporarily suspended implementation of that plan at the request of several providers.

The rule that dialysis providers object to had been scheduled to go into effect Friday.

But the temporary restraining order granted Thursday gives dialysis providers more time to fight a rule that they say will "dramatically disrupt" patients' ability to get private insurance that is suited to their needs, and interfere with their access "to life-sustaining medical treatment," while hurting the bottom lines of providers. The rule would require insurance plans agree to accept third-party financial aid for their covered patients.

U.S. District Judge Amos Mazzant also ordered parties in the case to appear for a hearing next Wednesday in Texas federal court.

The case relates to concerns raised by federal health regulators that some dialysis providers — with their funding of insurance premiums paid by patients — are steering people into private individual health plans when those patients are either already getting or are eligible for government-run insurance programs such as Medicare and Medicaid.

Last summer, those regulators warned that such steering by providers could drive up health costs nationally, and may be hurting the financial performance of insurers selling individual plans.

Private insurance plans, including those sold on Obamacare exchanges, pay higher reimbursement rates for dialysis treatment than do Medicare and Medicaid.

On the heels of the regulators' warning, a number of insurance companies complained about the practice of dialysis providers providing help to patients in paying their monthly premiums. Providers for decades have donated to charities such as the American Kidney Fund, which provide patients with help in paying their health premiums.

On Dec. 13, the U.S. Health and Human Services Department announced a new regulation that would require dialysis providers to notify insurers of which premiums would be paid for by a charitable organization, and also would require those providers to disclose to patients that they are contributing to charities like the AKF.

On Jan. 6, a group of providers, including DaVita (DVA), Fresnius Medical Care and U.S. Renal Care, along with a dialysis patients organization, filed a motion asking for a temporary restraining order and preliminary injunction against the regulation.

The group argued that HHS did not comply with requirements to provide notice of the new rule in advance and take public comments on it. The group also argued that the rule would drive patients with end-stage renal disease into Medicare or Medicaid coverage, or deprive them of coverage altogether, "by identifying patients receiving premium assistance and allowing insurers to decline coverage of such individuals."

The Department of Justice, in a brief arguing against a delay in implementing the rule, said that patients often rely greatly on a dialysis facility's agent for information about what source of insurance best fits their medical situation. At the same time, dialysis providers have "an enormous financial conflict of interest given the boost to its bottom line" whenever a patient "can be steered into choosing" a private health plan.

In granting the temporary injunction, Mazzant said the plaintiffs have shown a reasonable probability of proving HHS violated the notice rules for the regulation, and that there is a threat that both patients and dialysis providers would be harmed by the regulation if it went into effect as scheduled.

DaVita, in a statement emailed to CNBC, called the temporary ruling "good news for the thousands of patients who would be harmed by the implementation of the rule."

"But our work is not done," DaVita said.

Noting next week's court hearing, DaVita said, "the dialysis community will continue its efforts to overturn it to protect patients from being discriminated against by health insurers."

HHS spokesman Benjamin Wakana said, "We are disappointed the court temporarily stayed implementation of this important rule while scheduling further proceedings to consider the parties' positions."

"We refer you to the Justice Department, who is litigating this pending matter," Wakana said.

The Justice Department declined to comment.

Correction: The Health and Human Services Department announced the regulation on Dec. 13. An earlier version misstated the date.

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