Aetna Files $120 Million Lawsuit Against Texas Hospital for Fraudulent Billing
More complex than it seems, a lawsuit filed on Feb. 23 in the Southern District of Texas actually involves a hospital and an insurance company fighting over in-network versus out-of-network contracting and billing issues. According to Aetna Life Insurance Company’s original complaint, North Cypress Medical Center and its CEO Robert A. Behar M.D. allegedly used fraudulent billing schemes to circumvent patient responsibility copays and paid kickbacks to physicians to garner the referral of Aetna patients to it, an out-of-network physician-owned hospital. Cypress argues in a motion to dismiss Aetna’s suit, however, that it has been the victim of Aetna’s alleged scheme to sue out-of-network providers across the country in an attempt to force them into financially disadvantageous contracts with Aetna. Aetna’s Original Complaint in the Feb. 23 Case Aetna claims that North Cypress has been much more successful than other hospitals in its market that have higher patient volumes and a wider array of services, reporting annual gross revenues of $1.5 billion. According to Aetna’s complaint, North Cypress marketed itself as having the atmosphere of an upscale five-star hotel. Aetna asserts that this success is not a result of it being a high quality and more efficient facility, but because […]
More complex than it seems, a lawsuit filed on Feb. 23 in the Southern District of Texas actually involves a hospital and an insurance company fighting over in-network versus out-of-network contracting and billing issues. According to Aetna Life Insurance Company’s original complaint, North Cypress Medical Center and its CEO Robert A. Behar M.D. allegedly used fraudulent billing schemes to circumvent patient responsibility copays and paid kickbacks to physicians to garner the referral of Aetna patients to it, an out-of-network physician-owned hospital.
Cypress argues in a motion to dismiss Aetna’s suit, however, that it has been the victim of Aetna’s alleged scheme to sue out-of-network providers across the country in an attempt to force them into financially disadvantageous contracts with Aetna.
Aetna’s Original Complaint in the Feb. 23 Case Aetna claims that North Cypress has been much more successful than other hospitals in its market that have higher patient volumes and a wider array of services, reporting annual gross revenues of $1.5 billion. According to Aetna’s complaint, North Cypress marketed itself as having the atmosphere of an upscale five-star hotel. Aetna asserts that this success is not a result of it being a high quality and more efficient facility, but because of its illegal activities. Aetna alleges that North Cypress offered ownership interests in the hospital to physicians who admitted patients, a form of kickback, and that physicians who did not admit a sufficient number of patients were eventually squeezed out of their ownership interest. Aetna also alleges that North Cypress, because of its out-of-network status, recruited patients to use its services by charging them no more than what they would have to pay if they used an in-network hospital, forgiving patient responsibility costs like copays, deductibles and co-insurance. North Cypress then, allegedly, billed Aetna inflated rates and was paid more than in-network providers precisely because it was out-of-network and was not forced to accept Aetna’s much lower in-network rates. Aetna, like many other insurance companies, allow out-of-network options for their members but the member must pay higher deductible and co-pays than if they went to an in-network facility. The excessive charges by North Cypress allegedly included such things as $20,000 for treatment of an abscess and near $83,000 for removing a nasal polyp, according to Aetna’s complaint. Aetna also alleges that this was a specific business strategy masterminded by Behar and carried out by others at North Cypress. It asserts that such activity constitutes violations of the Racketeer Influenced and Corrupt Organizations Act (RICO) and seeks $120 billion to recover overpayments North Cypress allegedly received.
North Cypress Files Motion to Dismiss or Transfer As mentioned earlier, this case has deeper roots than this single complaint. North Cypress and Dr. Behar asked the court to dismiss Aetna’s complaint or transfer the matter to another court already handling a lawsuit North Cypress filed against Aetna on Feb. 12, 2013, seeking to collect underpayments and non-payment of medical benefits from Aetna. That case is Koenig v. Aetna Life Ins. Co. (C.A. No. 4:13-cv-00359), filed in the Southern District, Houston Division. North Cypress now alleges that after two years of intense discovery in Koenig, involving over 1.4 million pages of documents, Aetna filed a motion for leave to file a first amended counterclaim which eventually was dismissed. According to North Cypress’s motion, Aetna’s new case discussed above, allegedly covers the identical 66,000 plus claims and the same 3,500 plans and policies as the Koenig case—essentially seeking a second shot at that counterclaim amendment. North Cypress claims Aetna is engaging in “judge shopping” in the hopes of finding a court more favorable to its case.
Laboratory Perspective Issues relating to exclusive insurance contracts have impacted the laboratory industry for many years and such exclusives are a key element in competition between large national laboratories and smaller regional or local laboratories. Insurance companies used this natural market force to commandeer predatory rates from both large and small providers who are hoping to garner a large enough share of a market to be able to control where discretionary tests are sent. The hope is that a physician will, as a matter of convenience, send all of their testing to the laboratory that he must use for the largest number of patients in his practice. This is known as gaining “pull through” business and it is still a prominent influence on the laboratory market. The idea is that a laboratory can cover its low margins, or in some cases losses, on low-bidded exclusive insurance contracts with revenue on the discretionary testing for which it can charge a higher price. This strategy, in part, depends on the insurance company being able to keep their members and physicians from using other laboratories, sometimes referred to as “leakage.” Insurance companies are well aware of the cost associated with leakage, which can be significant, particularly for a company Aetna’s size. If your laboratory is the excluded laboratory, you could find yourself fighting to stay viable and if you are the laboratory with the low-bid exclusive contract, you may be hoping that you gain control of the market before your ability to live with the marginal pricing expires. Some laboratories may try to overcome this problem by employing strategies Aetna alleges in this case. The questions compliance officers need to ask are precisely the questions that may be resolved by this case’s outcome. This, and other cases like it, demonstrate the insurance industry’s impatience with tactics that undermine cost control efforts by shifting costs to the beneficiary. While the tactics described in these court documents are merely the subject of allegations and are not proven facts, and the parties’ allegations of illegal conduct are simply the parties’ arguments for how the law should be applied to these facts, nonetheless, these cases provide guidance and raise questions compliance officers should ask when evaluating their laboratory’s policies, practices and procedures. Takeaway: Laboratories should follow this case because it could have far reaching effect on the influence insurance companies can exert on the laboratory industry and health care in general.
