DaVita loses employer health plan case at Supreme Court

An employer health plan didn’t violate federal law by limiting outpatient dialysis benefits for policyholders, the Supreme Court ruled Tuesday.

The 7-2 decision holds that Marietta Memorial Hospital Employee Health Benefit Plan in Ohio followed Medicare statute because its plan doesn’t differentiate benefits for participants with end-stage renal disease.

The hospital’s health plan offers low reimbursement rates for outpatient dialysis services, that discourage providers from joining its network and effectively makes all of them out-of-network, the leading dialysis provider DaVita contended in its lawsuit.

DaVita sued Marietta Memorial Hospital Employee Health Benefit Plan in 2018, alleging its policy limits dialysis coverage. In addition to discriminating against kidney failure patients, the health plan violated the Medicare Secondary Payer Act, which dictates that Medicare shouldn’t pay for services another entity should cover, the company contended.

But the health plan applied the same coverage rules to all enrollees whether they have ESRD or not, which makes it lawful, the high court decided. Furthermore, there’s no definition in the statute for what would constitute inadequate dialysis coverage, Justice Brett Kavanaugh wrote in the opinion.

“Courts would be entirely at sea in trying to determine an appropriate benchmark or comparator for outpatient dialysis. Put simply, DaVita’s approach is a prescription for judicial and administrative chaos, and further demonstrates that DaVita’s disparate impact theory is not a correct interpretation of the statute,” Kavanaugh wrote.

Justices Elena Kagan and Sonia Sotomayor dissented, writing that outpatient dialysis is an “almost perfect proxy” for ESRD, and therefore not adequately covering dialysis is discriminatory.

“A reimbursement limit for outpatient dialysis is in reality a reimbursement limit for people with end-stage renal disease. And so a plan singling out dialysis for disfavored coverage ‘differentiate[s] in the benefits it provides between individuals having end stage renal disease and other individuals,'” Kagan wrote.

The decision reverses a 2020 ruling by the U.S. Court of Appeals for the 6th Circuit.