The Devil (You Think) You Know / Part IV

In March of 2000, in a New York State court, a class action suit was brought against the United Health Group, the second largest health insurer in the nation. It was brought on behalf of the American Medical Association (AMA), the Medical Society of the State of New York, the Missouri State Medical Association, and other interested parties. The suit charged United Health with systematic under-reimbursement of out- of-network charges. AMA trustee, Dr. Donald Palmissano, remarked at the time that, "...the case calls into question the entire payment mechanism that the insurance companies have used for years in paying physicians."

But it was not only the physicians who were being shortchanged. Many of the parties in the suit included the direct insured, who found themselves saddled with the difference between what they were being charged and what United was willing to pay as "usual, customary, and reasonable" (UCR) charges.

In New York, complaints to the attorney general's office became so numerous and egregious that in 2008 the Attorney General launched an investigation into insurance industry practices. The investigation would be ongoing and would focus on Ingenix, Inc., the nation's largest provider of healthcare billing information. As sixteen subpoenas were going out to the nation's largest health insurers, the Attorney General also announced he would seek to file suit against Ingenix and United Health.

And so begins our story.
Who's Minding the Store ?

Over the past few decades, health insurers have developed a practice for reimbursing out-of-network claims based on customary, usual, and reasonable charges for services. And to provide the needed data, a separate industry was born. These companies would compile the data, do the analysis, and for a fee, provide insurers with UCR rates based on individual procedures, and classified by regions.

The two largest providers of healthcare billing information were the Prevailing Healthcare Charges System (PHCS), and the Medical Data Resource (MDR) database. The PHCS database was created in 1973 by the Health Insurance Association of America (HIAA), which at that time was the industry's trade association. MDR was its next largest competitor. But in the late 1990s, the two would essentially become one, ending any semblance of competition in the field. But wait, it gets worse.
In 1997, the MDR database was purchased by Ingenix, Inc.. The following year HIAA sold its database as well, also to Ingenix. And who is Ingenix? They are the information technology business unit of United Healthcare (to repeat, the second largest health insurer in the nation). So, to summarize, the two main sources of UCR data, which insurers use to calculate how much they will reimburse for out-of-network charges, were suddenly owned by the second largest health insurer in the country. Wouldn't that be the equivalent of putting the kid with the fastest car in charge of setting the speed limits for school zones? And yet, it raised no red flags. Especially in the healthcare industry.
Which brings us back to the 2000 suit filed by the AMA and others, and the 2008 investigation by the New York attorney general's office. (The insurers may not have been paying much attention, but everyone else surely was.) After a yearlong investigation, New York Attorney General, Andrew M. Cuomo, concluded that there was a clear conflict of interest, which resulted in the under-reimbursement of New York consumers. After comparing the Ingenix "customary, usual, and reasonable" rates with claims actually filed in New York, they'd found that consumers were systematically under-reimbursed by 28-30%, due to faulty Ingenix data.

On January 13, 2009, the same day the attorney general's office released it's report, United Health publicly stated for the first time there was an "inherent conflict of interest" in its business relationship with Ingenix. They signed an agreement with the attorney general to shut down the PHCS and MCR databases, and promised to contribute $50 million towards the start of a new, non-profit entity that would create and administer an independent medical claims database. It would be housed in a New York academic institution and would make its price data available to the public through a website.

Two days later (and nearly nine years after filing their original suit), the AMA reached a tentative settlement, with United Health agreeing to pay $350 million for reimbursing patients and providers.

A good end result? You tell me. There is little transparency in the healthcare industry as it is. Even less when corporations settle out of court, as they nearly always do. So we rarely know the actual amounts misappropriated. Only the amounts of their fines. Considering United Health reported earnings for the second quarter of 2009 of $859 million (that's net earnings), it makes one wonder. Have fines simply become a win/win cost of doing business, with companies profiting generously, even if they get caught? And still more if they don't?

Here's a clue. On May 7, 2009, the Federal judge presiding over the class action lawsuit refused to approve the $350 million settlement. The judge expressed concerns over the sufficiency of the settlement amount, and the quality of the data provided to the plaintiffs in reaching that amount. In other words, even in the process of attempting to reach a settlement, the company could not be depended upon to, in good faith, provide anything but faulty data. They'd cheated consumers; they'd cheated taxpayers; they'd cheated healthcare providers and physicians ..... and in reaching a settlement to avoid going to court, they were still cheating.

