Doctors Suing Insurers Over Denied Claims

OB/GYN News, Oct 15, 2001 by Jennifer Silverman

WASHINGTON -- Physicians are getting bolder about challenging insurers over delayed or denied health care claims.

Dr. John McMahan, an Illinois ear, nose, and throat physician, sued Employers Health Insurance Co., a subsidiary of Humana Inc., after the managed care organization began downcoding claims on outpatient office visits.

Although the difference in coding amounted to about $30 to $40 per claim, in the aggregate this can mean "savings of millions of dollars that are not being paid to providers," Jim Marks, an attorney with Harris, Kessler & Goldenstein in Chicago, who represented Dr. McMahan, told this newspaper.

In a settlement of the case last November, Dr. McMahan recovered all of the money owed on past claims, plus his attorney's fees and interest, the attorney said.

Mr. Marks said he's seeing more class action and individual suits by physicians seeking compensation that was denied due to downcoding, bundling, or other reasons.

Class action suits supported by state medical associations, specialty associations, and the American Medical Association, also are on the rise. Dr. Donald Palmisano, AMA's secretary-treasurer, predicted that "as long as insurance companies don't deliver on promises in their contacts," an increasing number of physicians will be filing lawsuits against the insurers--and winning more cases.

Susan Pisano, vice president for communications with the American Association of Health Plans, termed the increase in lawsuits against insurers "a troubling development."

Filing suit is becoming the routine method for dealing with any issue on the minds of some practitioners, she said, blaming the "predatory nature of trial lawyers" as the number one reason for the increase in suits.

In case pending in Illinois, two physicians sued CIGNA Corp. and its affiliates ford downcoding and bundling CPT codes. According to the complaint, these actions represent a breach of contract by CIGNA.

The complaint alleges that when CIGNA's computer system recognizes certain predesignated CPT codes, it automatically substitutes a different, cheaper CPT code in lieu of the actual medical service billed by the physician.

Many physicians have been intimidated by the fact that carriers control substantial parts of their income, "but they're only collecting 60% to 70% of what they're actually owed," Mr. Marks estimated. "They're beginning to realize they don't have a choice but to go to court.

Even when the law is on the side of physicians, it can take a suit to enforce it. In 39 states, including Illinois, Alabama, and Texas, "prompt-pay" statutes require insurers to pay claims within a certain time period, but these laws haven't been very useful in remedying the problem of delayed payments, Mr. Marks said.

"The language in the statutes is often ambiguous. It's easy for a carrier to find some problem in each claim and get around the prompt-pay requirement," he said.

Carriers who have been sued have argued that the prompt-pay statutes are preempted by the Employee Retirement Income Security Act (ERISA), which encourages employers to set up benefit plans under a federally uniform law that precludes employees from raising state law claims when benefits are denied. "Carriers are claiming that physicians who provide services to beneficiaries of an employer health plan governed by ERISA cannot sue under the prompt-pay [requirement]," Mr. Marks said.

In their suits against managed care, physicians appear to be "taking it to a higher level of engagement" beyond prompt pay, said Robert Portman, a health care attorney and partner with Jenner & Block, Washington, D.C. Suits at include claims for other forms of underpayment, nonpayment, and late payment have been asserting violations of the Racketeer Influenced and Corrupt Organizations Act, fraud, misrepresentation, and-as used in the CIGNA case-breach of contract.

Ms. Pisano of AAHP countered that the association's member companies have a contractual responsibility with many employers to make sure that the claim is processed correctly, that it hasn't been paid before, and that it's complete. "The plans are committed to paying physicians promptly and fairly," she asserted.

There are more practical and less antagonistic ways to solve claims disputes than lawsuits. Some physicians are choosing instead to work through the problem with the provider, Ms. Pisano said, noting that physicians' contracts typically include arbitration provisions.

Ms. Pisano also looks forward to electronic claims processing, an emerging technology that she believes will greatly smooth the process.

A federal prompt-pay statute has never been enacted, but that could change if a patients' rights bill is signed into law. Both the House and Senate versions of the bill (H.R. 2563, S. 1052) contain language that would amend ERISA and other statutes to require that health insurers and Medicare Plus Choice organizations make payments within 30 days of a clean claim.