Maryland enacted the first “prudent layperson standard” (PLP) in state law in 1993 (see related timeline). The PLP standard they devised protected a patient’s access to emergency medical services, including on-call services, if the medical condition of the patient manifests itself by acute symptoms of sufficient severity (including severe pain) such that a prudent layperson could reasonably expect that the absence of immediate medical attention could result in serious jeopardy to the health of the patient.
Using Maryland state law as a guide, the American College of Emergency Physicians (ACEP) and the Emergency Department Practice Management Association (EDPMA) lobbied for passage of federal protections beginning in the mid-1990s. The PLP standard was first enacted into federal law in the Balanced Budget Act of 1997 (BBA ’97) and made applicable to Medicare and Medicaid programs. There were multiple interpretative letters issued by the HCFA (now CMS) to interpret BBA ’97. One of the HCFA letters, written by then Medicaid Director Tim Westmoreland (the Westmoreland Letter) specifically cited that the CPT 9928X codes should be reimbursed under federal PLP unless the Medicaid plan believed there were program integrity issues with the claim.
Since the mid to late 1990s, the federal PLP standard applies to all commercial insurance programs, the Federal Employee Health Benefits Program (FEHBP), Employee Retirement Income Security Act (ERISA) plans, and Affordable Care Act (ACA) plans. In addition, 48 states (all but Mississippi and Wyoming) have enacted various versions of the PLP standard. The PLP has a rich history of protecting patient’s access to emergency care, but in recent years, the standard has faced attack.
Virginia Medicaid and the Roberts Decision
In April 2020, amid pandemic financial concerns, Virginia’s legislature approved the Governor’s budget amendment, which included a Medicaid “Downcoding Provision.” This amendment downcoded Medicaid reimbursements to a Level 1 visit if the patient’s final diagnosis appeared on a list of 790 diagnoses, deemed “avoidable emergencies,” for Medicaid patients. The list was created to penalize Medicaid Managed Care Organizations for not managing their beneficiaries care resulting in “preventable” ED visits; however, the health plans successfully argued that emergency medicine groups and hospitals should share this responsibility. The Downcoding Provision included diagnoses such as heart failure, diabetic ketoacidosis, and acute asthma. This meant that professional E/M services would be downcoded and paid at just under $16, a considerably lower reimbursement than the charges submitted. The provision similarly downcoded hospital facility fees. Virginia Medicaid submitted the Downcoding Provision to CMS for approval, as required by federal law, and estimated the provision would save approximately $40 Million annually.
In response, the Virginia College of Emergency Physicians (VACEP), the Medical Society of Virginia (MSV), and the Virginia Hospital and Healthcare Association (VHHA) appealed to CMS arguing the provision violated the PLP and cited previous CMS opinions finding similar Downcoding Provisions unlawful. To further demonstrate how the provision violated the PLP, 200 commentors cited numerous statutory and regulatory authorities and filed letters with Virginia’s Department of Medical Assistance (DMAS). VACEP and ACEP also met with CMS who advised their guidance had not changed, and the Downcoding Provision would not be authorized. Months later however, CMS paradoxically approved it and failed to provide any rationale, explanation, or response to the multiple letters and supporting authorities. As such, on July 20, 2020, VACEP, MSV, and VHHA sued Virgnia DMAS, the Medicaid Program Director, Cheryl Roberts, and CMS in Virginia Hospital & Healthcare Association, et al., v. Roberts.
The plaintiffs argued that the Downcoding Provision violated the federal PLP law and regulations, the Administrative Procedures Act (APA), and the Takings Clause of the Fifth Amendment to the US Constitution. After an initial setback in District Court, the plaintiffs appealed to the 4 th Circuit Court of Appeals who agreed with the plaintiffs and sent the case back to District Court. In April 2023, US senior federal court judge Henry Hudson decided in favor of the plaintiffs and struck down the Downcoding Provision.
While denying the plaintiff’s constitutional claims, the court found CMS in violation of the APA by not following the Medicaid Act and failing to provide adequate explanation. The court also found CMS acted in an arbitrary and capricious manner in approving the VA Medicaid Downcoding Provision thereby reversing multiple previous rulings supporting PLP. The judge quoted the Westmoreland Letter citing that the CPT 9928x codes should be reimbursed under PLP. Finally, the judge cited regulatory provisions from the Affordable Care Act and the No Surprises Act, which carried forward the original PLP protections from BBA ’97.
The Sterling Precedent
Virginia DMAS and CMS had two months to appeal, and the appeal deadline of June 26, 2023, has since passed without appeal. This means the Roberts case will become binding precedent in the Richmond VA federal court district and stands as persuasive authority for other potential plaintiffs challenging “restrictive diagnosis” lists by commercial or Medicaid health plans across the United States. To be sure, the Roberts decision will serve as a sterling precedent for other potential challenges and threats to the PLP standard and should serve as a cautionary example for other states considering similar actions. CMS must thoughtfully consider prior agency interpretations of federal PLP standards and stakeholders’ comments before state Medicaid amendments are rubber stamped.
Timeline of the Prudent Layperson (PLP) Standard
1986: EMTALA, which sets the standard that hospitals must provide care to anyone needing emergency treatment, is passed.
Early 1990s: The PLP emerged in the insurance environment and gained recognition in the healthcare industry after first appearing in consumer protection law.
1993: Maryland is the first state to enact a PLP law in response to the unfair and dangerous requirements from private insurers; 46 other states soon follow suit.
1997: Congress enacts the PLP for Medicare and Medicaid managed care plans via BBA ’97.
1998: The PLP extends to cover all federally insured employees in the Federal Health Benefits Program, also known as “Federal BCBS.”
2010: The ACA extends the PLP to individual and small-group health plans, as well as self-funded employer plans under ERISA.
Medicaid managed care plans, like Centene, and commercial health plans, like Anthem and BCBS in GA, deploy downcoding lists, algorithms and policies that attempt to cut back on federal and state PLP protections. ACEP, state chapters, and EDPMA respond with litigation.
2023: On April 27, the Roberts decision strikes down the VA Medicaid Downcoding Provision in part for violating the federal PLP standard, citing that the Provision impermissibly “downcoded” claims based on the final diagnosis.
Present: The PLP remains an important patient protection and a bedrock principle of emergency medicine, alongside EMTALA. It provides assurance that anyone can receive emergency care regardless of insurance status or ability to pay.
TODD PARKER, MD, FACEP, is an emergency physician and executive medical director with Riverside Health System in Southeast Virginia, and the President of the Virginia College of Emergency Physicians