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Private Payer Class Action Lawsuits

Ed Gaines, JD, for HealthLeaders Media, August 17, 2009

Over the past five years, a series of settlements in class action suits brought principally by the American Medical Association and several large state medical societies against the nation's major managed care companies have—to greater or lesser extents—compelled the health plans to discontinue practices that systematically denied physicians' reimbursement for services rendered to patients.

A primary complaint by the medical societies was the widespread carrier practice of bundling services to avoid paying physicians for specific CPT codes. "Bundling" in this context refers to the use of claim editing software to review certain procedure codes, e.g. a head laceration from a motor vehicle accident, which may be used with a CPT modifier (the -25 modifier) in conjunction with an "evaluation and management" (E/M) service, e.g., CPT 99283 (emergency department visit involving a limited exam and moderate decision making.).

Carriers essentially would bundle the procedure code into the E/M service (or vice versa) and not reimburse for the procedure code. These practices, it was alleged, were not compliant with the Current Procedural Terminology Version IV (CPT-4) coding, which is the standard for professional services coding and billing, according to federal HIPAA regulations (HIPAA mandated that CPT-4 codes be used for healthcare transactions).

The settlements have included significant payouts to physicians nationwide and, among other things, prohibited the managed care companies from automatically downcoding. The agreements also required fair coding and bundling rules consistent with CPT, transparent fee schedules and claim edits, and a formalized dispute resolution process.

Agreement expirations beginning
Although the settlements marked a major victory for physicians, it is critical to note that several of the agreements were effective for four-year terms and the earliest of those settlements will soon expire or have already done so. The Aetna and CIGNA agreements expired on June 2, 2008 (Aetna) and September 4, 2007 (CIGNA), while Anthem/Wellpoint expired on July 15, 2009.

Consequently, physician groups should reacquaint themselves with the terms of the settlements to ensure a clear understanding of both the agreement's timetable and the conditions stipulated in the settlements. CIGNA, for example, announced in April 2009 (after its settlement agreement expired) that certain code combinations will not be separately eligible for reimbursement, even though other health plans, including Aetna, have been successfully challenged under the settlement agreement and agreed to reimburse for these same code combinations, e.g. CPT 93010 (12 lead ECG) with an emergency department E/M service.

Fortunately, the national Blue Cross Blue Shield Settlement provisions are early in their four-year cycle and thus provide physicians with the opportunity to address complaints with BCBS through a court-ordered and independently monitored legal process. The effective date of the key provisions of the BCBS national settlement is January 18, 2009 (9 months from the final settlement date in 2008), and the agreement's term is currently set to run for a four-year term and expire in 2012. The nine-month transition period from the 2008 settlement date was to permit BCBS plans to bring their systems, policies, and procedures into full compliance with the settlement agreement.

Understanding the agreements
Physicians and practice managers should take the time to reacquaint themselves with the nature of the disputes that triggered the original class action litigation. The American Medical Association provides information about the Blue Cross settlement agreements on a state-by-state basis at www.ama-assn.org.

In addition, details about the entire range of carrier settlements can be found at www.hmosettlements.com. Most state medical societies likewise are well-versed in the specifics of settlements involving health plans in their regions.

Although the language of settlements signed by the carriers varies, the agreements generally included the following changes in business practices:

  • Clinical definition of medical necessity
  • Prohibition of downcoding evaluation and management codes
  • Compliance with most CPT rules, guidelines and conventions, including recognition of standard modifiers, e.g. the -25 modifier
  • Disclosure of fee schedules and payment rules, including the explicit listing of "significant edits", i.e. edits that cause the denial of payment
  • Prohibition of gag clauses
  • Prohibition of "all products" clauses
  • Prohibition of "most favored nation" clauses in physician contracts
  • Faster credentialing
  • Prompt, external dispute resolution

Vigilance required
Physicians should be particularly vigilant during contract negotiations and renewals to ensure that health plans are complying with the letter and spirit of the settlements. While the agreements ostensibly preclude managed care companies from imposing onerous provisions that restrict reimbursement by disregarding CPT conventions, certain health plans may be reverting to these practices or may ignore the stipulations unless challenged. In addition, many of the pre-lawsuit managed care agreement forms are still in circulation and may contain provisions that could be in violation of the settlement agreement provided the provisions are challenged by the providers.

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