Armchair Finance

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Score One for the Docs

Physicians may need to find something else to talk about at cocktail parties now that they’ve declared victory over the longstanding payment practices of health insurers. Almost since doctors stopped accepting barter for their services, it seems, they have complained that insurers conspire to “play the float” through intentional and systemic methods to delay paying their claims—or deny them entirely.

News that 23 Blue Cross and Blue Shield insurers settled a class-action lawsuit in late April with some 900,000 physicians largely puts to rest an expensive experiment for health insurers nationwide. The concepts are complicated, involving CPT coding practices, medical necessity clauses and inches-thick contracts governing how physicians are paid. But in the end, at least through their actions if not their words, insurance companies have admitted that they can’t win. The result is deceptively simple: lots of cash.

The $128 million settlement will largely end four years of protracted legal wrangling over whether health insurers slow- or no-paid claims intentionally. That money will come on top of a $405 million settlement with about 600,000 doctors reached in 2003 with Humana, Aetna, CIGNA, WellPoint and HealthNet in a different lawsuit alleging similar practices.

Though certainly the insurers will admit no wrongdoing (that’s how these things get settled, after all), the reasons for the delays were myriad—and insurers’ claims that physicians are often lax in properly coding procedures have some merit. But the fact that as a group they knuckled under this time just as they did four years ago could have long-term repercussions.

Dangerous precedent?

Hospitals may be attempting to use similar arguments to start class-action proceedings of their own. Already, two hospital systems in New York have sued UnitedHealth Group (see HealthLeaders, May 2007), alleging that the insurer conspired to delay execution of signed contracts, intimidated hospitals and erroneously informed patients that they would be personally responsible for larger portions of their bills should they receive service at those hospitals.

Notably, United is not among the majority of companies that settled with doctors. The company eventually fought the doctors’ suit nearly on its own, and last summer the lawsuit was thrown out. Still, on the heels of this most recent settlement, and given the broad similarities between the cases, don’t be surprised if other hospitals join in. The New York hospital CEO who initiated the lawsuit alleges that far from being a local contract dispute, United is operating a “rogue business plan that is siphoning millions out of the state.”

Whether or not the hospitals’ case has merit, insurers are surely girding their lawyers for yet another potentially long and possibly embarrassing fight. And when embarrassment is involved, settlements and pledges to do better are often in the defendant’s best interest.
—Philip Betbeze




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