Out of Network? Cigna, RICO and where’s the line?


Sometimes you wonder where the line is in health care. And perhaps more importantly, whether anyone in the system cares.

The last few months have been dominated by the issue of costs in health care, particularly the costs paid by consumers who thought they had coverage. It turns out that “surprise billing” isn’t that much of a surprise. Over the past few years several large medical groups, notably Team Health owned by Blackstone, have been aggressively opting out of insurers networks. They’ve figured out, probably by reading Elizabeth Rosenthal’s great story about the 2013 $117,000 assistant surgery bill that Aetna actually paid, that if they stay out of network and bill away, the chances are they’ll make more money.

On the surface this doesn’t make a lot of sense. Wouldn’t it be in the interests of the insurers to clamp down on this stuff and never pay up? Well not really. Veteran health insurance observer Robert Laszewski recently wrote that profits in health insurance and hospitals have never been better. Instead, the insurer, which is usually just handling the claims on behalf of the actual buyer, makes more money over time as the cost goes up.

The data is clear. Health care costs overall are going up because the speed at which providers, pharma et al. are increasing prices exceeds the reduction in volume that’s being seen in the use of most health services. Lots more on that is available from HCCI or any random tweet you read about the price of insulin. But the overall message is that as 90% of American health care is still a fee-for-service game, as the CEO of BCBS Arizona said at last year’s HLTH conference, the point of the game is generating as much revenue as possible. My old boss Ian Morrison used to joke about every hospital being in the race for the $1m hysterectomy, but in a world of falling volumes, it isn’t such a joke any more.

But it’s not as if this is a new issue. Back in 2009 I was writing about Ingenix’s (now called Optum/UHG) problems with trying to figure out what usual customary and reasonable (UCR) prices to pay for medical procedures. Essentially UCR prices (the ones baked into but not defined by Medicare) were made up, and the whole American health system’s cost structure follows along.

It wasn’t supposed to be this way, or at least not by now. The theory, taught to brave young health policy types like me decades ago, was that intelligent buyers would give integrated plan and delivery systems a fixed amount of money per head, and that those organizations (basically Kaiser & Geisinger) would be so much more cost effective that they’d force every other hospital system to become like them. Two decades of M&A later and it’s clear that the alphabet soup of HPO, IDN, ACO et al. has meant little. In practice, local monopoly or oligopoly provider systems have bought up the referring physicians and worked hard to feed the beast—the expensive inpatient procedural services where they make their money. And of course because of their oligopoly status they have been price setters not price takers. The recent $575m settlement for overcharging by Sutter Health is exhibit A of typical health system behavior. But it was presaged two decades ago by similar settlements by Tenet and HCA. The reward for that bad behavior? You get to be Governor/Senator of the great state of Florida!

The casual observer might notice that while the odd case of outright fraud by the little guys gets trumpeted by the DOJ there are no real punishments for the HCA/Sutter level of pricing extortion. No one goes to jail and the cost of the fine is never enough to put the miscreants out of business.

Which gets us back to the present debacle around surprise billing. While everyone can pretend to be appalled, the insurer doesn’t pay directly—the patient or their employer does. Meanwhile the providers are able to stop any real action in Congress. The provider defenders, like Anish Koka writing on THCB last year, say they want a baseball-style arbitration system, and that anyway the problem isn’t as bad as the extreme cases bandied about in the press. They may be right, but they’re just fighting their corner, and they don’t seem to be on opposite sides from insurers in the long run.

But we now have a real doozy. As reported by the folks at consulting company AVYM, one of the BUCAs, in this case Cigna, is being accused of playing both sides off against the middle in an out-of-network billing case.

