Krista C. (Self-Funded Plan administered by Pinnacle Claims Management / The Holman Group)
Krista C. was admitted to the hospital for treatment. Prior to admission, the hospital contacted the Holman Group and verified that inpatient benefits were payable at 80% of "usual, customary and reasonable" (UCR) charges, subject to a $2,000,000 lifetime maximum. The hospital was advised that pre-authorization was required for inpatient care. Thereafter the hospital obtained all necessary authorizations, in writing, for the treatment rendered. This consisted of a series of seven separate authorization letters. Therefore all treatment was meticulously case-managed and approved.
Total charges exceeded $100,000. The Holman Group paid a little over $18,000 on the claim. The stated reason for non-payment on the Explanation of Benefits (EOB) forms was "Not Covered". No explanation was stated on the forms for this drastic underpayment, except that it said charges "Exceeded Amount" (without specifying what mystery amount the charges exceeded).
It appeared that the plan might be governed by ERISA or it might have been considered a "government plan" exempt from ERISA. In any case, the EOB forms failed to comply with even the most rudimentary mandates of ERISA and the federal regulations, (if indeed ERISA applied), nor with even the minimum requirements of state law (if ERISA did not apply), nor even with the provisions of the plan itself, as in either case both the law and the plan require clear notice of the reasons for a claim denial.
When the hospital representative contacted Holman Group, he was told that all of the claims were paid at $488.88 per day, which was said to be 80% of an "allowed amount" of $611.10 per day, as that was said to be "the per diem rate" from some "fee schedule". When asked "What fee schedule?" the Holman representative confessed she did not know. The hospital representative was advised to speak to the "Care Manager", who reiterated that the claim had been paid at an "allowed rate", but the "Care Manager" didn’t provide any further information as to what exactly that meant. Ultimately, he said that he "double checked everything and all rates were calculated correctly." So absolutely no explanation of any kind was ever given by anybody from the Holman Group, either telephonically or in writing, for the drastic underpayment of the claim.
The case was referred to me. I learned that the Holman Group apparently had used "Ingenix" criteria for determining its UCR rates. And administrative appeal was submitted in which I pointed out that the handling of the claim was in clear violation of the law. I also pointed out that Ingenix was at that time (2008) under investigation by then New York State Attorney General Andrew M. Cuomo (now Governor). According to Cuomo’s public announcement, he was conducting an industry-wide investigation into "a scheme by health insurers to defraud consumers by manipulating reasonable and customary rates." The investigation identified that Ingenix, Inc., the nation’s largest provider of healthcare billing information, was serving as a conduit for rigged data to the largest insurers in the country. Cuomo stated that Ingenix was "at the center of the scheme".
Cuomo's investigation found that Ingenix databases used to quantify reasonable and customary rates "were remarkably lower than the actual cost of typical medical expenses". This inappropriately provided health insurance companies with a basis to deny a portion of provider claims, thereby pushing costs down to members. The investigation charged that by distorting the "reasonable and customary" rate, the insurers were able to keep their reimbursements artificially low and force patients to absorb a higher share of the costs.
Cuomo said the investigation found a clear example of the scheme: United insurers knew most simple doctor visits cost $200, but claimed to their members the typical rate was only $77. The insurers then applied the contractual reimbursement rate of 80 percent, covering only $62 for a $200 bill and leaving the patient to cover the $138 balance. When members complained their medical costs were too high, the investigation concluded, United's insurers allegedly hid their connection to Ingenix by claiming the rate was the product of "independent research". (Sources: Healthcare IT News www.healthcareitnews. com; Office of New York Attorney General website http://www.oag.state.ny.us; Ingenix.com).
Result: The case was resolved satisfactorily without litigation.