Tennessee physicians to receive refunds in overpayment lawsuit

The dispute centered on a firm that wrongly tried to recoup money from doctors who supposedly upcoded claims to self-funded health plans.

By Emily Berry — Posted Dec. 27, 2010

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In a settlement reached Nov. 29, Nashville Metropolitan Public Schools and Health Research Insights, a firm the school system hired to try to collect alleged overpayments from physicians, have agreed to give back money doctors paid them and stop claiming that the doctors overcharged for their services.

The Tennessee Medical Assn. and two physicians sued HRI and the school system in June 2009. The Litigation Center of the American Medical Association and the State Medical Societies helped fund the lawsuit.

Yarnell Beatty, director of the legal and government affairs division of the Tennessee Medical Assn., said that thanks to warnings from the TMA advising them not to pay Health Research Insights, physicians paid only about $8,000 of the total $650,000 in claims HRI had sought. He wasn't sure how many doctors made payments.

Mary Johnston, assistant metropolitan attorney for the government of Nashville and Davidson County, Tenn., said the school system was represented in court by HRI's insurance carrier and that the settlement would not cost the school system anything.

Beginning in February 2009, HRI, based outside Nashville, sent letters to 810 physicians on behalf of the school system, telling them they would have to repay in some cases thousands of dollars based on its determination that the doctors upcoded on one or more occasions after treating school employees or their family members.

Paper manufacturer Georgia-Pacific and trucking company Averitt Express also were among the self-insured companies in Georgia, Kentucky and Texas that hired HRI to try to reclaim money from doctors who treated their employees. Physicians who declined to repay were instructed to submit medical records to prove they had coded their claims properly.

HRI had arranged to keep 40% of the money it collected and send the rest to the employer. Nashville schools used BlueCross BlueShield of Tennessee to administer its health plan, but the Blues were not involved in the recoupment efforts.

HRI had not seen any medical claims before accusing physicians of upcoding. The company claimed it relied on a proprietary algorithm that could calculate a likely rate of upcoding based on aggregated claims data.

A Nashville-Davidson County Circuit Court judge ruled July 7 in a partial summary judgment for the plaintiffs that the school system was bound by state law limiting overpayment claims to 18 months, despite the system self-funding its plan under the Employee Retirement Income Security Act. In the July ruling, HRI was enjoined from making any further claims against physicians on behalf of the Nashville school system.

As part of the final settlement, HRI agreed not to claim that it targets only physicians who have "willfully and persistently" overbilled, to stop claiming that the company's algorithm can identify upcoding without review of medical records, to stop threatening physicians with legal or criminal action and to refrain from "misrepresenting its relationship to governmental authorities," according to the TMA's news release announcing the settlement.

HRI "retracted its assertion that the plaintiff physicians upcoded claims," according to the release. The 810 physicians should receive notice of the settlement by mail.

The TMA is still trying to win back what physicians paid HRI in response to letters sent on behalf of Averitt Express, Beatty said.

HRI's website is no longer live, and its chief executive officer, Thad Perry, PhD, could not be reached for comment.

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