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Usual, Customary and Reasonable Payments

American Medical Association v. Aetna Health Inc. (D.N.J.; 11th Cir.)

Also under Managed care payments and Payment issues (for physicians)

Issue

The issue in this class action lawsuit is whether Aetna systematically understated its calculation of “usual, customary and reasonable” (UCR) payments for out-of-network medical services.

AMA interest
The AMA supports fair policies and practices regarding payment for physician services.

Case summary

The American Medical Association, several state medical societies, and two individual physicians sued Aetna Health and its various subsidiaries.  The complaint alleged that Aetna systematically miscalculated the "usual, customary and reasonable" (UCR) amounts paid to out-of-network physicians.  The miscalculations arose out of Aetna's use of two databases maintained by Ingenix, a subsidiary of United HealthCare.  The complaint asserted violations of ERISA, RICO, and the Sherman Antitrust Act.  The Judicial Panel on Multidistrict Litigation consolidated the various cases against Aetna that claim damages on account of its use of the Ingenix databases.

On December 7, 2012, the provider and subscriber plaintiff classes (not including the association plaintiffs, as they are not a part of either class), presented a settlement agreement to the court, which would settle the class claim. The agreement included a provision under which Aetna could terminate the settlement if a threshold number of plaintiffs rejected the settlement by opting out of the lawsuit.

On March 13, 2014, Aetna advised the court that more than the threshold number of plaintiffs had opted out. Consequently, Aetna unilaterally terminated the settlement. The case is therefore proceeding on the merits.

A third amended complaint was filed on July 11, 2014.

The medical associations hope to settle their injunctive claim against Aetna. 

AMA involvement

The AMA is a named plaintiff in the case.

American Medical Association v. Connecticut General Life Insurance (11th Cir.)

Also under Managed care payments and Payment issues (for physicians)

Issue
The issue in this class action lawsuit was whether CIGNA systematically understated its calculation of “usual, customary and reasonable” (UCR) payments for out-of-network medical services.

AMA interest
The AMA supports fair policies and practices regarding payment for physician services.

Case summary

The American Medical Association, several state medical societies, and two individual physicians sued CIGNA and its various subsidiaries.  The case was consolidated with a parallel class action brought by patients.  The consolidated complaint alleged that CIGNA systematically miscalculated the "usual, customary and reasonable" (UCR) amounts paid to out-of-network physicians or received by patients.  The miscalculations arose out of CIGNA's use of two databases maintained by Ingenix, a subsidiary of United HealthCare.  The complaint asserted violations of ERISA, RICO, and the Sherman Antitrust Act.

After the suit was filed, CIGNA obtained an order from the United States District Court for the Southern District of Florida requiring the AMA and the various state medical societies to show cause why they should not be held in contempt for proceeding with the New Jersey litigation.  CIGNA argued that the New Jersey claims were released pursuant to a settlement agreement entered into in 2003 as part of In re Managed Care Litigation; MDL No. 1334, which was litigated in the Southern District of Florida.  This was notwithstanding that the claims asserted in the New Jersey litigation arose subsequent to the signing of the earlier settlement agreement, the AMA was not a party to the settlement with CIGNA, and the AMA was not even a party in the In re Managed Care Litigation.  The enjoined parties appealed this order to the United States Court of Appeals for the Eleventh Circuit, but the Eleventh Circuit denied the appeal, holding that the proper way to challenge the injunction was through an appeal of an order of contempt.

The New Jersey court dismissed, without prejudice, all claims that the Florida court had ordered dismissed.  Also, on September 23, 2011, the New Jersey court found that the plaintiff physicians and medical societies had failed to allege a proper cause of action, and it dismissed their claims.  The court held that the physicians had failed to allege an assignment of all benefits under their patients’ insurance policies with CIGNA, rather than merely an assignment of CIGNA’s payments.

On January 12, 2012, the physician plaintiffs and the medical societies sued CIGNA in the United States District Court for the Northern District of Georgia.  The complaint asserted many of the claims that were dismissed by the New Jersey judge. 

On January 10, 2013, the Florida court ordered the medical societies to dismiss the majority of their outstanding claims, and on February 4, 2013 the case was dismissed.  On February 20, 2014, the Eleventh Circuit affirmed that dismissal.

On June 24, 2014, the New Jersey court dismissed the subscriber claims, which were all the remaining claims in this lawsuit.  Another appeal has now been taken to the Eleventh Circuit.

Notwithstanding the dismissal, the AMA is seeking to settle its injunctive claim against CIGNA.

AMA involvement

The AMA was a named plaintiff in the case.