Business Ethics is an Oxymoron
The U.S. Health and Human Services Department and its investigators this year found that 80% of companies participating in the Medicare prescription drug benefit program overcharged subscribers and taxpayers by an estimated $4.4 billion.

Just thought I'd throw that in there.

The investigation by the New York attorney general's office, and similar state investigations and resulting legal suits across the nation, were beginning to shine a fair amount of light on Ingenix, United Health, and "standard" industry practices. And with government run healthcare programs being affected as well, the federal government was obligated to do some investigating of its own.

In March of this year the Senate Commerce Committee held two hearings to look at the way Ingenix data was being used to reimburse consumers for out-of-network charges. The Committee Chairman, Sen. John D. Rockefeller IV (W.Va.), also sent information requests to 18 of the largest health insurers not involved in the New York attorney general's investigation. Based on those hearings and the information he'd requested, as well as prior investigations, the Committee issued its report on June 24. And what they found could easily be considered a template for the entire healthcare industry, much to its disgrace.

To begin, they determined the use of the Ingenix database to be pervasive throughout the health insurance industry, with most insurers subscribing to its service. It was so pervasive that one healthcare executive told the Committee, "We know of no alternative sources of national healthcare charge databases."

That is a disturbing discovery, considering the same insurers subscribing to the UCR database were also submitting the data. And, as if there weren't incentives enough to supply that data, the insurers were also offered large discounts on Ingenix database products for participating in the "Data Contribution Program". By submitting medical claims data they could receive "Data Credits", which could easily add up to discounts of 50% or more.

According to United Health Group CEO, Stephen Hemsley, nearly 100 different parties contributed data. These parties agreed to submit "non-manipulated, complete, usable data for all covered members for all submitted claims". Ingenix's data submission rules stated:

Customer shall include all data fields that Customer currently collects that are required in the data contribution format, and Customer shall not manipulate or present the data so as to provide only a particular subset of its data. Customer will submit its full claims experience for the number of total contracted covered lives.

"..... total contracted covered lives." That's creepy enough. But, hey ... okay. Sounds like they laid down the law. No cheating ..... okay, guys? Wait. What was that? Was that a wink? Did I just see a wink?

Me? I Thought YOU Checked

Although Ingenix CEO, Andy Slavitt, had claimed before the Committee, "we run a number of analyses to check and make sure" the data is accurate and complete, Ingenix's Manager of Research and Development for both database products, Ms. Carla Gee, had responded in recent court proceedings quite differently.

She had stated that, although Ingenix did perform occasional audits of the data, they were ultimately "at the mercy" of insurers to submit accurate and complete data. And even more compelling, "Ingenix has never tested its results to determine if its statistical conclusions bear any relationship to the actual high, low, median, or 80th percentile" of service rates charged by health care providers in any given area.

Excuse me? You mean you've never tested to see if you were even in the ballpark. Is that what you're saying? Wouldn't Ingenix, as virtually the only source for insurers to determine what is customary, usual, and reasonable, bear some responsibility to make sure its data is accurate? Apparently not.

In a paragraph contained in Ingenix materials labeled "Information Tool", they essentially went so far as to disclaim any responsibility for their data:

The data is provided for informational purposes only .... Any reliance on, interpretation of and/or use of the Data by Customer is solely and exclusively at the discretion of Customer. Customer's determination or establishment of an appropriate reimbursement level or fee is solely within Customer's discretion, regardless of whether Customer uses Data.
And yet, they clearly anticipated legal challenges, promising to provide customers with technical and legal assistance in "database challenges", and legal support to defend attacks on its data integrity. Not that they thought any attacks would be forthcoming.

Proprietary Misinformation
During Committee hearings, Chairman Rockefeller discussed the case of Jill Faddis. In 2001, her husband was billed $140 for a visit to a periodontist. Their carrier, Aetna, would only pay the "customary and usual" fee of $65. Thinking the figure low, Jill called every periodontist in the area to compare rates. She found the usual charges to fall between $110 and $163 for the same service. But having no way to challenge her insurer, she paid the difference.

