(Story updated at 8:41 p.m. ET)
Prime Healthcare Services is suing at least half a dozen insurers, saying they underpaid its hospitals for treating patients out-of-network, leading to bloated bills for patients.
Prime filed lawsuits Wednesday, Thursday and Friday against Aetna; Anthem subsidiary Amerigroup Nevada; Cigna Corp. and its Qualcare subsidiary; EmblemHealth; Magnacare; and UnitedHealthcare.
The chief complaint of the lawsuits involves “usual, customary and reasonable” rates—or amounts that health insurers are willing to pay for services. If hospitals and insurers can't agree on reimbursement rates, hospitals are considered out of network. Patients have less incentive to go to out-of-network providers because they may have to pay most or all of the cost of care. However, if an insurer covers some out-of-network claims, it will pay providers a “usual, customary and reasonable” rate instead of a contracted rate.
Prime alleges that the insurers “have demanded such low rates and have become so onerous and one-sided” that they have forced Prime to not accept in-network rates. And when Prime is an out-of-network provider, the insurers have “drastically underpaid hospitals” by using “flawed methodologies” in how they determine usual, customary and reasonable rates. That, Prime argues, forces the hospitals to balance bill patients for the remaining amounts that are due.
Balance billing is a practice in which providers bill patients for the difference, or balance, between their charges and what insurers pay them for out-of-network services.
“These flawed methodologies unfairly and illegally shift the burden and expense of payment for emergency and post-stabilization healthcare services to patients, and force non-contracted hospitals to balance bill their patients for sums which are legally owed by (the) defendants,” Prime said in the complaints.
In a statement, Prime general counsel Troy Schell said the system is committed to providing quality healthcare to all patients.
"We do not and will not bill or 'balance bill' patients," Schell said. "We have attempted to negotiate with insurers for payments that are fair market rates for the cost of care provided. Unfortunately, certain insurers have been unwilling to provide fair compensation and we have been forced to take legal action."
Aetna spokesman T.J. Crawford and Anthem spokeswoman Jill Becher said their companies had no comment on Prime's lawsuit. Attempts to reach the other insurers involved were unsuccessful Friday.
Such disputes between providers and insurers have a long history, said David Kaufman, a partner at Freeborn & Peters, who was previously general counsel for Blue Cross and Blue Shield of Illinois. He said there's tension as insurers try to keep costs low and providers try to maintain their revenue streams.
“I think this is all part of the process of implementation of the Affordable Care Act— insurers trying to hold down costs and providers feeling the pinch of lower reimbursement,” Kaufman said.
Jack Hoadley, a health policy analyst and researcher at Georgetown University, said the dispute over data used to determine usual, customary and reasonable rates is similar to one in a New York case several years ago. In that case, a settlement led to the creation of Fair Health, a not-for-profit that collects data on charges and amounts paid that can be used to settle out-of-network claims. A relatively new state law there created a process to settle disputes over payment amounts, and as part of that process, the arbitrator can use the Fair Health database to help reach a decision, Hoadley said.
Prime argues in its complaints that it “has a stellar reputation and provides high-quality care." But Prime has faced heat from consumers, government programs and others in the industry for overbilling Medicare and Medicaid, inappropriately admitting emergency department patients and charging high rates for out-of-network emergency care.
Prime, which abandoned a widely watched bid for a California-based Catholic health system last year, has also filed several other lawsuits over the past several years, including one that alleged a union was waging a smear campaign.
Several of the lawsuits this week were filed by for-profit Prime Healthcare Services and several were filed by Prime's not-for-profit arm, the Prime Healthcare Foundation. Together they own and operate 43 acute-care hospitals across the country.