A federal lawsuit against Humana alleging breach of contract is moving forward in what could set a new precedent for providers.
A federal judge denied Humana's motion to dismiss a lawsuit by California-based Prime Healthcare that claims the insurer denied or underpaid for services rendered to Medicare Advantage patients.
Humana argued that in-network providers cannot directly sue them for breach of contract as they are preempted from doing so by the Medicare Act.
However, Judge Virginia Phillips found this interpretation of the law to be overly broad.
The decision is the first time a federal court has recognized that providers can challenge private contracts with MA insurers, Damaris Medina, an attorney with Buchalter who represented Prime in the lawsuit, told FierceHealthcare.
"This decision confirms that contracted providers do not have appeal rights through the Medicare Appeals process and therefore do not have to exhaust such a process before suing; and that they are not preempted by the Medicare Act from suing a Medicare Advantage Plan for breach of contract," the firm said in an emailed statement to FierceHealthcare.
Medina added that that the ruling will open the door for other providers to directly sue MA insurers for breach of contract, which many have tried and failed.
Humana did not immediately respond to FierceHealthcare's request for comment.