The case files of attorneys general all across the country are full of similar testimonies. When insurers are questioned about their methods for determining UCR rates, they often reply with vague answers, claim proprietary information, or simply lie. And the recourse is no different for doctors and providers. AMA President, Dr. Nancy Nielsen, testified that when doctors asked insurers how they had calculated their "usual and customary" rates, they were told the information was "proprietary". Which, actually, was true. Ingenix contracts forbid any subscribers from divulging their "secrets".

So here's where we are:

Insurers need someone to determine what's usual and customary so they can say with authority this is the normal fee.

The service they subscribe to is the only game in town ..... and it's owned by one of their own.

The data used to determine those rates that insurers will have to pay out is furnished by the same people who will be doing the paying. Sort of a "closed loop", if you will.

And .... the company that determines the rates never checks to see how accurate they are. And no one has to tell anybody where in the hell they get their numbers!

I think that about covers it. Now ... any guesses on how our story ends? You got it!

Aye, There's the Scrub
In an expert report submitted to the New Jersey federal court in 2006, a statistical expert testified that insurance companies did not submit complete sets of data, and some preferred "scrubs" that skewed the data downward. They testified that Aetna, Ingenix's largest data contributor, eliminated the highest 20% of valid medical charges before sending the data to Ingenix. And Ingenix employed essentially the same procedure once it received the data. The effect was to make the charges appear to be lower than they actually were.

In addition to Aetna, the Committee found that CIGNA contributed data from only four of its nine claims systems. While another unnamed company that contributes more than 5 million claims a month to Ingenix, admitted to providing Ingenix with its own average charges for each procedure, rather than the unadulterated "full claims experience" that were required in the contracts. The company stated it had been submitting its data this way for many years, and had received discounts, certifying Ingenix had accepted its data as valid. But then, no one was checking, were they?

The Committee also found that the insurance industry, either through misinformation or false information, routinely failed to provide consumers with accurate information in disclosure statements. Linda Lacewell, a senior attorney from the New York Attorney General's Office, stated that some insurers affirmatively misstated the source of their numbers, claiming they came from "independent" sources. That's a nice way of saying they lied.

Nor was it unusual for large insurers to attribute their UCR rates to the Health Insurance Association of America, even though Ingenix had purchased the database from them more than a decade ago, and the association had been out of existence since 2003.

In the end, a series of private lawsuits and an investigation by the New York Attorney General's office was the only way American consumers and health care providers could discover why reimbursement payments were consistently lower than what really was usual and customary.

I'm Sorry and It Won't Happen Again?
On March 31, 2009, United Health's CEO, Stephen Hemsley, testified before the Committee:

We have a number of regrets related to this. We regret we did not recognize the appearance of this conflict sooner. We regret we were not more forceful in our broad disclosures with respect to the relationship of this database relative to other aspects of our company. And we regret that there has been any breach in terms of the perception of trust, in terms of the consumers' participation in this.

Also before the Committee, the CEO of Ingenix, Andy Slavitt:

There is no denying that Mr. Hemsley's company owns my company and another company that uses our product. And it is clear that we were myopic and perhaps so analytical about defending our integrity that we missed the bigger picture.


To which I can only reply ...... What? Are you kidding me?


Committee member, Claire McCaskill, the Democratic Senator from Missouri, stated that the way Ingenix was marketed to insurers was as a way to "get out of paying" the correct reimbursement rate, a charge Slavitt outright denied. She said neither Slavitt nor Hemsley was willing to take responsibility for the problem, yet "it is my understanding that cases get settled because you are afraid you'll get nailed in court". "This is why there is such a lack of confidence in health care.", she said. "The way you did this, putting the wrong information, put consumers on the short end of the stick. I think this committee needs to stay on you like white on rice."

I couldn't agree more.

I've attempted to provide you with a look into one company within the healthcare complex. And shown you how greedy, uncaring, and arrogant an industry can become. The sad, but necessary truth is that the entire industry is infected with the same virus. Millions of lives are at stake every day. And yet, to think that my life or the life of someone I love might be less of a consideration than shareholder dividends or executive bonuses is chilling, if not an outrage.

And if you're still willing to stay with the devil you know ... Perhaps now you know him just a little bit better.