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When do receivables for provided services arise for health care providers?

  • United Kingdom
  • Netherlands
  • Health and life sciences

09-12-2016

The Court, and subsequently the Court of Appeal in Amsterdam have rendered judgements with regard to the question as to when receivables against either patients or health insurers, or both, arise for services that have been provided by healthcare providers.

Should a pledger enter into insolvency (and thus lose the power to dispose of its assets), it is important that a pledgee can determine whether a receivable that was pledged to him (in advance), existed and whether it was thus possible for the pledger to grant a valid right of pledge over the receivables. If the receivable did not already exist at the moment that the pledger entered into bankruptcy, the receivable cannot be pledged.

In the Netherlands, both the Treatment Contract and the Billing Contract (with health insurers) and the now repealed Billing Regulation influence the moment when a receivable arises for a healthcare provider against a health insurer (in this case).

Background

Better Life B.V. (“Better Life”) was a healthcare provider who offered treatment processes which consisted of multiple consultations. Better Life was financed by Famed B.V. (“Famed”). Better Life gave Famed a valid right of pledge over all current and future receivables which Better Life had or would acquire against health insurers in relation to the consultations that Better Life provided.

Several agreements played a part in this case. Next to the factoring agreement between Famed and Better Life, there were treatment contracts between Better Life and its patients (“Treatment Contracts”) and contracts between Better Life and several health insurers with regard to the manner in which, and the moment that, Better Life could bill it’s fees for consultations it provided under a Treatment Contract (“Billing Contracts”). Pursuant to such Billing Contract, healthcare providers can directly bill their fees from the health insurer, rather than from the patient.

The (repealed) Regulation Expenses scheme in the curative Mental Healthcare (“the Billing Regulation”) was applicable to the contractual relationship between Better Life and the health care providers by operation of law. According to the Billing Regulation, Better Life could only invoice it’s fees from the health insurers after finishing the entire treatment process.

Better Life went bankrupt and a substantial part of the treatment processes was not yet finished. Therefore, the question was if Better Life receivables had arisen against the health insurers with respect to the consultations that Better Life already performed during the process, but for which they had not yet submitted their invoice to the health insurers in accordance with the Billing Contract and the Billing Regulation.

The bankruptcy trustee was of the opinion that for consultations that Better Life had already provided, but for which the entire treatment was not yet finished (and therefore not yet billed), no receivables against the health insurers had arisen for Better Life. Therefore, these receivables did not yet exist and could therefore not have been pledged in advance to Famed. Of course, Famed was of the opinion that the receivables arose directly after Better Life had provided the consultation, regardless of the fact that they hadn’t been billed yet.

The judgement

The court of first instance

According to the judgement of the Court, the receivables of Better Life against the various health insurers arose in three phases. The first phase was the entering into of the Billing Contract. The second phase was the entering into of Treatment Contracts with patients. According to the court, the entering into of a Treatment Contract lays down the foundation of payment obligations. The third phase was the actual treatment of a patient. According to the court, after each consultation a payment obligation arises for the patient and thus, pursuant to the Billing Contract, a receivable arises against the relevant health insurer for Better Life.

The Court ruled that in respect to the Treatment Contracts which were entered into before the bankruptcy and for which treatments have actually been performed before bankruptcy, receivables arose against the health insurers. These receivables may not have been due and payable in accordance with the Expenses Contract, but nevertheless existed and could therefore be made subject to a right of pledge to Famed (whether or not in advance).

Court of Appeal

The Court of Appeal did not share the judgement of the court of first instance. In their view, the receivables do not arise pursuant to the Treatment Contracts, but pursuant to the Billing Regulation and therefore they only existed from the point in time that the entire treatment could be invoiced to the relevant health insurer. The receivables of Better Life against the health insurers arose from the moment that all requirements of the Billing Contract and the Billing Regulation were met. As long as this was not the case, Better Life could not invoice their fees for the separate consultations and therefore did not have any receivables against the health insurers that could be validly encumbered with a right of pledge.

So what?

The factual issue in this case was that nothing was specifically agreed with regard to the moment when receivables would arise against either the health insurers or the patients, or both. The only point that was agreed, was the moment that the fees for the consultations could be billed. It follows that because there was no agreement when the receivables would arise, Better Life was dependent on the interpretation of the different contracts.

Given the significance of this case for the financing of health providers, we expect that this case will be submitted to the Supreme Court. Until then, financers of healthcare providers are advised to demand clear agreements from their clients with their patients and health insurers with respect to the moment that receivables arise for either consultations or treatments, or both, as well as ensuring that it is clear for all parties when these receivables are due and payable.

Please see the full decision of the court of appeal in Amsterdam (only available in Dutch)