U.S. Supreme Court Upholds Plan’s Decision to Treat Dialysis Services as Out-of-Network, Potentially Savings Thousands of Dollars

In late June, the U.S. Supreme Court issued an opinion on a case that could potentially save health insurance plans thousands of dollars. The case came from the Sixth Circuit Court of Appeals and involved a dispute between a health insurance plan and a dialysis center. In a succinct seven-page opinion the 7-2 majority upheld the Plan’s decision to treat all dialysis claims as out-of-network and rejected the dialysis center’s discrimination claims.

The Case – Marietta Memorial Hospital Employees Health Benefit Plan v. DaVita Inc.

The Marietta Memorial Hospital Employees Health Benefit Plan (the “Marietta Plan”) is a self-insured health plan that noticed a trend currently impacting many health plans: rapidly rising in-network outpatient dialysis costs. When those services are provided in-network, plans are forced to pay a percentage of the underlying charges. The problem here is that plans have no control over the “underlying charges.” When the underlying charges increase, the total amount the plan pays increases even though the percentage stays the same. The Marietta Plan decided to control those costs by carving out all outpatient dialysis services from the network coverage. That means that all outpatient dialysis services were out-of-network.

As a result, the Marietta Plan looked at the average charges within the geographic area and paid the provider on a “usual and customary” basis. While this amount was greater than the Medicare rate, it was well below what the Marietta Plan had been paying on an in-network basis.

At trial, the dialysis provider (DaVita Inc.) argued that the Marietta Plan’s action violated the Medicare Secondary Payer rules. Under those rules, plans cannot discriminate against someone because they are eligible for Medicare or have end-stage renal disease. The Court held that since the Marietta Plan treated all outpatient dialysis claims as out-of-network, and used the same reimbursement process for all claims, it did not violate either of the Medicare Secondary Payer anti-discrimination rules.

From the Court

“Section 1395y(b)(1)(C)(ii) prohibits a plan from differentiating in benefits between individuals with and without end-stage renal disease. Because the Marietta Plan’s terms apply uniformly to individuals with and without end-stage renal disease, the Plan does not ‘differentiate in the benefits it provides between individuals’ with and without end-stage renal disease.”

 “DaVita’s contention that a plan that provides limited coverage for outpatient dialysis impermissibly ‘take[s] into account’ the Medicare eligibility of plan participants with end-stage renal disease fails for the same reason. Because the Marietta provides the same outpatient dialysis benefits to all Plan participants, whether or not a participant is entitled to or eligible for Medicare, the Plan cannot be said to ‘take into account’ whether its participants are entitled to or eligible for Medicare.”


Dialysis claims are some of the most expensive and marked-up claims of all. Therefore, with this decision plans could review dialysis charges and trends and consider whether they want to act. However, some network agreements prohibit plans from taking such actions. Thus, fiduciaries should consult with their professionals’ advisors before taking any definitive action.