Proposed settlement does not cover underpaying professional provider claims: Federal court

A federal court in New York, overseeing a proposed class action settlement against United Healthcare for underpaying professional provider claims, has confirmed that the settlement does not cover claims for services and supplies rendered by facilities.

“It became apparent before and during the court hearing that United was hoping to obtain releases for facility services and supplies through the class action, even though no facilities were parties to that class action.”

The order came in response to a request of the court from Hooper, Lundy & Bookman, P.C. (HLB), following United's attempt to assert that some of the claims in a lawsuit pending in Los Angeles federal court on behalf of all ambulatory surgery centers (ASCs) in the country were covered by the proposed settlement in New York.

Ultimately, the New York court confirmed that, not only does the New York settlement exclude ASCs, it excludes hospitals and other types of facilities. The result is that facilities throughout the country still have the right to pursue United for underpaying their claims for their services and supplies.

The issue arose when United sent class action notices to several ASCs, creating confusion about whether the settlement in the New York released claims for services provided by ASCs and other facilities. United initially refused to stipulate that the New York lawsuit only applied to claims by professional providers, and not to facility providers. United argued that certain types of facility claims were covered by the New York settlement, including bills on certain forms, bills using certain codes, and bills for drugs submitted in certain ways.

What began as a request on behalf of ASCs, expanded to include similar requests by the California Hospital Association (CHA), which represents the largest number of hospitals in any state, and other providers.

"United made this order necessary by sending out unclear class action notices to providers about the scope of what was being released and then refusing requests to clarify that facilities were outside the scope of the New York settlement. Only after a formal request and hearing by the federal court in New York on the issue, was United willing," explained Glenn E. Solomon, co-lead counsel for the ASCs and CHA. "It became apparent before and during the court hearing that United was hoping to obtain releases for facility services and supplies through the class action, even though no facilities were parties to that class action."

AMA Case

The New York case involves professional claims paid using United's flawed Ingenix system, and certain other pricing systems used by United. The case was pursued by the American Medical Association (AMA), along with several professionals, for compensation.

"The AMA did a good job representing professional provider members," said Daron Tooch, co-lead counsel for the ASCs. "But the AMA never claimed to represent the interests of facilities as to their separate underpaid claims for their services and supplies." Although both the New York and the Los Angeles lawsuits involve underpayments by United, the Los Angeles case relates only to services and supplies provided by ASCs.

ASC Case

When the Los Angeles action began, it was alleged that United paid ASCs based on the same flawed Ingenix system, based in part on United having represented to ASCs that it had used Ingenix for this purpose. Through discovery, however, HLB discovered that United actually paid most ASC claims based on other methods, which appear to be even more flawed than the Ingenix system.

The amended complaint filed in Los Angeles details how United represented in its Evidences of Coverage (EOCs) that it would pay ASC claims based on what is known as the "usual, customary and reasonable" (UCR) charges; represented in its Explanations of Benefits (EOBs) that it paid ASC claims based on "reasonable charges" -- i.e, a shorthand for UCR; and represented during appeals that ASC claims had been priced using the Ingenix system. But United now admits that it really paid most ASC claims based on a multiple of either contracted rates or Medicare rates, which are not systems that even consider the provider's charges, whether reasonable or otherwise. "At least the Ingenix system purported to be based on UCR data, whereas the methods actually used to pay ASC claims appear to be entirely detached from charges," explains Solomon.

As a result of the order, ASCs, hospitals and other facilities that may have received class action settlement notices from United need not write-off their underpaid claims for their services and supplies. The rights of facilities to pursue underpayments for their own facility services and supplies are retained. A copy of the New York federal court order with more details can be found at