Supreme Court Decision Supports Group Health Plans Cost-Containment Strategies for Dialysis Payments

January 8, 2024

On June 21, 2022, the U.S. Supreme Court found in favor of the group health plan in the case of DaVita v. Marietta Hospital, finding that the Marietta Hospital Employee Health Benefit Plan did not violate the Medicare Secondary Payer Act (MSPA) in limiting dialysis payments to DaVita. The court held that the plan does not discriminate against patients with end-stage renal disease (ESRD), as it offers the same level of coverage for all patients with kidney disease.

The dialysis provider initially sued, alleging that the out-of-network classification and the lower levels of coverage for dialysis than for other services violated MSPA, which prohibits differentiation in benefits between individuals with end-stage renal disease and other individuals covered by the plan. In addition, MSPA does not allow plans to take Medicare coverage into consideration when designing their benefits and plan may not offer different benefits to patients with more advanced stages of kidney failure, as to them into enrolling with Medicare.

Marietta countered that its plan applies coverage uniformly to individuals with and without end-stage renal disease and did not consider Medicare coverage when designing its plan.

The Supreme Court rejected DaVita’s argument and concluded that the plan’s coverage terms for outpatient dialysis does not violate MSPA because the terms apply uniformly to all covered individuals. The court also ruled that the plan did not take into account Medicare eligibility for end-stage renal disease patients by paying lower reimbursement rates for outpatient dialysis, than for other benefits.

The court’s decision supports a group health plan’s adoption of outpatient dialysis cost-containing strategies, such as network carve-outs and Medicare-rate based pricing, as long as plans offer the same terms of coverage to individuals with and without end-stage renal disease. Plans may contact their network partners to confirm what dialysis carve-out actions are permissible and to acquire appropriate plan document verbiage to ensure their actions are defensible.

If you would like to implement a Dialysis Cost-Containment program, please contact your Account Executive.