March 9, 2009
As we have long known, “UCR” rates on which health plans base their payments to nonparticipating physicians are not usual, customary or reasonable. A year-long investigation into the out-of-network payments by the Attorney General of the State of New York, Andrew M. Cuomo, resulted in a ground-breaking report entitled “THE CONSUMER REIMBURSEMENT SYSTEM IS CODE BLUE,” released on January 13, 2009. The report concluded that UnitedHealth Group had manipulated and used its Ingenix database of “prevailing” provider charges systematically to under-reimburse consumers (and their physicians).
Agreements between the Attorney General and the health plans
United promptly agreed to close the Ingenix database and to pay $50 million to a qualified nonprofit organization that will establish a new, independent database to help determine fair out-of-network reimbursement rates for consumers throughout the United States. According to the agreement, furthermore:
- The future nonprofit will own and operate the new database, and will be the sole arbiter and decision-maker with respect to all data contribution protocols and all other methodologies used in connection with the database;
- The nonprofit will develop a website where consumers around the country can find out in advance how much they may be reimbursed for common out-of-network medical services in their area;
- The nonprofit will make rate information from the database available to health insurers; and
- The nonprofit will use the new database to conduct academic research to help improve the health care system;
United was on the leading edge. Two days later, on January 15, the Attorney General announced that Aetna had entered into a similar agreement, under which it would pay $20 million toward to the independent nonprofit organization that will be selected to establish the new database of “fair” out-of network reimbursement rates. Both United and Aetna agreed to provide claims information to the future database. Since together they account for 70% of the claims that made up the Ingenix database, the replacement should quickly contain enough data to be credible – if indeed the methods that corrupted the Ingenix data do not find themselves reincarnated. Some of those methods were less subtle than others. One of the most egregious ways in which United and Aetna cooked the books was simply to delete charges at the higher end of the range.
On the basis of subpoenas alone, without filing any litigation, Mr. Cuomo has since obtained agreements (1) to cease using Ingenix, (2) to pay toward the creation of the new billing database, and (3)in some cases to reprocess claims and to reimburse consumers from the following health insurers: CIGNA ($10 million), Wellpoint (parent of Empire Blue Cross Blue Shield) ($10 million), Excellus Health Plan) ($775,000), Capital District’s Physician Health Plan ($300,000), MVP Health Care ($535,000), Independent Health ($475,000) and HealthNow NewYork ($212,500).
On behalf of its student health subsidiary, Aetna also reached a deal last month with Mr. Cuomo to pay $5 million plus interest and penalties to approximately 73,000 former members and their physicians based on its use of Ingenix. Aetna has indicated that it will pay physicians automatically unless a student patient sends back a form showing that s/he already paid the physician for the underreimbursed claim. The company expects to send out payments within six months.
AMA/state society lawsuits
The evidence of intentionally falsified UCR data, something that many physicians have long suspected, helped organized medicine to file lawsuits of its own. The objective of these private actions is to obtain monetary damages in addition to injunctive and declaratory relief. One action brought by the AMA some nine years ago has already been settled: within days of the settlement with the New York State Attorney General, United agreed to pay $350 million to doctors around the country who were underpaid based on Ingenix data. (The $350 million has not been paid, however, because some individual doctors have filed legal challenges to the class certification.)
Then in February, the American Medical Association, joined by a number of state medical societies (listed in Table 1) and several named physicians filed two class action lawsuits, against Aetna and CIGNA respectively, in federal district court in New Jersey. The lawsuits seek to recover the difference between what the health plans allowed as UCRs and what the physicians in the class would have received if the health plans had used accurate prevailing rates to calculate out-of-network payments.
Table 1. Medical Society plaintiffs in the class action lawsuits against Aetna and CIGNA
Medical Society of New Jersey
Medical Society of the State of New York
Connecticut State Medical Society
Texas Medical Association
North Carolina Medical Society
The lawsuits against Aetna and CIGNA allege a number of different statutory violations arising out of the same basic facts – that the Ingenix database intentionally skewed “usual and customary” rates downward through faulty data collection, poor pooling procedures, and a lack of audits, meaning consumers were forced to pay more than they should have and/or that physicians were paid less than they should have been:
- ERISA (Employee Retirement Income Security Act of 1974);
- RICO (Racketeer Influenced and Corrupt Organizations Act) – treble damages sought; and
- Sherman Act Section 1 price-fixing – treble damages sought.
