Mayo Clinic sues Sanford Health Plan over $700k unpaid bills

Mayo Clinic has filed a lawsuit against Sanford Health Plan, alleging the South Dakota-based insurer misrepresented its role in covering medical bills, leaving the clinic with over $700,000 in unpaid costs for a patient treated in early 2022.

The legal battle stems from a 52-day hospital stay in Rochester, Minnesota, where the patient received intensive care and other treatments.

The dispute arose after Sanford initially preauthorized the patient’s care and made partial payments but later claimed that Blue Cross Blue Shield of North Dakota (BCBS ND), a Medicaid health plan, was the primary insurer. Mayo refunded the payments to Sanford but was then denied reimbursement by BCBS ND due to a lack of preauthorization.

“For the reasons outlined in the lawsuit, Mayo Clinic is pursuing payment from Sanford Health Plan, which presented itself as the patient’s primary insurance plan and approved all medical care,” Mayo Clinic said in a statement. “Sanford’s misrepresentation prevented Mayo from obtaining reimbursement from the other health insurance plan.”

Sanford Health Plan denies the allegations, stating in court filings that Mayo failed to follow Medicaid claims procedures, leading to BCBS ND rejecting the reimbursement request. “Sanford is not responsible for … medical expenses just because Mayo failed to follow standard Medicaid procedure,” the insurer wrote.

Mayo alleges that Sanford consistently approved services during the hospitalization, leading the clinic to believe it was the primary insurer. “Sanford confirmed its role as primary by preauthorizing all dates of service and paying several claims submitted to it by Mayo for those dates,” the lawsuit states.

However, on April 15, 2022, Sanford notified Mayo that the patient’s coverage fell under the Three Affiliated Tribes Tribal Health Plan, a payer of last resort, and requested refunds of prior payments. Mayo complied but then faced claim denials from BCBS ND due to missing preauthorization.

“Mayo would not have sought preauthorization from BCBS ND at the time of admission because it was led to believe that Sanford was primary,” the lawsuit claims. “Due to Sanford’s negligent and material misrepresentations, Mayo has gone unpaid for more than two years for services totaling $739,956.20.”

Sanford Health Plan, in its motion to dismiss, argues that Mayo’s reliance on its initial statements was not the cause of BCBS ND’s denial. It further contends that BCBS ND, as the Medicaid plan involved, is an indispensable party to the lawsuit. “There is no dispute that Medicaid was the party responsible for the patient’s medical bills,” Sanford wrote.

The case, originally filed in Olmsted County District Court in November, was moved to the U.S. District Court of Minnesota. A pretrial conference is set for February 4.

Mayo Clinic, one of the largest nonprofit medical providers in the U.S., has recently expanded financial assistance programs to support patients who lack adequate insurance coverage. “We are committed to providing necessary care without seeking payment from the patient in this case,” the clinic noted.

Sanford Health Plan, a division of Sanford Health, which finalized a merger with Marshfield Clinic on Thursday, declined to comment on the pending litigation. Similarly, BCBS ND stated it could not discuss the matter, urging clarification to be directed to the parties involved in the complaint.

The lawsuit raises critical questions about the responsibilities of insurers and providers in handling complex coverage disputes, with Mayo seeking damages beyond the unpaid medical bills, including litigation costs and fees.