2009 Medical Professional 2009 Medical Professional Liability SymposiumLiability Symposium

Chicago, Illinois ~ March 24 & 25, 2009

Managed Care Liability Issues: Managed Care Liability Issues: Past, Present and FuturePast, Present and Future

March 2009

Managed Care Liability: Managed Care Liability: Past, Present & FuturePast, Present & Future

MODERATOR:

Susan Angelo, Senior Vice President, OneBeacon

PANELISTS:

Terrence F. Dreyer, Senior Vice President, National Managed Care Practice Leader, Marsh USA Inc.

Janis Raynak, Esq., Director of Litigation Services,

Blue Cross/Blue Shield of Arizona

Steven M. Ziegler, Esq., Managing Partner,

Law Offices of Steven M. Ziegler, PA

Managed Care Liability Managed Care Liability “The Past”“The Past”

• Early 1990’s Theories of Liability Developed

• Involving Bodily Injury to a Subscriber based on: Bad Faith / Breach of Contract Vicarious Liability

• Ostensible or Apparent Agency

Managed Care Liability Managed Care Liability “The Past”“The Past”

• Negligent Utilization Review

• Cost Control Systems Disincentive for Quality Care (Capitation)

Managed Care Liability Managed Care Liability “The Past”“The Past”

• Early Provider Actions

Anti Trust – shut out of networks

Credentialing

Managed Care Liability Managed Care Liability “The Past”“The Past”

• Provider Disputes evolved into complex contract disputes / class actions

Managed Care Liability Managed Care Liability “The Past”“The Past”

• What Changed? Independent External Review Any Willing Provider Statutes Mandated Benefits Change in Business Model

EMERGING TRENDS IN MANAGED CARE LITIGATION

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The Non-Participating ProviderReimbursement

• The reimbursement of non-participating providers is increasingly the focus of regulatory action and litigation.

• The overwhelming issue in reimbursement litigation surrounds the “usual and customary rate.”

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What Is Usual and Customary?

• Usually arises in the HMO context of reimbursement for non-participating providers who are hospital based or provide emergency services.

• Also arises in the non-HMO setting when dealing with non-network providers and authorized treatment from non-network providers.

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How is Usual and Customary Determined?

• Temple University Hospital v. HealthCare Management Alternatives, 832 A.2d 501 (Pa., 2003) –seminal case addressing usual & customary reimbursements.

• Held that in the non-par provider context, (no express agreement to pay) the law implies a promise to pay a reasonable fee for services.

• A proper calculation of payment is what the services are ordinarily worth in the community, i.e. what the healthcare provider ordinarily receives as payment for services.

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What is Expected As Usual and Customary Payment?

• Providers - maintain that usual and customary payments =

FULL BILLED CHARGES

• MCO –maintain that payments must be reasonable and should be based upon amounts normally accepted as reimbursement.

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How Does The MCO Compute UCR Payments

• Medicare – the gold standard- as Medicare is the largest payor in country.

• UCR payments based upon a percentage of Medicare fee schedules.

• Use of UCR data from third party vendors.

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UCR DataThe Ingenix Factor

• Many MCOs use UCR data compiled by Ingenix to establish UCR rates for non-par providers.

• Ingenix controls 50% of the market regarding UCR data & has contracts with 1,500 health insurers, 200,000 doctors, 3,500 hospitals, & 140 drug companies & government agencies.

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The Attack

• In February, the NY Attorney General opened a probe of Ingenix and its parent (United Health Group) regarding out-of-networking pricing. The investigation revealed a defective & manipulated database which dramatically under-reimbursed patients for out of network expenses.

• Ex: Most UHG plans offer 80% coverage for out of network services. PPO members pay a higher premium for the right to treat with out of network providers. United, relying on the Ingenix database, artificially set non-par reimbursement rates at a lower level, leaving patients to pay significant amounts of the balance.

