The insurer is headed to court after suing five New Jersey doctors over out-of-network fees that it calls "unconscionable"
In 2007 cardiologist Benyamin Hannallah charged $220 to evaluate patients admitted to the hospital where he worked, Jersey City Medical Center, across the river from New York. Then he opened his own practice and raised his fee for the 25-minute bedside consultation to $56,980, according to a lawsuit filed by Aetna (AET). The health insurer is suing Hannallah and five other New Jersey doctors for charging what Aetna calls "unconscionable" fees to treat patients admitted at four New Jersey hospitals.
The lawsuits could help determine what pricing limits insurers can impose on out-of-network physicians who don't have contracts with health plans that set how much a service or procedure can cost. "It's the uninvited guest who comes into your hospital room and then bills you and your health plan for outrageous, undisclosed amounts," says J. Edward Neugebauer, Aetna's chief of litigation.
The complaints provide a glimpse of the sums physicians earn from an insurer and the huge variations in how much different doctors charge and receive for the same services. Hannallah billed $59,490 for a cardiac ultrasound, which typically earns Aetna's in-network doctors in Jersey City $74, says Aetna spokeswoman Cynthia Michener. Another defendant, obstetrician Waleed Abdelghani, charged $30,000 for a Caesarean birth, or more than 10 times the in-network fee Aetna quotes, Aetna claims. "If these charges are accurate, consumers and purchasers should be outraged," says David Lansky, president of the Pacific Business Group on Health in San Francisco, a coalition of health insurance buyers that includes Chevron (CVX), Walt Disney (DIS), and General Electric (GE). Lawyers for the doctors declined to comment on specific charges in the suits and said their clients did nothing wrong.
Aetna tried in 2007 to impose caps on some out-of-network payments, prompting doctors' complaints to the New Jersey Banking and Insurance Dept. The agency fined the insurer $2.5 million for violating consumer-protection laws by failing to reimburse enough for HMO patients, and ordered it to pay out-of-network practitioners enough so that patients would be asked for no more than their co-pays.
In 2009, Aetna, UnitedHealth Group (UNH), Cigna (CI), and WellPoint (WLP) were accused by the New York attorney general of underpaying out-of-network physicians by manipulating a database used to calculate payments. They paid a total of $90 million in settlements without admitting wrongdoing. UnitedHealth, again without admitting wrongdoing, agreed that year to pay $350 million to settle a lawsuit by the American Medical Assn. over the same issues. Similar AMA lawsuits against Aetna, Cigna, and WellPoint are pending.
The Aetna lawsuits, filed over the past eight months, allege the defendants violated New Jersey State Board of Medical Examiners rules against excessive fees and seek triple damages under state insurance fraud laws against filing false or misleading claims. Cardiologist Hannallah charged $59,490 for a heart ultrasound in April 2010 and was paid $47,592, the suit says. In April 2010, Hannallah asked for $54,600 for a heart catheterization, Aetna said, up from $5,500 for the same procedure in 2007. When the insurer gave him $2,000—a sum it deemed "usual and customary" for the procedure—Hannallah complained. Aetna paid in full to prevent him from billing the patient for the remainder, Michener says. The insurer says it paid Hannallah a total of $3.2 million in 2008 and 2009, up from $529,503 in the prior two-year period.
Robert Conroy, Hannallah's lawyer, says Aetna's description of some of the fees in its complaint are false or misleading. Some charges cited were pre-approved by the insurer, he says, and some were negotiated between Hannallah and a third party representing Aetna.
In its suit against Deepak Srinivasan, a cardiologist at Hackensack University Medical Center, Aetna claims the doctor raised his fee for heart catheterizations to $18,720 in 2007 from $3,000 in 2006. His income from Aetna rose to $2.5 million in 2008, from $155,310 in 2006, the suit says. George Frino, Srinivasan's attorney, says Aetna agreed to his fee schedule as an out-of-network practitioner in 2007. Srinivasan filed a countersuit alleging that Aetna, by not paying him what it owes, violated laws governing group health plans and committed mail and wire fraud in its reimbursement practices. Aetna's Michener calls Srinivasan's counterclaim "unfounded."
Abdelghani, who also practices at the Hackensack (N.J.) hospital, increased his Caesarean charge to $30,000 in 2009, from $3,000 in 2008, the suit alleges. Aetna paid the full $30,000 fee "numerous" times in 2009, says Michener. In-network doctors in the area receive $2,655 for the operation, according to Aetna. Abdelghani's income from Aetna rose from $76,173 in 2007 to $5.1 million in 2010, the company says.
Abdelghani's attorney, Charles Gormally, disputes Aetna's figures and says the insurer paid Abdelghani's practice a total of $5.8 million over a three-year period. The practice billed Aetna nearly $13 million over the three years, with some procedures not reimbursed at all, he says.
The bottom line: Aetna's legal campaign against expensive out-of-network charges is just the latest attempt by insurers to restrain soaring health costs.