Health Net, Prudential settle physician lawsuits

Medical leaders hope remaining health plans will resolve lawsuits in which doctors claim that companies improperly reimbursed them.

By Damon Adams — Posted May 23, 2005

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In its proposed settlement with physicians, California-based Health Net plans to improve how it does business with doctors, including speeding up claim payments and creating an external board to resolve billing disputes.

A proposed agreement with Prudential Insurance of America contains monetary compensation for doctors but doesn't include systematic changes because the company sold its health care subsidiary, Prudential Health Care.

The two settlements, announced May 3, won't translate to much cash for the more than 700,000 physicians involved in the case that challenged the way insurance companies reimburse them. But medical association leaders said the deals, like previous agreements with Aetna and CIGNA, are more about improving physician practices than getting a check.

"It's the future [of medicine] that gets a huge gain here," said Jack Lewin, MD, chief executive officer of the California Medical Assn., one of the groups that sued health plans over the way doctors were paid. "It's going to be a pleasure to sit down with Health Net and work out problems across the table rather than lawyer to lawyer."

Physicians' attorneys said system changes by Health Net, which covers 6.5 million people in 27 states and Washington, D.C., could be worth about $300 million to doctors.

Jay Gellert, president and CEO of Health Net, said settling was the right thing to do for physicians and the company. Health Net agreed to pay $40 million to physicians and about $20 million for plaintiffs' legal fees.

"This will allow us to continue to enhance our working relationship with the physicians who serve our members. It will put a potentially contentious matter behind us," Gellert said in a statement.

Medical society leaders and physicians' attorneys said the agreement would enhance communication between Health Net and physicians and reduce time-consuming administrative burdens.

In a statement, Archie Lamb, the co-lead counsel for the physicians, said the Health Net and Prudential deals "recognize the overriding importance of the physicians' input in all health care decisions."

Health Net's practice changes will include speeding up payments to doctors, with electronically submitted claims paid in 15 days and paper claims paid in 30 days. The company will provide 90-day notice of changes in practices and policies and institute changes to standard form contracts.

Health Net said it would use a uniform definition of medical necessity and enhance disclosure of certain claims payment practices. Among other changes, the company will create an external review board to resolve billing disputes and establish an independent physician advisory committee to discuss agenda items of statewide or greater scope concerning physicians and Health Net.

"Ultimately, [physicians] are going to be happy" with the changes, said Tim Norbeck, executive director of the Connecticut State Medical Society. "It does make sense to make peace with doctors and to end this adversarial relationship."

Meanwhile, Prudential will pay $22.2 million under its settlement with physicians, officials said. Prudential sold its health care business, Prudential Health Care, in 1999, so system changes are not part of the agreement.

Prudential spokeswoman Laurita Warner said the company did not admit to any wrongdoing but settled because pursuing litigation "would not be in the best interest of anyone at this point."

U.S. District Judge Federico Moreno in Miami will hold a final hearing to approve the settlements. At press time, a date had not been set.

The settlements stem from lawsuits physicians and medical societies filed against health plans in courts across the country, claiming that plans failed to pay them fairly. The California Medical Assn., the Connecticut State Medical Society and the Texas Medical Assn. were among the original groups to file the lawsuits, which later were consolidated in the U.S. District Court in the Southern District of Florida under Moreno.

In 2003, CIGNA and Aetna signed settlements with physicians, agreeing to pay millions to compensate doctors for past claims and promising to make changes.

As those settlements are implemented, the American Medical Association and CMA said some physicians who filed for damages under the CIGNA settlement recently had their claims denied by mistake. Doctors who received "defective" notices now have 60 days instead of 30 days to resubmit claims to the settlement administrator.

A handful of health plans, including Humana and WellPoint Health Networks (which merged with Anthem), have not settled similar lawsuits filed by physicians.

"The remaining defendants continue to prepare for trial and are confident in the merits of their case," said Mike Hotra, a spokesman for the insurers. Trial is set for September.

But physician leaders said they hoped that agreements could be reached before trial. "Others will see that having to fight this in the courts ... is not a very good strategy for a health plan," Dr. Lewin said.

AMA President John C. Nelson, MD, MPH, said: "The American Medical Association is pleased Health Net and Prudential have settled the class-action lawsuits filed against them by the nation's physicians. These two insurers clearly recognize the benefit of improved relations with physicians. We expect the other insurers that have not yet settled will follow this same course if they wish to improve relations with physicians."

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Settlement terms

Health Net and Prudential Insurance of America reached settlements with physicians this month in class-action lawsuits claiming that the health plans had reimbursed physicians improperly. Here are some key components of the agreements that still need final approval from the court:

  • Health Net will pay physicians $40 million.
  • Prudential will pay physicians $22.2 million.
  • Health Net will pay electronic claims in 15 days, paper claims in 30 days.
  • Health Net will use uniform definition of medical necessity.
  • Health Net will establish external billing dispute board and physician advisory committee.

Sources: Health Net and Prudential Insurance of America

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External links

Health Net Inc. settlement agreement, in pdf (link)

American Medical Association on Aetna and CIGNA settlements (link)

Aetna and CIGNA HMO settlements, including forms physicians can print (link)

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