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Throwing Stones at the Big Boys

People tell me major health insurers are “rackets” more often than you might think. Usually this stuff comes from certifiable crackpots. But my ears perked up when I heard about a lawsuit between a hospital system and the nation’s second-largest insurer.

When I spoke with David Rosen, who for 30 years has been president and CEO of MediSys Health Network, he was calm, collected and tired from a tussle he never wanted. Rosen says Oxford Health Plans, a unit of the nation’s second-largest health insurer, United Health Group, should be punished under the Racketeer Influenced and Corrupt Organization Act—the same law associated with convicting organized crime figures.

In its federal lawsuit, MediSys says United Health Group has implemented a “rogue business plan on a national level” that “contributed to UHG’s profits, which, in turn, have been utilized in attempts to justify outlandish compensation to [former United CEO William] McGuire, other UHG senior executives and managers of its business groups.”

How did a dispute over a couple of local hospital payer contracts lead to a federal RICO suit? MediSys, an urban system in the New York boroughs of Queens and Brooklyn with 1,200 acute beds and three hospitals, among other holdings, services a working class population. Rosen alleges that United bullies dozens of smaller hospital systems like his across the country that compete for business with large academic medical centers, while treating AMCs comparatively well.

The lawsuit, filed in the U.S. District Court, Eastern District of New York, centers on provider contracts that came up for renewal at different times in 2004 for Jamaica Hospital and Flushing Hospital. It accuses Oxford of telling its members falsely that Jamaica and Flushing were out-of-network providers while MediSys and Oxford disputed the implementation of two signed contracts over a period of years. Meanwhile, United continued to pay the hospitals under old lower rates and selectively told patients they would be responsible for a larger portion of their bill should they choose to have procedures done at a MediSys facility, the suit contends. Rosen says this behavior was motivated by Oxford’s desire to coerce MediSys into cajoling an independent, fee-for-service anesthesiology group into accepting Oxford’s network terms.

Rosen says “it’s lonely out there being the only guy throwing stones,” and that he never wanted to file a lawsuit. Another MediSys facility, Brookdale University Hospital and Medical Center in Brooklyn, has since filed a lawsuit of its own against Health Insurance Plan of Greater New York alleging the managed care organization conspired with physicians to improperly deny coverage to patients. However the UHG case turns out, Rosen says he’s surprised that Oxford chose to escalate to this level instead of simply executing the signed contracts and paying the hospitals retroactively. “But frankly, now we’ve reached the point where they can’t come in here and settle very easily.”

—Philip Betbeze