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Bunion Repair at $66,100 Spurs Aetna Lawsuit Against Clinics

Feb. 3 (Bloomberg) -- Aetna Inc. is suing seven California surgery centers for a billing system that it claims “recklessly subverts” health care delivery with charges of as much as $66,100 for a bunion repair.

The lawsuit seeks to stop the centers from waiving the co-insurance payments people are supposed to be charged when they use doctors or facilities that don’t have contracts with their insurers. By not requiring such payments for so-called out-of-network care, the centers illegally lured patients, and then billed Aetna up to 2,500 percent more than what the company pays its contracted providers for procedures, according to the suit.

Aetna claims the centers shared the profits with doctors who own the facilities, giving them incentives to refer clients with the most generous insurance plans.

The “scheme must be promptly declared illegal to preclude its continuation and replication throughout California, and to avoid the potential consequences of irreparably damaging a system of healthcare delivery on which millions of citizens rely,” according to the suit, filed in California state court in Santa Clara County.

The complaint names 11 defendants, including Bay Area Surgical Management LLC, known as BASM, and six centers it manages. BASM’s general counsel, Brian Blatz, called the allegations “baseless” and said Aetna is retaliating against BASM for two suits it filed against Aetna seeking to collect on unpaid medical bills. Those cases haven’t gone to trial.

Joe Montana’s Elbow

BASM manages 11 surgery clinics, imaging centers and medical laboratories in Silicon Valley, which is south of San Francisco, and counts famous surgeons among its 90 or so physician-investors, according to its website.

One of them, orthopedist Michael Dillingham, co-owns SOAR Surgery Center in Burlingame, California, a BASM clinic named in the Aetna complaint. Dillingham was team doctor for the National Football League’s San Francisco 49ers in the 1980s and 1990s, operating on quarterback Joe Montana’s elbow, quarterback Steve Young’s shoulder and receiver Jerry Rice’s knee. Another SOAR partner, Kenneth Akizuki, performed surgery on San Francisco Giants’ catcher Buster Posey’s ankle after the Major League Baseball player’s collision at home plate ended his season last year. Akizuki is listed as a surgeon at Pacific Heights Surgery Center in San Francisco, which Aetna names in its complaint.

Neither Dillingham nor Akizuki are defendants. Officials at the Pacific Heights clinic couldn’t immediately be reached for comment. Karen Sollar, chief executive officer of SOAR’s medical group, said she hadn’t seen the complaint and couldn’t comment.

‘Push Us Around’

Hartford, Connecticut-based Aetna is attempting to muscle BASM into signing a provider contract with unfairly low rates, said Bobby Sarnevesht, one of three BASM executives named as defendants. “This is the 800-pound gorilla saying, ‘You better take this contract,’” he said. “They’re big, rich and they can push us around, and there’s not much we can do about it.”

Aetna’s allegations concern so-called facility charges, which medical clinics bill for the use of its rooms and for drugs, equipment and other supplies.

According to the suit, Aetna paid SOAR Surgery Center $1.9 million in facility charges for 152 procedures between October 2008 and September 2011, or 513 percent more than what Aetna paid its in-network providers in Northern California for the same procedures.

Hip Jobs

The suit says Aetna paid the SOAR clinic $22,027 each in the fees for two shoulder arthroscopies, compared to $2,130 for the same at facilities with which Aetna has contracts; and $16,000 to drain joint fluid, which cost Aetna $1,124 at contracted clinics.

At the BASM-run Bay Area Surgical Group Inc., the suit says Aetna paid an average $119,671 each in fees for 12 lower-back disk surgeries, compared with $6,175 each at contracted facilities, and an average $46,454 apiece in facility charges for six outpatient hip jobs, as opposed to $4,949 at in-patient centers. On the $66,100 bunion facility charge, Aetna paid Bay Area Surgical Group $52,880, versus $3,677 to in-network providers, the suit claims.

Aetna has accused out-of-network providers of gouging in at least six lawsuits. In five filed in superior court in Camden, New Jersey, the insurer is suing six physicians for billing what Aetna calls “unconscionable” rates, including $56,980 for a bedside consultation and $59,490 for an ultrasound that typically costs $74. The doctors deny the claims.

In another Aetna suit in state court in Houston, it claims two physicians referred patients to their out-of-network hospital and charged insurers as much as $99,750 to remove ear wax. The defendants deny wrongdoing.

The case is Aetna Life Insurance Co. v. Bay Area Surgical Management LLC, 112CV217943, Santa Clara County Superior Court.

To contact the reporter responsible for this story: Peter Waldman in San Francisco at

To contact the editor responsible for this story: Gary Putka at

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