United States: Insurer Actions Cut The Heart Out Of Out-Of-Network Providers

Aetna Life Insurance Company recently won a $37 million verdict against a group of Northern California surgical centers, Bay Area Surgical Management, LLC and its affiliates (collectively, Bay Area), for an alleged out-of-network overbilling scheme and kickbacks to referring physicians. This lawsuit is simply one more effort in a larger trend by insurers to make it more difficult for out-of-network providers to provide services to insured patients. Through audits and investigations of patient collections, third-party payors have increasingly examined the practices of providers that charge amounts substantially in excess of prevailing charges; in many cases, they have sought recoupments and reduced reimbursements, and in some cases have ceased reimbursing providers.

Allegations in the Aetna Case

Arguing that Bay Area engaged in a "massive conspiracy" to defraud the insurer, Aetna asserted causes of action for fraud, intentional interference with contractual relations, and unjust enrichment. Specific allegations in the case against Bay Area include:

  • Inducing physicians to refer Aetna insureds to Bay Area facilities through kickbacks. Physicians were sold shares in the ambulatory surgical facilities at below-market value, which resulted in disproportionally high returns of several hundred percent per year to the physician owners. At least one physician had received an 805 percent return on his investment, according to the complaint.
  • Waiving patient coinsurance, deductible, and amounts above Aetna's recognized reasonable charge (e.g., the "balance bill" obligations).
  • Submitting false claims and inflated bills that included amounts that Bay Area never intended for their patients to pay.

Aetna also alleged that the sale of shares to the physicians was preconditioned on an understanding that the physicians would refer patients requiring high-value procedures to Bay Area facilities. A $40 million lawsuit against Bay Area affiliates has been filed by United Healthcare Services for the same types of practices. Bay Area defendants have announced that they will appeal the Aetna verdict and have also filed a lawsuit against Aetna and United Healthcare Services on antitrust grounds.

Health Net's Out-of-Network "Self-Disclosure" Attestation and Verification Requirement

In an interesting data-mining twist, insurance provider Health Net recently began sending a "self-disclosure" Attestation and Verification form for providers to sign, attesting that they:

  • Applied all deductibles and coinsurance, and collected all applicable copayments, from the patients in connection with services provided
  • Did not reimburse any patients for deductibles, coinsurance, and copayments, nor paid or waived any such amounts on behalf of any patients
  • Submitted charges to Health Net that are the same as those billed to and collected from the patients
  • Did not make any payments to or on behalf of patients
  • Did not make any payments to, or receive any payments from, any third party with the intent to induce the referral of patients for services
  • Billed only for services that were ordered and rendered

The Attestation and Verification requirement allows Health Net to more precisely focus its investigatory resources on providers that fail to return the required form or make significant changes or exceptions to the form. False statements by providers on the Attestation and Verification form may enable Health Net to pursue suspected fraud claims more easily, in some cases.

The End of Payment for Out-of-Network Services?

Recent efforts by third-party payors to aggressively investigate and pursue suspect billing and claims submissions by out-of-network providers are a clear indicator that careful consideration by providers of specific state laws governing such practices are critical. While the Bay Area verdict does not signal the end of payment for out-of-network services, it likely will embolden insurer efforts to deter patient access to out-of-network services.

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