Borrowing a strategy from consumers and their law firms, the American Medical Association and the Medical Society of the State of New York have teamed with a New York physician and his patient to file a class-action lawsuit against two of the nation's largest health insurance companies.
In their lawsuit, filed March 15 in the New York Supreme Court in Manhattan, the plaintiffs allege that Metropolitan Life Insurance Co. and United Healthcare Corp. knowingly use flawed data to reduce reimbursement for medical services, shortchanging doctors and forcing patients to pay higher copayments.
A similar approach is used by law firms and their consumer plaintiffs who allege that HMOs dupe enrollees by hiding financial incentives to limit care. At least 20 of those class-action suits have been filed against major health insurance companies during the past six months, said Louis Saccoccio, general counsel at the American Association of Health Plans.
At issue in the AMA's class-action lawsuit is a database on physician fees maintained by United Healthcare. The Health Insurance Association of America created the database, called the Prevailing HealthCare Charges System (PHCS), almost 20 years ago. The HIAA sold the database to Ingenix, a United Healthcare-owned information company based in Eden Prairie, Minn., in October 1998 for an undisclosed amount.
According to United Healthcare spokesman Roger Cruzen, it is the largest database of its kind and includes physician fee data from 1,800 insurers, third-party administrators and other payers nationwide. United Healthcare used the data to determine physician reimbursement rates when drafting contracts.
The contract at the heart of the suit, called the Empire Plan, provides out-of-network services to New York state employees at 80% of "usual, customary and reasonable" charges, based on PHCS data. But according to the complaint, the HIAA told insurers from the beginning that the database was unsuitable for the purpose of setting usual, customary and reasonable charges for physician reimbursement. It was supposed to be used only for informational purposes, as a guideline for contracting.
The suit claims both defendants, which had a contractual relationship, are responsible for improperly reducing payments based on the unsuitable data.
The plaintiffs also said the insurers began using the inappropriate data in January 1997 and that they concealed the data from subscribers and providers. Donald Moy, general counsel for the New York medical society, said if the insurers are using the physician-specific data to discount fees for subscribers who use out-of-network doctors, they are likely setting fees too low for all physicians within a certain specialty, regardless of experience or training.
United Healthcare's senior vice president of health policy, Lee Newcomer, said the complaint that the data don't differentiate physicians based on experience or ability is irrelevant. The AMA is arguing for an alternative that would require insurers to pay whatever a doctor charges, he said.
"There are very few physicians who have solid data that show they do better work than anyone else," Newcomer said. "Experience has no correlation in showing us who is likely to do well." Until doctors have that performance data, "there's no way" United Healthcare can reimburse them on that basis, he said.
In a written statement, the HIAA said the lawsuit had little to do with protecting patients.
"The AMA lawsuit seeks more money for doctors," said HIAA President Chip Kahn. "If the AMA truly is interested in lowering costs, then it should drop its push for higher reimbursements, antitrust waivers and `patient protections' that benefit physicians at the expense of patients and consumers."