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• Examples cited by Cuomo – a simple office visit costs $200 but UHG claimed that it was $77. UCR would paying 80% of the $77 or $62. The patient/member is billed for the balance- $138.

• AG Cuomo maintains that “the lack of accuracy, transparency, and independence surrounding United’s process for setting a ‘reasonable and customary rate’ is astounding.” Further, he notes that “United’s ownership of Ingenix, coupled with inherent problems with the data it is using, clearly demonstrates a broken reimbursement system.”

• Cuomo also maintains that other plans providing data to Ingenix are manipulating data, compounding the problem.

The Attack

The Ingenix Settlement

• United agrees to disband the Ingenix database & help create an independent nonprofit organization, possibly a university-level school of public health.

• United agrees to contribute $50 million toward development of the new database.

• This will allow consumers to find out reimbursement for out of network services in advance.

• Nonprofit will make rate information available to insurers.

• Nonprofit will use new database to conduct academic research to help improve health care system.

• Nonprofit will be selected and announced at a future date.

The Ingenix Settlement

Other Settlementswith OAG

• Aetna – Will contribute $20 M to new database.

• CIGNA – Will contribute $10 M

• WellPoint/Empire BCBS – Will contribute $10M

• Guardian – Will contribute $500,000

• Excellus – Will contribute $775,000 to new database and pay additional $775,000 in fees.

• Capital District’s Physician Health Plan (CDPHP) – Will contribute $300,000 to new database.

• GHI/HIP – Will contribute $1.5 million

The AMA Settlement

• United to pay $350 million to settle class-action lawsuit brought by AMA on behalf of patients and doctors who claimed to be shortchanged for out of network services.

• Settlement subject to court approval.

The Fallout: Litigation

• Increased litigation over the amounts paid to subscribers and providers pursuant to the Ingenix fee schedule.

• Amounts to be paid from the time the agreement with Ingenix was reached and the time the new database was available?

• Disputes where Ingenix was used in arriving at a percentage of Medicare fees or contracted rates.

Will the DisputeOver UCR End?

• What will be the basis for determining the payment amount?

• Will this amount be required for all payors?

• Will the database set the industry standard for payment amounts?

• Will the providers accept the payments as determined by the database?

Managed Care Liabilities: Past, Present & Future

Rescission of the Health Care Contract

An expensive proposition

Presented by:

Janis Raynak

BlueCross BlueShield of Arizona

State Laws Differ

Legal Fraud Intent to Deceive Related Claim Materiality

A.R.S. §20-1109Statements as representation; effect of

misrepresentation upon policy

All statements and descriptions in any application for an insurance policy or in negotiations therefore, by or in behalf of the insured, shall be deemed to be representations and not warranties. Misrepresentations, omissions, concealment of facts and incorrect statements shall not prevent a recovery under the policy unless:

1. Fraudulent.2. Material either to the acceptance of the risk, or to the

hazard assumed by the insurer.3. The insurer in good faith would either not have issued the

policy, or would not have issued a policy in as large an amount, or would not have provided coverage with respect to the hazard resulting in the loss, if the true facts had been made known to the insurer as required either by the application for the policy or otherwise.

What Does Fraudulent Mean?

• Proof that applicant made false statements concerning material facts which were of such a nature that they were presumably within his personal knowledge.

What Does Fraudulent Mean?

The issue presented is whether the disorder manifested itself to the applicant’s knowledge and belief before or after the application.

It is not whether the applicant was in good health when the application was made.

What is the Standard for Review?

Does Fraud = Willful Intent?

Recent Decisions

Courts now appear to demand:

1. Willful Intent

2. Reasonable efforts at the time of underwriting

Hailey v. California Physicians’ Services

Typical Appellate Review

• Is the application clear and simple?• What efforts were made at underwriting?

Request records? Follow up phone calls?

• What was the trigger for the investigation?• Was the investigation timely?• Was the rescission timely?• Did the question concern facts or opinion?