American Medical Association v. United HealthCare, 588 F.Supp.2d 432 (S.D.N.Y. 2008)

Also under Managed care payments and Payment issues (for physicians)

Outcome:    Very favorable

Issue

The issue in this class action lawsuit was whether United HealthCare (UHC) had been systematically understating its calculation of "usual, customary, and reasonable" charges when paying physicians or reimbursing patients for out-of-network medical services.

AMA interest

The AMA supports fair policies and practices regarding payment for physician services.

Case summary

Most reimbursement health insurance policies provide that out of network insurance benefits are to be based on whichever of the following amounts is lowest: (i) the physician’s actual charge; (ii) the physician’s usual charge; or (iii) the "reasonable and customary charge" for the services. The "reasonable and customary charge" is defined as "the usual charge of other doctors or other providers of similar training or experience in the same or similar geographic area for the same or similar service or supply."  This payment scheme is commonly called "usual, customary and reasonable" or UCR.  The insurance company determines the reasonable and customary portion of the UCR charge, supposedly based on information available to it but not to the general public.

This suit alleged that UHC’s subsidiary, Ingenix Corp., had developed a database to determine UCR and frequently used unreliable or insufficient data to make that determination.  The plaintiffs asserted that the reasonable and customary charges for certain procedures were substantially higher than UHC had allowed.

The AMA, the Medical Society of the State of New York, the Missouri State Medical Association, individual physicians and subscribers/beneficiaries, and several unions of New York State employees were named plaintiffs. The suit alleged that the plaintiffs were representatives of a large class of physicians, subscribers, and beneficiaries.

Based primarily on the information provided by the plaintiffs in this lawsuit, the New York Attorney General undertook a broad investigation into the use by insurers of defective databases when determining "usual, customary and reasonable" payments made to out of network healthcare providers.  Following that investigation, the Attorney General publicly reported that UHC had been fraudulently underpaying New York consumers through its use of the flawed Ingenix database.  The United States Senate Committee on Commerce, Science and Transportation subsequently released its own report, which similarly concluded that major health insurers had been underpaying out-of-network benefits, based on the Ingenix database.

To resolve the consumer fraud claim of the Attorney General UHC announced that it would discontinue its defective database.  As part of its settlement with the Attorney General, UHC also paid $50 million to a not-for-profit corporation, which was then to develop a replacement database, using more transparent methodologies.  Several other large health insurance companies, which had also been using the defective Ingenix database to determine UCR payments, made their own settlements with the Attorney General and made their own contributions to the development of the replacement database.  As a result, close to $100 million in insurance company funds was paid for that purpose. 

Pursuant to its settlements with the insurance companies, the New York Attorney General appointed the trustees of a new not-for-profit corporation, known as FAIR Health, to develop and manage the replacement database.  He also designated a coalition of universities in New York State to assist in that effort.  The data and methodology in the new database was to be accessible to the general public.  Hence, the new database was to be more transparent than the old one, and it was to be free from conflicts of interest.

One day after it settled with the New York Attorney General, United signed a settlement agreement with several of the plaintiffs in the American Medical Association lawsuit, including the three medical societies.  Under the settlement, United paid $350 million to resolve the claims against it. 

The aggregate payment to physicians came to approximately $200 million.

AMA involvement

The AMA was the lead plaintiff in the case.

 

American Medical Association v. WellPoint, Inc. (C.D. Cal., 11th Cir.)

Also under Managed care payments and Payment issues (for physicians)

Issue

The issue in this class action lawsuit is whether WellPoint systematically understated its calculation of “usual, customary, and reasonable” (UCR) payments for out-of-network services.

AMA interest

The AMA supports fair policies and practices regarding payment for physician services.

Case summary

The American Medical Association, several state medical societies, and a number of individual physicians sued WellPoint, Inc.  The complaint alleged that WellPoint systematically miscalculated UCR payments to out-of-network physicians.  The miscalculations arose out of WellPoint's use of the databases maintained by Ingenix, a subsidiary of United HealthCare.  The complaint asserted violations of ERISA, RICO, and the Sherman Antitrust Act.

The Judicial Panel on Multidistrict Litigation consolidated the AMA case with various other cases against WellPoint that claim damages on account of its use of the Ingenix databases to calculate UCR payments.  WellPoint moved to dismiss the consolidated complaint.  The court granted that motion in part and denied it in part.

