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More than $90 Million in NY Ingenix Settlement to Fund Independent Insurance Payment Database

ARTICLE IN BRIEF

Several leading health insurers have paid some $90 million in settlement costs associated with a legal probe by New York State Attorney General Andrew Cuomo that determined that patients who received out-of-network medical services were paid between 10- and 28-percent less than they were owed, because of a flawed database from Ingenix.

The dominoes continue to fall in New York Attorney General Andrew Cuomo's case against insurers who use the flawed Ingenix database to calculate payments for out-of-network care.

Last March, Neurology Today reported that Cuomo had charged Ingenix and its parent company, United Healthcare, with defrauding consumers by manipulating reimbursement rates for patient visits to out-of-network doctors. [See www.neurotoday-online.com, “UnitedHealth Charged with Data Manipulation Scheme,” March 20, 2008.] Ingenix “intentionally skewed usual and customary [reimbursement] rates downward through faulty data collection, poor pooling procedures, and the lack of audits,” Cuomo said.

Since the initial probe was announced, dozens of insurance companies have settled with the attorney general's office and agreed to stop using the Ingenix database. The latest settlement, with Guardian Life Insurance in early March, “brings us within striking distance of complete industry reform,” Cuomo said. Guardian has some 20,000 health insurance customers in New York. So far, insurers that include WellPoint (whose subsidiary, Empire BlueCrossBlueShield, is the largest insurer in the New York state), Cigna, and Aetna have paid some $90 million in settlements associated with the case.

The probe determined that patients who received out-of-network medical services were paid between 10- and 28-percent less than they were owed. Instead of reimbursing each patient, however — a task that would be extremely cumbersome — the settlement fees will be used to set up an independent nonprofit entity that will develop a transparent database to calculate future reimbursements.

‘A MONOPOLY ON THE DATA’

Ingenix has had a virtual monopoly on the data used to establish out-of-network reimbursement rates, said Joel Kaufman, MD, associate professor of clinical neuroscience at Warren Alpert Medical School of Brown University in Providence, RI, and chair of the AAN Payment Policy Subcommittee. “There aren't many companies that are able to collect, process, and analyze this type of information. As an example, a few years ago, when Medicare was looking at modeling hospital data, only a couple of companies were able to respond — and Ingenix was one.”

Ingenix compiled its system by gathering data from insurers and pooling it into a larger database. “But no one, in my opinion, truly vetted the data that went in,” said Bill Henderson, an administrator of Upstate Neurology Consultants in Albany, NY, and a member of the AAN Practice Management and Technology Subcommittee.

“Companies gave their data to Ingenix, but I've never heard Ingenix describe their methodology to review the accuracy of that submitted data. Ingenix then determined what the ‘usual and customary’ fees were, and then the big question that neither United Healthcare nor any insurer has been able to answer is: Why did they decide that 80 percent of ‘usual and customary’ is what they should reimburse for out-of-network care? How did they arrive at that number? They really have no idea — they've just always done it that way.”

EFFECT ON NEUROLOGY PATIENTS

Did the flawed database have any specific impact on neurology, or particular types of neurologic care? Not that Henderson could see. “The impact was on our patients. Out-of-network patients did have to pay additional money to come here. We often found that we had to collect significantly more money directly from these patients after their insurer paid us. It was inconvenient for us to do a second step in billing, seeking perhaps $75 from the patients, which of course did impose an economic hardship on them. The problem for the patients was that they often didn't know exactly what out-of-network care would cost them until after they'd had their visit.”

“Large insurers have the information about what they pay physicians and what they've negotiated,” said Dr. Kaufman. “But physicians are divided and conquered, and because of antitrust laws, we can't get together and be on an equal footing with insurers, so you have things like this happening.”

How did the Ingenix database get so bad? “That's a good question,” said Dr. Kaufman, who noted that he has worked with people from Ingenix and praises them as “smart, talented people.”

“Was the data bad from the beginning, did the people who used it not take into account its limitations, or did they purposely use flawed data?” Dr. Kaufman asked. “The lawsuit said that some people at Ingenix manipulated the data favorably for insurers, and I suspect that's true, since when you're owned by an insurer, it's hard not to want to manipulate the data in their direction.”

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ANDREW CUOMO said the latest settlement, with Guardian Life Insurance in early March, “brings us within striking distance of complete industry reform.”

So what happens now? In New York, a new interim fee schedule is being set up to fill the gap until the attorney general's planned independent agency and database (slated to be housed in a university setting) is established.

Health-care statistician Frank Cohen, senior analyst with MIT Solutions, Inc., helped to develop the interim system. “I have a proprietary model that uses a statistical approach, pulling claims files and looking at average charges by physicians across the country, and specifically for New York, by specialty,” he said.

In other states, the Ingenix database is still being used. In fact, the New Jersey Hospital Association told Crain's Health Pulse that the state will soon mandate that insurers offering state-regulated health plans for small employers and individuals use the Ingenix data. New Jersey's Small Employer Health Benefits program would require these plans to use Ingenix data to establish their “customary and reasonable” fees.

“At some point down the line we could change, but for now it seems a reasonable approach,” a spokesman for the Department of Banking and Insurance told Crain's.

But that may change — a class-action suit has been filed in New Jersey federal court, seeking to ban the use of Ingenix data to set fees nationwide. In that suit, the American Medical Association and the medical societies of New York, New Jersey, Connecticut, North Carolina, and Texas sought to prevent insurers in other states from claiming that the Cuomo settlements only apply to New York policies.

Cohen has also heard from other states interested in pursuing similar actions against Ingenix there, although he can't reveal which ones. He thinks the settlement was important — but doesn't go far enough. “I'm glad, at least, that somebody paid for this, and that there will be a new system with transparency and accountability.”