Physicians sue insurer over payment denials

California doctors say Health Net’s process of defining the medical necessity of health care services is inaccurate.

By Alicia Gallegos — Posted Oct. 2, 2012

Print  |   Email  |   Respond  |   Reprints  |   Like Facebook  |   Share Twitter  |   Tweet Linkedin

In the latest battle among doctors and insurers over what constitutes “medically necessary” treatment, the Los Angeles County Medical Assn. is suing Health Net, claiming that the plan routinely denies payment for lifesaving health care services. The medical association is asking a judge to immediately block the insurer’s payment practices, which doctors say includes a faulty set of criteria used to define medical necessity.

Health Net is irreparably harming the doctor-patient relationship and keeping physicians from ensuring that their patients receive appropriate care, said Rocky Delgadillo, the association’s CEO.

“Doctors and the patients that they serve are being hurt by Health Net defining medical necessity by its own terms and by its own people,” he said. “It’s another case of insurers putting profit over patients and denying care simply because the care is expensive.”

Health Net said in a statement that it carefully follows the guidelines established by the California Dept. of Managed Health Care and the Dept. of Insurance to define what is medically necessary. Health Net declined to comment on the lawsuit.

“Medical care is complex, and sometimes there are differing medical opinions as to what constitutes medically necessary care,” Health Net’s statement said. “These regulatory procedures provide a ready path for members to seek review of Health Net decisions by medical professionals who are not affiliated with Health Net. If the independent expert reviewer determines that the desired treatment is medically necessary, then Health Net covers it.”

Other actions over coverage

The Los Angeles suit is at least the second legal challenge in California over billing protocols by doctors and insurers. In July, the California Medical Assn. and more than 50 physicians sued Aetna. The CMA said Aetna is underpaying out-of-network physicians, refusing to authorize some out-of-network services and illegally terminating the contracts of doctors who make such referrals.

Aetna argues that the CMA’s lawsuit is retaliation against the insurer because of Aetna’s lawsuits against physicians. Aetna has accused physicians and health centers in four states of drastically overbilling for out-of-network services. The suits, filed in courts in California, New Jersey, New York and Texas, allege overcharging. In some cases, the suits say, in-network physicians are receiving kickbacks for out-of-network references.

In late August, CMA issued its own retaliation claim, saying that Aetna is punishing CMA members by terminating their contracts or abruptly ending contract negotiations because of CMA’s lawsuit. The medical association sent a cease-and-desist letter to the insurer, demanding that it stop the unfair treatment of CMA members.

“Regardless of Aetna’s position in the ongoing litigation, they must stop these egregious and retaliatory actions against physicians,” CMA President James T. Hay, MD, said in a statement. “Terminating contracts and ending negotiations will only shrink Aetna’s network of physicians, while patient access to care will be severely impacted.”

In an Aug. 28 letter to CMA, Aetna rebutted CMA’s allegations.

“It does not serve anyone for the CMA to send inflammatory, inaccurate and improper correspondence to Aetna simply so that they can provide copies of it to the press, all for the purpose of shaping an inaccurate and skewed public opinion regarding the recently filed litigation,” wrote John Edward Neugebauer, Aetna’s deputy chief legal officer.

In the Los Angeles case, doctors say they have grown frustrated with ordering treatments for patients only to have payment for those services denied by Health Net. Several patients have joined the legal challenge claiming breach of good faith and breach of contract by Health Net. In one patient’s case, Robert Mendoza said the insurer refused to pay for a procedure to treat his rare form of prostate cancer. The Mendoza family was forced to cash in a family life insurance policy to pay for the $30,000 treatment, according to the suit.

Often, California physicians who provide necessary medical care to patients are not properly paid by Health Net for their services, Delgadillo said.

“Physicians who take an oath to make their patients better and to improve their quality of life will perform the procedure — especially in those instances where it is lifesaving — and not get reimbursed by Health Net,” he said. Doctors will “basically subsidize treatment for the patient.”

Back to top



Read story

Confronting bias against obese patients

Medical educators are starting to raise awareness about how weight-related stigma can impair patient-physician communication and the treatment of obesity. Read story

Read story


American Medical News is ceasing publication after 55 years of serving physicians by keeping them informed of their rapidly changing profession. Read story

Read story

Policing medical practice employees after work

Doctors can try to regulate staff actions outside the office, but they must watch what they try to stamp out and how they do it. Read story

Read story

Diabetes prevention: Set on a course for lifestyle change

The YMCA's evidence-based program is helping prediabetic patients eat right, get active and lose weight. Read story

Read story

Medicaid's muddled preventive care picture

The health system reform law promises no-cost coverage of a lengthy list of screenings and other prevention services, but some beneficiaries still might miss out. Read story

Read story

How to get tax breaks for your medical practice

Federal, state and local governments offer doctors incentives because practices are recognized as economic engines. But physicians must know how and where to find them. Read story

Read story

Advance pay ACOs: A down payment on Medicare's future

Accountable care organizations that pay doctors up-front bring practice improvements, but it's unclear yet if program actuaries will see a return on investment. Read story

Read story

Physician liability: Your team, your legal risk

When health care team members drop the ball, it's often doctors who end up in court. How can physicians improve such care and avoid risks? Read story

  • Stay informed
  • Twitter
  • Facebook
  • RSS
  • LinkedIn