The two complaints did not quantify the economic losses for which the plaintiffs would like to be compensated. Cuomo’s investigation found the rate of underpayment by insurers ranged from 10% to 28% for various medical services across New York, however.
Aetna and CIGNA dispute the charges that they intentionally manipulated the Ingenix data to pay doctors less than the real UCR rates. CIGNA issued a statement claiming that its payments to out-of-network doctors are "robust and fair." The high fees charged by physicians are allegedly part of the problem. CIGNA noted, for example, that doctors in New York City charge on average $214 for a 15-minute, out-of-network office visit -- but that health plans reimburse $160 or less, relying on the Ingenix database. The $54 difference between charges and allowable reimbursements would seem to illustrate only that Ingenix discounts rates – the heart of the dispute. If $214 is, as CIGNA acknowledged, the average charge, it is probably close to “the ‘prevailing charge’ charged by most providers of comparable services in the specific area where the member received the service, with consideration given to the nature and severity of the member’s condition, as well as any complications or unusual circumstances that would require additional time, skill, or experience on the part of the Nonpar” which is how the health plans define UCRs.
The defendant health plans’ arguments that $160 is much more generous than the $77 Medicare pays doctors for the same visit is a red herring. Medicare rates are cost- or resource-based, not charge-based, and they have also been artificially depressed by the infamous Sustainable Growth Rate (SGR) formula, so they are truly irrelevant benchmarks.
Aetna, for its part, contends that the AMA lawsuits are duplicative of consumer litigation pending in state courts in New Jersey and Connecticut. Its spokeswoman said the insurer has developed “much improved” relationships with doctors over the last several years and wants to continue “collaborative dialogue with them on this topic.”
Will the ramifications be minimal or colossal?
Has anyone received a check from one of the health plans that made deals with the New York Attorney General? Please tell us if you have.
We would also like to hear from you if your out-of-network payments have increased (or decreased). The Ingenix database was used by a large portion of the health insurance market and whether and how it has been replaced is not evident. Although some $90 million for the development of the new, independent claims database has been promised by the insurers who entered into agreements with Mr. Cuomo, the nonprofit institution that will develop the database has not yet been selected. Wellpoint was one of the health plans subpoenaed by Mr. Cuomo, but other Blues licensees, e.g. Blue Cross Blue Shield of Texas, have never used Ingenix. There are clearly other data sources available.
The AMA requested jury trials. The suits against Aetna and CIGNA are also class actions, and it can take many months merely to certify the class. In other words, any damage awards in the next year or two are highly unlikely.
The forced abandonment of the Ingenix database is going to have considerable ramifications and these will begin to be felt soon, however. The AMA has called upon all third party payers to stop using Ingenix. Health plans that haven’t been targeted by the New York Attorney General may find their Ingenix licenses challenged by attorneys general in other states. Most self-funded health plans use Ingenix. These former Ingenix customers are already now studying ways to manage their out-of-network charges. Indeed, the entire health insurance industry will be searching for defensible ways to produce UCR data. Some of the battles fought during the last 17 years of tug-of-war over the Resource Based Relative Value System (RBRVS) are probably going to be relitigated, and such areas as geographic segmentation, accounting for outliers, differences in physician training and specialization, and currency of research and subscription data are going to receive thorough examination.
The health insurers will fight back, it appears, by attacking the amount of and annual increases in the charges for individual physician services – and the lack of transparency of those charges.
The turmoil in out-of-network reimbursement calculations will require anesthesiology practices to remain on their toes. Payer contracts that reference the Ingenix database will need to be updated since that database is set to close permanently. Individual physicians will need to determine whether they are members of the class of plaintiffs in either the Aetna or CIGNA lawsuits or in similar class actions filed against other health plans. They must then either submit the paperwork that will entitle them to their share of any awards, or opt out of the class if they believe that they can better pursue remedies on their own.
ABC will be following the lawsuits and related developments and we will work with our clients to protect their interests in the post-Ingenix landscape. We will also publish information through Alerts and other media for the benefit of all our readers. We invite your questions and will be diligent in our searches for answers.
Sincerely,
Tony Mira
President and CEO