In the meantime, the United States District Court for the Southern District of Florida enjoined the AMA, various state medical societies, and the named physician plaintiffs from proceeding with the California litigation with WellPoint.  The Florida court found that the claims were released pursuant to a settlement agreement entered into in 2006 as part of In re Managed Care Litigation; MDL No. 1334, which had been litigated in the Southern District of Florida.  This is notwithstanding that the claims asserted in the California litigation arose subsequent to the signing of the earlier settlement agreement, the AMA was not a party to the settlement with WellPoint, and the AMA was not even a party in the In re Managed Care Litigation.  The enjoined parties appealed the order to the United States Court of Appeals for the Eleventh Circuit, but the Eleventh Circuit denied the appeal, holding that the proper way to challenge the injunction was through an appeal of an order of contempt.

Three state medical associations and three of the individual physician plaintiffs were held in contempt of court for violation of the injunction.  The Florida court fined the individual plaintiffs $100 per month each and the medical associations $500 per month for so long as they violate the court's order of dismissal.  The parties who incurred the fine again appealed to the Eleventh Circuit.  In this latest appeal, the Eleventh Circuit ruled that certain claims (those based on ERISA) were viable and reversed the dismissal of the remaining claims.  Also, the Eleventh Circuit ordered the trial court to reconsider its order or contempt sanctions, since it had reinstated some of the claims.

The Central District of California dismissed most of the counts on various technical bases, including most of the medical association claims.

AMA involvement

The AMA is a named plaintiff in the case.

Medical Association of Georgia v. Blue Cross & Blue Shield of Georgia, Inc., 536 S.E.2d 184 (Ga. Ct. App. 2000)

Also under Managed care payments and Payment issues (for physicians)

Outcome:    Very favorable

Issues

The issues in this case were whether Georgia Blue was required to provide its panel physicians with its fee schedule and the method by which that fee schedule was calculated.

AMA interest

The AMA supports fair policies and practices regarding payment for physician services.

Case summary

The Medical Association of Georgia ("MAG") and four of its members sued for a declaration that Georgia Blue had breached its provider contracts in a number of respects. The trial court ruled against the claims of the plaintiffs. The Georgia Court of Appeals, however, held that unless the provider contract with the physicians were to specify otherwise, a health insurance company must provide its doctors with its fee schedule and "the precise methodology that is used for determining payments." The appellate court remanded the case to the trial court, with instructions to order Georgia Blue to follow its ruling. The Georgia Supreme Court denied requests from both sides to review the appellate court’s decision.

Following remand, the trial court ordered Georgia Blue to provide the information ordered by the Court of Appeals. Georgia Blue subsequently certified to the court that it had complied with the trial court’s and Court of Appeals’ orders.

MAG later asked the trial court to hold Georgia Blue in contempt of court, because although Georgia Blue had disclosed its fee schedule, it had not disclosed the various edits in its payment software which could significantly alter the payments made to physicians. On this basis, MAG argued that Georgia Blue had not disclosed "the precise methodology … used for determining payments," as the Georgia Court of Appeals had required.

The court denied MAG’s contempt motion. It indicated that Georgia Blue’s practice of bundling fees was a matter separate from its failure to disclose its fee schedule. MAG appealed from that order, but withdrew that appeal after determining that Georgia Blue was disclosing its payment edits.

Based on the Court of Appeals ruling the Georgia Insurance Commissioner passed a regulation requiring all health insurance companies doing business in Georgia to disclose their fee schedules to their panel physicians. The Georgia Legislature then enacted a law to the same effect.

Litigation Center involvement

The AMA asked the trial court for leave to join the case as an additional plaintiff, but that request was denied. In addition, the Litigation Center contributed substantially to MAG’s legal expenses.

Merkle v. Aetna Health, 940 So.2d 1190 (Fla. Dist. Ct. App., 4th Dist. 2006)

Also under Managed care payments and Payment issues (for physicians)

Issue
The issue in this case was whether an out-of-network physician could sue HMOs to recover the full value of his fees for emergency services provided under statutory mandate to the HMOs’ beneficiaries.

AMA interest
The AMA supports fair payments to physicians for their medical services.

Case summary
Dr. Merkle, an orthopedic surgeon, sued four HMOs in the Circuit Court for Palm Beach County, Florida, alleging that he was outside the HMOs’ networks but regularly provided emergency medical services for their beneficiaries. For these services, the HMOs paid him at Medicare reimbursement rates, "plus a small premium." The HMOs’ payments systematically fell below his usual charges, and they also fell substantially below the usual and customary charges for such services in Palm Beach County.

