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Unpacking the Ingenix Settlement

Earlier this week, New York Attorney General Andrew Cuomo  announced a "victory" in his battle with the insurance industry over how out-of-network physician claims are paid. Cuomo had argued that the industry’s use of its out-of-network "customary and reasonable" database "defrauded" consumers and he sued the database’s manager, United Health’s Ingenix, over the controversy.

In a February 2008 post I said, "In a few months, we will hear that Ingenix paid a big fine and agreed to fix something (that no one will understand)  and Cuomo will have another notch in his belt."

Here’s how the settlement will work: Ingenix will pay $50 million to
set up an independent not-for-profit to operate the customary and
reasonable database. The industry gets to continue determining what
customary and reasonable
physician charges are through this non-profit and just exactly how they
do it will continue to be done by systems gurus the way systems gurus
do things–pretty much in a "black box." While an undetermined
university will operate the system, the industry, who will finance it,
will presumably have a great deal of input into
it. The industry’s use of the database will be more defensible since
one of its own is no longer arguably directly controlling the entity.

$50 million is peanuts compared to the out-of-network customary and reasonable savings
any one of the big health plans achieves every year and this settlement
makes the ability of state medical societies and trial lawyers to
attack the system much harder.

What will be better is that
consumers, presuming they know about the new "transparency" website,
will be able to go on-line to see what their allowable charges will be
in advance. So, if Joe Middle America is on vacation in Orlando and
needs to go out-of-network to the emergency room,
prior to rushing off for treatment they can go find a computer, find
the website, and shop around for emergency rooms that have the lowest
out-of-network payments. Gosh, Andy, thanks!!!

The big losers
here are the docs. The result is going to be about the same and their
medical societies will now have less reason to challenge the customary and reasonable system than they did before.

"In a few months, we will hear that Ingenix paid a big fine and
agreed to fix something (that no one will understand)  and Cuomo will
have another notch in his belt."

Why poor Andy is being passed over for the Senate I just don’t know!

Robert Laszweski has been a fixture in Washington health policy
circles for the better part of three decades. He currently serves as
the president of Health Policy and Strategy Associates of Alexandria,
Virginia. Before forming HPSA in 1992, Robert served as the COO, Group
Markets, for the Liberty Mutual Insurance Company. You can read more of
his thoughtful analysis of healthcare industry trends at The Health Policy and Marketplace Blog.

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medictom hughesPamela OwenPeterDarrell Recent comment authors
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medic
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medic

i smell class action

tom hughes
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tom hughes

Is it possible to get back any of the money that we the insured paid out of pocket in the past.

Pamela Owen
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Pamela Owen

Bob, While I agree that there is serious problem with how the information acquired from the PHCS database is used, evidence shows that Ingenix did not manipulate data and that the manipulation occured at the insurer level. Having been involved in this industry since 1976, I am fairly familiar with UCR development. The database itself was created first by HIAA in 1973 in an attempt to normalize self-reported charges by providers. Ingenix purchased the database in 1998 and essentially updates data and reports/sales data sets requested by insurers using a methodology that has been widely accepted and deemed sound. However,… Read more »

Peter
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Peter

With nation wide single-pay administered through the states there would be no need to fight over out-of-network as everyone would be in-network. Nate is right about the fact that no matter what you do you lose in this system, if you want to call it a system.

Nate
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Nate

Darrell, If only real life worked the way logic and the law said it should. We are a TPA, process insurance claims, we aren’t an insurance company, we don’t assume any risk, we just push paper on behalf of of employers and insruance companies. We had offices in NV and CA with a particilar client in a small town in UT. Provider did some procedure that wasn’t covered, we denied the claim and thus it was patient responsibility. The provider sued us in court. Not the employee cause that would look bad. Not the employer because they where local and… Read more »

Darrell
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Darrell

The best way to fix this is: 1. Have a broad enough network available so that you REALLY have to work hard to find an out-of-network provider. We have 3 tiers: (a) directly-contracted local providers (where we have the greatest leverage); (b) a state-wide rent-a-network that we use on a “so-called” %-of-savings basis that includes almost every hospital, physician and witch-doctor in the state; (c) an even larger wrap-around network (something like Beech Street) for the rest of the country. At this point, almost everybody is IN network. 2. For those rare providers who just refuse to contract with anybody… Read more »

spike
Guest

What’s frustrated me most about coverage and discussion of the issue is that nobody mentions that UCR is probably close to a reasonable approximation of a fair price for services, but provider billed charges are 2x to 3x what a fair price is. We’re all bickering over UCR, while the patient going out of network is virtually guaranteed to have to pay 100% to 200% of the costs of his services out of pocket, regardless of what percentage the payor has decided to pay of UCR or what level they set UCR at. News coverage feigns outrage over the 5%… Read more »

Skeptic
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Skeptic

Nate is on target. In fact, even without the $50 million fine the settlement does not do anything to fundamentally address cost issues. While the settlement may improve transparency to some extent (a good thing) any increase in insurance plan payments to providers will inevitably show up as premium increases. If N.Y. Attorney General Andrew Cumo was intellectually honest, he would have acknowleged this in his press release announcing the settlement.

Nate
Guest
Nate

Pat you really have no clue what UCR is do you? There is no fraud corruption or abuse involved. If you understood the system before you jumped on your soapbox you might actually effect the status quo. UCR is a number which in of its self has no meaning or relevance. Carriers, Payors, Plans et al decide and disclose at what percent of that number they will reimburse non ppo doctors. The Ingenix number has no impact on provider payment or participant cost. The percentile the payor reimburses at determines the allowable. There is no science to how the percentile… Read more »

Pat Whelan
Guest

I am frankly appalled. This situation exposes a Pandora’s Box of issues that point to some of the key reasons why Healthcare reform is needed in the USA and now. For some time I have been working on breakthrough plans and ways to dramatically and positively change the Healthcare status quo. The use of technology has been my primary focus but the business conscious part of my brain has always reminded me of an undisputable fact; that one of many “wicked” problems that exist today is that there are too many hands stuck in the Healthcare cash register. And here… Read more »

Skeptic
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Skeptic

I predict the Ingenix settlement will do almost nothing to reduce the confusion, anger, and frustration when health plan subscribers use out-of-network providers. As long as there are consumers who insist on retaining the option of going out of network for elective services (as well as emergency services) and providers with sufficient market power to avoid negotiated fee schedules this problem will not go away.

David C. Kibbe, MD MBA
Guest

Thanks, Bob, for this brief but “transparent” report. Sounds to me like a minor fix to a major fubar system. DCK