CIGNA settles massive managed care lawsuit

But physicians involved in cases moving through a federal court in Miami are challenging the agreement.

By Tanya Albert, amednews staff. Dec. 16, 2002.

U.S. physicians who believe CIGNA HealthCare wrongfully denied claims they've submitted over the past six years could stand to recoup that money under a proposed settlement agreement in a class-action lawsuit that includes an estimated 400,000 physicians.

In complicated legal maneuvering that CIGNA hopes will clear up the other physician-filed state and federal lawsuits against it, CIGNA, in late November, settled a lawsuit originally filed by two physicians in state court in Illinois.

More than money
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That lawsuit -- which accuses CIGNA of bundling, downcoding and arbitrarily denying claims -- was the first physician-filed lawsuit against an HMO to get class-action certification. It now stands to be the first lawsuit in which physicians will recover tens of millions of dollars and will see some changes in the way that a managed care company interacts with physicians on matters of billing.

"It's a great win for doctors," said Alton, Ill., otolaryngologist Timothy N. Kaiser, MD, who originally filed the lawsuit against CIGNA along with Irving, Texas, pediatrician Suzanne LeBel Corrigan, MD, because they were tired of getting the runaround when they billed for their services. "It demonstrates that individual physicians can make a big difference."

A federal court in Illinois still needs to approve the proposed settlement at a hearing scheduled for March 2003. Also, if 7.5% of physicians in the class decide to opt out of the proposed settlement, CIGNA or the physicians could withdraw it.

If the settlement does become final next year, the amount of money physicians would recover depends on how many of their past claims were wrongfully denied.

A federal court still needs to approve the settlement.

CIGNA has agreed to pay wrongfully denied claims dating back to Jan. 1, 1996, and it will waive any arbitration clauses. In some cases, the company will automatically pay physicians for certain billing codes if physicians can show that they were denied payment for those services.

In most cases, physicians who treated CIGNA subscribers and submitted claims to CIGNA on a fee-for-service basis will have to resubmit the disputed claims. A third-party reviewer will rule whether that claim should have been paid.

Plaintiffs' attorneys say they believe the claims could cost CIGNA at least $200 million. But CIGNA executives have said they don't believe the cost will be that high. The company expects to recognize an after-tax charge of about $50 million to $65 million in the fourth quarter of 2002.

In addition to the monetary gains, the settlement calls for changes that plaintiffs hope will make it easier for doctors to do business with CIGNA.

For example, CIGNA agreed to put explanations of its claims coding and other payment policies on its Web site so doctors and other health care workers could get information. The agreement also calls for CIGNA to pay interest on fully documented claims that aren't paid within 30 days, even in states without prompt-payment laws.

"This is a major step for physicians," said Judy L. Cates, one of the lead attorneys for the physicians. "They can say to other companies: 'Why aren't you doing this, too?' "

CIGNA has agreed to pay wrongfully denied claims dating back to Jan. 1, 1996.

CIGNA President Patrick E. Welch said the agreement improves the working relationship with physicians. "We are making accommodations in our business practices that will ease administrative burdens for physicians," he said in a statement.

The AMA called the CIGNA settlement a significant step toward curbing abusive insurance practices and said more progress can, and should, be made. "The AMA hopes CIGNA's acknowledgment will raise the bar for the entire health insurance industry on fair and open business practices," AMA President Yank D. Coble Jr., MD, said in a statement. "More improvements are needed before this development can be hailed as a turning point in relations between physicians and managed care organizations."

Several state medical societies -- including ones in Missouri, Illinois, Montana and Washington -- supported a settlement agreement that was circulated earlier this year. Some changes were made to the proposed settlement, and some societies were still reviewing the November agreement at press time. But plaintiffs' attorneys say the settlement has received overwhelming support from physicians.

Still, the proposed settlement agreement isn't embraced by all.

Objections from Miami

Legal maneuvers that were part of the settlement agreement are being criticized by lawyers and plaintiffs in lawsuits that have been consolidated in U.S. District Court in Miami before Judge Federico A. Moreno. The lawsuits make similar claims against CIGNA and other health plans for bundling and downcoding.

The Illinois case was originally filed in state court in May 2000 as a contract dispute. It did not include the federal anti-racketeering and federal Employee Retirement and Income Security Act of 1974 complaints that are central to the Miami lawsuits.

But the Illinois case -- which has already gone through the discovery phase -- was recently moved to federal court in East St. Louis, Ill., when the plaintiffs added ERISA and federal anti-racketeering claims to the lawsuits and filed the settlement agreement in the federal U.S. District Court for the Southern District of Illinois.

If the federal judge approves the settlement at the fairness hearing scheduled for March, the settlement would apply to the physicians involved in the class-action lawsuit against CIGNA in Miami.

Those plaintiffs object to the Illinois settlement because they think it is deficient, said Archie Lamb, co-lead counsel representing individual doctors and medical associations in California, Florida, Georgia, Louisiana and Texas. On Dec. 3, lawyers for physicians in the Miami cases asked Moreno to intervene in the Illinois settlement. Moreno is expected to rule on the issue by mid-December.

"It's clear this is an attempt to circumvent Judge Moreno's authority," Lamb said.

Jack Lewin, MD, CEO of the California Medical Assn., said the proposed CIGNA settlement was a piece of what they were working toward in Florida. But it puts doctors through a lot to recover money and it doesn't have enough teeth, he said.

"We need a means of resolving disputes on an ongoing basis," Dr. Lewin said. "We need to change the fundamental relationship between physicians and health plans. The current one is one of absolute distrust."

ADDITIONAL INFORMATION:

More than money

The proposed settlement also requires CIGNA to:

Pay interest on any delayed payments in the future, even in states without prompt-pay laws.
Stop requiring physicians to submit copies of patient medical records to be paid for office visits that take place on the same day as a separately billed surgery or other procedure.
Create a Web site for physicians that includes regularly updated disclosures of fee schedules, claim coding, claim processing, clean claims, claim-bundling logic and medical necessity definitions and guidelines.
Establish e-mail procedures so physicians can ask about fee schedules and claim coding.
Eliminate the "well-woman" code, for example code 90769.
Submit to third-party review of medical necessity denials.
Not say or imply that the American Medical Association endorses the company's claim coding.

To claim your cash

If the court approves the settlement, physicians can resubmit claims that CIGNA has denied since Jan. 1, 1996, and a third-party administrator will decide if they should be paid. CIGNA would:

Waive arbitration clauses.
Establish uncapped funds to pay valid claims that were improperly downcoded, bundled or denied on medical necessity grounds.
Automatically pay certain CPT code claim denials.
Compensate physicians for delayed claim payments, even in states without prompt-payment laws.