Aetna’s Original Complaint in the Feb. 23 Case Aetna claims that North Cypress has been much more successful than other hospitals in its market that have higher patient volumes and a wider array of services, reporting annual gross revenues of $1.5 billion. According to Aetna’s complaint, North Cypress marketed itself as having the atmosphere of an upscale five-star hotel. Aetna asserts that this success is not a result of it being a high quality and more efficient facility, but because of its illegal activities. Aetna alleges that North Cypress offered ownership interests in the hospital to physicians who admitted patients, a form of kickback, and that physicians who did not admit a sufficient number of patients were eventually squeezed out of their ownership interest. Aetna also alleges that North Cypress, because of its out-of-network status, recruited patients to use its services by charging them no more than what they would have to pay if they used an in-network hospital, forgiving patient responsibility costs like copays, deductibles and co-insurance. North Cypress then, allegedly, billed Aetna inflated rates and was paid more than in-network providers precisely because it was out-of-network and was not forced to accept Aetna’s much lower in-network rates. Aetna, like many other insurance companies, allow out-of-network options for their members but the member must pay higher deductible and co-pays than if they went to an in-network facility. The excessive charges by North Cypress allegedly included such things as $20,000 for treatment of an abscess and near $83,000 for removing a nasal polyp, according to Aetna’s complaint. Aetna also alleges that this was a specific business strategy masterminded by Behar and carried out by others at North Cypress. It asserts that such activity constitutes violations of the Racketeer Influenced and Corrupt Organizations Act (RICO) and seeks $120 billion to recover overpayments North Cypress allegedly received.
North Cypress Files Motion to Dismiss or Transfer As mentioned earlier, this case has deeper roots than this single complaint. North Cypress and Dr. Behar asked the court to dismiss Aetna’s complaint or transfer the matter to another court already handling a lawsuit North Cypress filed against Aetna on Feb. 12, 2013, seeking to collect underpayments and non-payment of medical benefits from Aetna. That case is Koenig v. Aetna Life Ins. Co. (C.A. No. 4:13-cv-00359), filed in the Southern District, Houston Division. North Cypress now alleges that after two years of intense discovery in Koenig, involving over 1.4 million pages of documents, Aetna filed a motion for leave to file a first amended counterclaim which eventually was dismissed. According to North Cypress’s motion, Aetna’s new case discussed above, allegedly covers the identical 66,000 plus claims and the same 3,500 plans and policies as the Koenig case—essentially seeking a second shot at that counterclaim amendment. North Cypress claims Aetna is engaging in “judge shopping” in the hopes of finding a court more favorable to its case.
Laboratory Perspective Issues relating to exclusive insurance contracts have impacted the laboratory industry for many years and such exclusives are a key element in competition between large national laboratories and smaller regional or local laboratories. Insurance companies used this natural market force to commandeer predatory rates from both large and small providers who are hoping to garner a large enough share of a market to be able to control where discretionary tests are sent. The hope is that a physician will, as a matter of convenience, send all of their testing to the laboratory that he must use for the largest number of patients in his practice. This is known as gaining “pull through” business and it is still a prominent influence on the laboratory market. The idea is that a laboratory can cover its low margins, or in some cases losses, on low-bidded exclusive insurance contracts with revenue on the discretionary testing for which it can charge a higher price. This strategy, in part, depends on the insurance company being able to keep their members and physicians from using other laboratories, sometimes referred to as “leakage.” Insurance companies are well aware of the cost associated with leakage, which can be significant, particularly for a company Aetna’s size. If your laboratory is the excluded laboratory, you could find yourself fighting to stay viable and if you are the laboratory with the low-bid exclusive contract, you may be hoping that you gain control of the market before your ability to live with the marginal pricing expires. Some laboratories may try to overcome this problem by employing strategies Aetna alleges in this case. The questions compliance officers need to ask are precisely the questions that may be resolved by this case’s outcome. This, and other cases like it, demonstrate the insurance industry’s impatience with tactics that undermine cost control efforts by shifting costs to the beneficiary. While the tactics described in these court documents are merely the subject of allegations and are not proven facts, and the parties’ allegations of illegal conduct are simply the parties’ arguments for how the law should be applied to these facts, nonetheless, these cases provide guidance and raise questions compliance officers should ask when evaluating their laboratory’s policies, practices and procedures. Takeaway: Laboratories should follow this case because it could have far reaching effect on the influence insurance companies can exert on the laboratory industry and health care in general.
Subscribe to view Essential
Start a Free Trial for immediate access to this article