Cuomo's reasonable investigation into health plan pricing

New York takes on United over an allegedly rigged system for pricing services by out-of-network physicians.

Posted March 10, 2008.

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A six-month investigation by New York Attorney General Andrew Cuomo echoes what physicians have claimed for years: The system that insurers nationwide use to set "usual, customary and reasonable" prices for out-of-network care is seriously flawed.

Cuomo alleges that UnitedHealth Group subsidiary Ingenix operates a database that is defective and intentionally manipulated to set UCR rates that are too low. On Feb. 13, he revealed his intent to sue United. His plans don't stop there. Cuomo said he already has issued subpoenas to 16 other insurers who use Ingenix data.

The American Medical Association, which is involved in a separate suit against United over the UCR system, commended the attorney general's efforts. At Cuomo's news conference announcing his investigation, AMA President-elect Nancy H. Nielsen, MD, PhD, said the problems he detailed are pervasive.

As physicians and Cuomo see it, use of an invalid system has allowed insurers to profit while patients and doctors are shortchanged. Consumers pay higher premiums for health plans that offer access to out-of-network physicians.

Insurers promise to cover a portion of the bill, typically 80% of the doctor's full charge or 80% of the usual and customary rate, whichever is cheaper. The problem, Cuomo says, is that bad Ingenix data set UCR prices that are artificially lower than physicians' actual costs. The result: The 80% of the UCR insurers pay out-of-network doctors is substantially less than what doctors charge. Health plans leave patients holding the bag.

As Robert B. Goldberg, DO, president of the Medical Society of the State of New York, points out, this system interferes with the doctor-patient relationship. When an insurer says it's covering the usual and customary rate but the physician bills for more, the patient wonders why the doctor is charging so much.

Physicians have been complaining for years about the system, only to be stonewalled by United's assertion that the methodologies are confidential and proprietary. In 2000, the AMA joined the MSSNY, the Missouri State Medical Assn. and individual physicians, along with others, in filing a class-action suit against the company. The case, pending before the U.S. District Court for the Southern District of New York, seeks awards for physician plaintiffs and a permanent end to use of the Ingenix database to determine UCR amounts, among other requests.

United members who complained about the low reimbursement for out-of-network care also got nowhere, according to Cuomo's office. The company refused to explain the basis for its rates and told members that they were based on "independent research from across the health care industry," the attorney general's notice of proposed litigation states.

But there is nothing independent about Ingenix or its data. Not only is Ingenix owned by United, but the data it uses come from United and other insurers, all of whom have an interest in deflating UCR rates to help their bottom lines.

Cuomo's office also alleges several problems with the Ingenix database that result in artificially low rates. For example, he says Ingenix deletes valid high charges, excludes charges that have modifiers to indicate services with complications, and pools data from dissimilar health professionals, such as nurses, physician assistants and physicians.

United is standing by its database. "The reference data is rigorously developed, geographically specific, comprehensive and organized using a transparent methodology that is very common in the health care industry," the company said in a prepared statement. It vows to cooperate fully with the attorney general.

The New York investigation and planned lawsuit are just the latest items on a long list of recent legal challenges against United. In late January, California fined the company several million dollars for mishandling claims, and additional fines are pending.

In December 2007, United said it wanted to improve its relationship with physicians and patients. Lifting the cloak of secrecy around the UCR methodology is one way the company could do it.

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External links

New York attorney general's notice of proposed litigation against UnitedHealth Group, Feb. 13, in pdf (link)

Fourth Amended Complaint, American Medical Association, et al. v. United Healthcare Corporation, et al., July 2007, in pdf (link)

AMA/State Medical Societies Litigation Center (link)

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