$350 million United settlement over physician pay gets preliminary approval

The AMA and state medical societies had sued the insurer over payments to out-of-network doctors that the organized medicine groups believed were too low.

By Emily Berry — Posted Dec. 21, 2009

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A federal judge has granted preliminary approval to a $350 million settlement agreement between UnitedHealthcare and the American Medical Association. But finalization could be delayed or barred by an appeal.

United agreed in January to settle allegations that it systematically downgraded pay for out-of-network physicians by using a manipulated database by Ingenix, another UnitedHealth Group subsidiary. It did not admit wrongdoing.

The lawsuit was filed in 2000 in U.S. District Court in New York by the Litigation Center of the American Medical Association and State Medical Societies, the Medical Society of the State of New York, and the Missouri State Medical Assn., on behalf of out-of-network physicians.

A related investigation by New York Attorney General Andrew Cuomo resulted in agreements from United and most other large insurers to stop using the database in question and pay to establish an independent one.

None of the companies has officially admitted wrongdoing.

"Years of litigation and tireless advocacy from the AMA and organized medicine have exposed the industrywide insurer scheme and paved the way for a more equitable way to set payments for out-of-network care," AMA Immediate Past President Nancy H. Nielsen, MD, PhD, said in a statement.

The United settlement has been on hold because plaintiffs' attorneys with the law firm Wilentz, Goldman & Spitzer argued that the $350 million settlement payment proposed by its co-counsel firm, Pomerantz, Haudek, Grossman & Gross, was too low.

Days after U.S. District Judge Lawrence McKenna, in November, granted preliminary approval to the agreement, Wilentz filed a petition to appeal to the Second Circuit Court of Appeals, claiming that the deal had been negotiated without its attorneys' participation.

D. Brad Hufford, Pomerantz' lead attorney on the case, said his firm planned to file an opposition to Wilentz' petition.

The appeals court will have to decide whether to hear the case, and there's no deadline for that decision.

In the meantime, it's unclear if physicians and other class-action lawsuit members will receive notice of the preliminary approval, which typically would include an opportunity to file a claim or to opt out of the proposed settlement.

If finalized, the $350 million settlement would be shared by an estimated 21.1 million physicians, and current and former United members who were underreimbursed for care.

Carlin Phillips, an attorney based in North Dartmouth, Mass., has litigated class-action lawsuits against insurers on behalf of physicians over payment issues. Although it's "not common" for two law firms on the same side to disagree over a settlement, he said, the situation may end up favoring doctors. Phillips is not involved with the AMA-United case.

McKenna was forced to do a thorough review of the deal earlier than the court would have otherwise, Phillips said. As a result, there are less likely to be other major challenges that would delay eventual payments.

Whenever settlement notices to class members are mailed out, "human nature will take over," and many of those who are eligible to collect part of the settlement likely will ignore it or never get around to filing a claim, Phillips said.

"They may think it's not worthwhile, or they just don't have the time and resources to devote somebody to do it," he said. "But in this case, the numbers are so big, they could get back quite a lot of money at a time hospitals and practices are hurting for money."

The AMA also has filed lawsuits against Aetna, Cigna and WellPoint over their use of the Ingenix database. Those cases are still pending.

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