Bad Facts Make Bad Law

• Courts will struggle to obtain an equitable outcome Does rescission restore

the status quo? How much prejudice

has occurred? What is the totality of

the circumstances?

Courts Disfavor Rescission

Given sufficient impetus – such as a chronic illness – it is likely that any health insurer will be able to find some detail within an insured’s medical history that, post hoc, amounts to misrepresentation.

Courts Disfavor Rescission

• New standard appears to require more than reliance on the affirmed application of the potential subscriber.

• What is the something more? Some plan to assure the application is

correct and complete.

Examples of “Something More”

• Review old applications• Review claims data• Follow-up phone calls• Request records on clean applications• Height/Weight verification• Clear/Unambiguous questions• Return of application

To Rescind or Not to Rescind?

• Nondisclosure presents two types of risk: Unfair exposure to Claims Threat of litigation

Need to balance the risks

Questions

• Is a third party review advisable?

• Should rescission still be an alternative?

• Has this affected applications?

• Should underwritten products be eliminated?

• How does this disadvantage those with complete disclosure?

Medical Tourism First Class All The Way…But When

You Land…

March 25, 2009

Terrence Dreyer, Chicago, IL

Where Are We Going?

Africa and Middle East Brunei Saudi Arabia South Africa Tunisia Jordan UAE

The Americas Argentiana Bolivia Colombia Costa Rica Brazil Dominican Republic

Canada Cuba Mexico Panama United States Uruguay

Where Are We Going?

• Asia/Pacific China Hong Kong India Malaysia Philippines Singapore Taiwan Thailand

• Europe Cyprus Germany Hungary Lithuania Malta Poland Portugal Turkey Czech Republic Slovakia Spain Poland

Preparation For Take Off

• Background The first recorded instance of medical

tourism dates back thousands of years to when Greek pilgrims traveled from all over the Mediterranean to the small territory in the Saronic Gulf. This territory was the sanctuary of the healing god Asklepios. This was the original travel destination for medical tourism

Preparation For Take Off

Estimates for 2006 show 500,000 people left the country for medical treatments. This is over 3 times the number of people in 2004 per National Coalition of Healthcare

Estimates for 2007 show that approximately 750,000 people left the country for medical treatments (50% increase)

Deloitte Consulting – projects medical tourism could jump by a factor over 10 in the next decade

Preparation For Take OffBackground Continued

• Dollars at stake Estimates on this industry range from

$40B to $100B within the next 4 years Patients save 30 to 80 percent on

medical treatment including travel costs Employers can possibly avoid 20 to 30

percent premium increases.

Preparation For Take OffBackground Continued

MCOs can achieve reductions in Medical Cost Ratio; positively impacting their margins

U. S. providers could lose millions of dollars in services due to outsourcing of medical services

Expect Some Turbulence

• Integrity of the data and quality outcomes

• Information privacy• Coordination of care before and after

treatment is rendered• Cost/benefit analysis for MCOs and

employers – cost containment turned into financial incentives for patients

Let’s grab our luggage, jump in a cab and get to

the…hospital

• Employers with self-insured-plans are looking for ways to stem and reduce costs but may not be ready for all of the responsibility

• Managed care companies are along for the ride but will be forced to deal with the legal issues, privacy of information and a new standard of what goes into benefit denials

Let’s grab our luggage, jump in a cab and get to the…

hospital

• Providers will face a new threats to their fees and the justifications for them as their competition just went global

• Travelers, if you think things went horribly wrong in Mexico after you drank the water…

Managed Care Liability Issues: Managed Care Liability Issues: Past, Present and Future Past, Present and Future

THE FUTURE….

• Medical Home????

• Obama Health Plan???

Managed Care Liability Issues: Managed Care Liability Issues: Past, Present and Future Past, Present and Future

On behalf of Steve, Janis, Terry & Susan

THANK YOU FOR YOUR ATTENTION