Former Health Net executive sues over prompt pay

The HMO employee alleges wrongful termination based on her refusal to comply with the Arizona insurer's delaying tactics.

By Cheryl Jackson, amednews staff. Aug. 27, 2001.

A former executive at one of Arizona's largest health insurers claims that the plan deliberately delays paying claims to physicians and kept her from changing the practice.

Health Net of Arizona would not move to pay physicians until 20 days after receiving a claim, Sally Fernandez alleges in a lawsuit filed Aug. 1 against the plan and its parent company, Woodland Hills, Calif.-based Health Net Inc., for wrongful termination. The suit, filed in Pima County Superior Court, is a rare case of an executive going on record with claims of a health plan purposefully delaying claims payments.

Case at a glance

The allegations are without merit, said Lisa Haines, a spokeswoman for Health Net Inc.

Health Net of Arizona fired Fernandez, then vice president of marketing and public affairs and interim vice president of operations in Tucson, Ariz., July 9 in a layoff of 139 of its 714 employees. The layoff came after the division reported losses of $65 million over two years.

The operations job, which Fernandez took in April, included responsibility for provider claims processing and other duties.

Fernandez said 62,000 of 300,000 unprocessed claims the Arizona plan had on hand were more than 30 days old when she took the operations position and that she moved to streamline claims processing.

State law requires insurers to approve or deny a clean claim within 30 days of receipt.

The company, Haines said, has about 60 claims processors and pays about 12,000 claims each business day.

According to the lawsuit, when Fernandez attempted to eliminate a "20-day lag" policy under which approved "claims were held for 20 days without reasonable justification before payment," state and corporate leaders told her she could not implement such a plan because it would create a financial burden on Health Net of Arizona.

Last month, Health Net Inc., formerly Foundation Health Systems Inc., reported that second-quarter operating income had risen 21% before losses from the sale of its Florida Health Plan business.

Second-quarter profits rose to $46.9 million, or 38 cents per share, from $38.7 million, or 32 cents per share last year.

As it is across the country, prompt payment is an issue for physicians with most health plans in the state, said John Sullivan, MD, associate dean of the University of Arizona College of Medicine in Tucson and president of the Pima County Medical Society.

He said he applauded moves by Fernandez to speed up claims processing.

"She's got guts. Somebody's trying to fix it and do business the right way," Dr. Sullivan said.

In other Health Net-related news, leaders at a Tucson IPA last month said the plan's unexpected termination of a contract caused it to have to lay off most of its staff and potentially go under.

Southwest Physician Network, which has about 200 primary care doctors and 500 specialists, fired 12 people July 6 and another five on Aug. 3.

The IPA is headed toward contractually required arbitration, said Michael Gerstenberger, chief executive officer.

He said Health Net of Arizona in February had signed a contract with the group to take effect July 1, covering about 60,000 members, but in June, the health plan told Southwest it was terminating the contract.

ADDITIONAL INFORMATION:

Case at a glance

Sally G. Fernandez v. Health Net of Arizona Inc., Health Net Inc.

Case number: C20013532
Venue: Superior Court of the State of Arizona, Pima County
At issue: A former Health Net executive claims that her company intentionally held back payment to doctors, then fired her when she tried to change the practice.
Potential impact: It could shed some light on whether plans, as many physicians suspect, hold back paying claims to them so the company may benefit.