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Why Providers in Value-Based Care Programs Should Suddenly Care about the Collateral Source Rule

The collateral source rule (CSR) prevents attorneys from using to their advantage whether defendants in a negligence lawsuit have insurance (a “collateral source”) to cover awards.  The concern is if a jury knows that a defendant has insurance, it will rule for the plaintiff; if not, it will rule for the defendant.  Under the CSR, each state has established a framework to address money already paid out by insurance companies on behalf of its insureds - assuming it becomes part of the lawsuit’s “damage” calculation. 

By the time a medical malpractice lawsuit is initiated, medical services have often been paid by health insurers.  If a plaintiff successfully establishes negligence, accounting for the money for these services is addressed under state CSR laws.  Depending on the state, the money might go back to the health insurer, to the injured patient or to the liability carrier as an offset to the total award.  Regardless of state law, the federal government is always entitled to reimbursement.

Under a value-based care model, a subcategory should be created to receive reimbursement when health insurers recover these funds: The provider group that technically incurred the expense. 

Alternatively, provider groups should negotiate language into value-based contracts with both the government and private payors to ensure subrogation rights.  They should also coordinate a strategy with their liability and stop loss carriers.    

If you are a provider group, management company or an attorney involved in value-based care arrangements, contact info@tororisk.com for more information. 

For a deeper dive into the CSR and its impact on bundled payments, see https://www.tororisk.com/tororiskblog/2018/2/2/eliminate-the-double-penalty-for-complication-expenses-in-bundled-payment-programs