 The lawsuit alleges that CIGNA accepts the out-of-network provider’s claims at the full billed charges and requests the same amount from the self-insured health plan. However, instead of paying the medical provider or member, CIGNA hires a Repricing Company to try and negotiate a reduction. If the provider refuses to negotiate, CIGNA pays the claim at an exorbitantly low level but appears to keep the difference between what was removed from the self-insured health plan and what was paid to the medical providers. In an attempt to conceal this from the patient and self-insured health plan, CIGNA issued Electronic Remittance Advice or paper Explanation of Benefits forms (collectively, the “EOB”) misrepresent the balance as “Discount” to the members, certifying the member is not responsible for the balance, while simultaneously representing the balance to the Plaintiffs as member liability or “Amount Not Covered”. Astonishingly, the complaint alleges that CIGNA, after being advised of these anomalies, not only refused to correct the issues but instructed the medical provider plaintiffs to sue to rectify the situation! 

This (allegation) is pretty brazen. Cigna gets the huge bill. It then takes that money from its employer client’s account. But instead of giving it to the provider, it keeps it, covers that up, and tells the provider to sue the employer for the difference that it has already taken.

Uncle Billy gives Potter the Building & Loan’s cash by mistake

Any similarity to the scene in It’s a Wonderful Life where old man Potter keeps the money Uncle Billy accidentally gave him and tries to later bankrupt the Building & Loan seems to be completely intentional.

You have to ask, who here is working in the patient or end buyer’s interest? And the answer seems to be, no one. The lesson of previous decades has been that health care companies can push the line as far as they like, even to beyond what looks like outright fraud, and nothing much will change.

What’s amazing is that the people paying the tab—the employers, the government and the patients themselves—seem to have no understanding that this is going on, and have few weapons to deal with it. Dave Chase and his Health Rosetta movement continue to point out a few cases where employers have figured out the game, but those best practices remain rare exceptions.

One might assume that a rational nation would look at this and agree on a single or multi-payer fee schedule, as exists in most other fee-for-service based systems like France, Canada, Germany & Japan. Or it’s time to put in a real version of global budgets either by government fiat or managed competition as I was taught years ago. But given the state of American politics, even though the Medicare For All cries are getting louder, no one seems to seriously believe that any rational policy is going to happen.

Instead the logical outcome is that in the pursuit of profit, every participant in the system will keep pushing up to and over that imaginary line. Perhaps there is no line. But unless the buyers completely revolt, not much will change

Matthew Holt is the publisher of THCB.

5 replies »

  1. “Avoid even the appearance of impropriety.” — That’s the ethical standard I remember so well from law school.

    “Embrace the appearance of impropriety.” — That’s become today’s political ethical standard…and is now pervading healthcare.

  2. If only there was an economic mechanism to coordinate between supply, demand and quality through the attribute of competitive prices!

  3. Cigna is, and always has been a criminal organization primarily. They have a long rap sheet with the DOJ. Their board and execs need to be jailed, and their charter needs to be dissolved. Why these filthy scumbags are allowed to continue to operate is unknown. Time for the crime spree to end.

  4. Most surprise bills, as I understand it, are attributable to anesthesiologists, assistant surgeons and emergency medicine doctors who may deliberately not join any networks so they can submit astronomical bills. Patients generally have no role in choosing any of these doctors even for elective care that is scheduled well in advance.

    At the same time, hospitals contract with these doctors to practice in their hospitals. As hospitals in much of the country have consolidated into large systems, I don’t understand why hospitals can’t insist that the doctors who practice in their hospitals join all of the networks that the hospital participates in. If the doctors think the network payment rate is too low, hospitals could agree to pay emergency medicine doctors some reasonable amount per shift to augment what insurance pays and ensure that the doctors earn an income sufficient to adequately reflect their training and expertise. Anesthesiologists and assistant surgeons could be paid a supplemental amount per hour of operating room time and the hospitals could build those incremental costs into their negotiated rates paid by insurers.

    Patients should not be responsible for more than their share of costs based on in network rates and uninsured patients should not have to pay more than what is routinely accepted as full payment from insurers or some reasonable percentage above Medicare. I wonder how some of these doctors and hospital executives would feel if they were on the receiving end of these bills. Whatever happened to common decency and fairness?

  5. This piece is right on target. When will realize and accept that “it’s the per unit cost, stupid!” We already utilize care at the same rate as other OECD countries, we just lay more for each unit of service.