The Florida Emergency Services Statute specifically required Dr. Merkle to provide his emergency services to HMO patients, even though he was out-of-network, yet the law prohibited him from balance billing the patients. However, Florida law also required the HMOs to reimburse him for his services at the lesser of (a) his charges, (b) the usual and customary charges for similar services in Palm Beach County, or (c) whatever charge the HMOs and he agreed upon within 60 days of the submittal of his claim. Since he had not come to an agreement with the HMOs, their payments fell below the legally designated standards.

The HMOs argued that the Emergency Services Statute was not intended to allow physicians or other providers of emergency medical services to bring a lawsuit against them to recover fees. Rather, they argued, the providers are constrained to follow a complex administrative procedure of the HMOs and the Florida Agency for Health Care Administration, as their exclusive remedy. The trial court accepted this argument and entered judgment for the HMOs. Dr. Merkle was not permitted to file an amended complaint, and he appealed.

The Florida District Court of Appeal reversed the trial court and found for Dr. Merkle, holding that the Florida Emergency Services Statute implied a private right of action and he was thus entitled to bring a lawsuit for its violation.

Litigation Center involvement
The amicus brief, submitted by the Litigation Center, the Florida Medical Association, two specialty medical societies, and the Florida Hospital Association, argued that the Florida legislature intended to allow providers of emergency medical services to sue the HMOs for the fair value of their fees.

Fourth District Court of Appeals brief.PDF File

Montvale Surgical Center v. New Jersey Health Benefits Commission (N.J. Super.Ct., App. Div.)

Also under Payment issues for physicians

Outcome:    Unfavorable

Issue

The issue in this case was whether a New Jersey government agency should pay an ambulatory surgical center out-of-network health care benefits at 160% of the Medicare rate, rather than, as required by statute, a rate determined by a “nationally recognized database.”

AMA interest

The AMA believes physicians should be fairly compensated for their professional services.

Case summary

Pursuant to the New Jersey State Health Benefits Program Act, N.J. Stat. §§ 52:14-17.25, et seq. (NJSHBPA), the New Jersey State Health Benefits Commission (SHBC) provides a State Health Benefits Program (SHBP) for state officers and employees. SHBP, which is self-insured, is administered by Horizon Blue Cross Blue Shield of New Jersey (Horizon).

NJSHBPA further provides that, subject to certain deductibles, SHBP participants are to receive “reimbursement for out-of-network charges at the rate of [either 70% or 80%] of reasonable and customary charges.” N.J. Stat. § 52:14-17.29(C)(1) & (2). NJSHBPA also states:

“Reasonable and customary charges” means charges based upon the 90th percentile of the usual, customary, and reasonable (UCR) fee schedule determined by the Health Insurance Association of America or a similar nationally recognized database of prevailing health care charges.

 

Notwithstanding this statute, Horizon, on behalf of SHBC, paid out-of-network surgery centers at 160% of Medicare rates.

Montvale Surgical Center was an out-of-network provider of health care services to SHBP participants. The participants, in turn, assigned their SHBP benefits to Montvale Surgical.   For at least some of the procedures Montvale Surgical performed for SHBP participants, the 160% of Medicare reimbursement fell below the rates calculated under the FAIR Health, Inc. database. Montvale Surgical therefore applied to Horizon for the difference in these reimbursement rates, but Horizon refused its application.

Montvale Surgical then appealed to the SHBC for an administrative declaration as to its right to receive payment under “a recognized database of prevailing health care charges,” rather than 160% of the Medicare rate. In its decision, SHBC noted that a purpose of the SHBP was to minimize the cost of health care to SHBP participants.   SHBC then made the following observations:

There are very few market forces that limit what an out-of-network provider can charge. For that reason, non-participating providers are often reimbursed significantly more than their in-network counterparts. Allowing out-of-network providers to appeal reimbursement amounts … undermines Horizon’s ability to recruit in-network providers. If a provider can appeal to receive additional payment beyond what the plan prescribes, it removes the incentive for providers to participate in the network.

 

When a charge based system is used to generate reasonable and customary allowances, there is an incentive for out-of-network providers to inflate charges.

 

SHBC concluded that Montvale Surgical lacked standing to pursue an administrative appeal. In the alternative, SHBC found that it had discretion regarding the issuance of a declaratory ruling, and, even if it were wrong to deny standing, it was exercising its discretion to deny the request for a declaratory ruling.

Montvale Surgical appealed the SHBC ruling to the New Jersey Superior Court.

Litigation Center involvement

The Litigation Center joined with the Medical Society of New Jersey in an amicus brief, supporting Montvale Surgical Center.  However, the Appellate Division denied the motion to file the brief.

New Jersey Superior Court brief