The Anatomy Of Reimbursement Litigation Changes In Technology, Pressures On Providers And Payors Lead to Rise In Suits

Attorney Ken Gogel has a pile of papers in the corner of his office about three feet tall; it represents work associated with just one reimbursement litigation case.


Health care can be a complicated and mercurial area of law, and the specific cases often pursued within the field are no less complex. One form of litigation that is becoming more visible due in part to the increasing difficulties associated with health care management and delivery and a few recent high-profile cases is that of reimbursement litigation involving health care insurers, or payors, and health care providers.

Gogel explained that reimbursement litigation is a significant part of health care law, involving private physicians, surgeons, medical centers, and other health care providers, and the payors with which, most often, they have signed service contracts.

Litigation typically occurs when a health care provider — an individual physician or health care system — suspects inadequate reimbursement for billable services, and because of the many variables affecting such cases – rising concerns over the cost of health care among them – they can also be emotionally charged.

Francis Dibble Jr., chairman of the Executive Committee and a member of the health care practice group at the Springfield-based law firm of Bulkley, Richardson, and Gelinas, LLP, said political, economic, and national concerns ranging from privacy and security to the overall quality of care across the country factor into the complexity of each reimbursement case.

“What we are dealing with here is one piece of a puzzle that reflects a whole set of issues affecting the health care marketplace,” he said. “We have health care providers who feel like they are burdened by excessive costs, and health insurance companies that are trying to keep costs down by scrutinizing bills from providers, in an effort to reimburse for what they feel is a reasonable charge.”

“Health care billing on both sides is a complicated issue,” added Jim Kessler, vice president and general counsel at Health New England, a Springfield-based Health Maintenance Organization (HMO), “and when issues are inherently complicated like this, there is always room for disagreement. What every health plan is aiming for is the most appropriate system that makes sense to providers.”

A PC World

Gogel said that through his practice, he has seen emerging technology play a larger part in billing issues and in turn disputes regarding reimbursements.

All health care providers and payors – whether they are a federal or state entity like Medicare or Medicaid, or a private company or HMO – must abide by strict guidelines set forth by CPT (Current Procedural Terminology) code manuals when billing and paying for procedures. CPT manuals are developed and updated by the American Medical Association (AMA) each year, in an effort to simplify compliance with the rules, regulations, and changes in medical technology and practice.

“Health care billing on both sides is a complicated issue, and when issues are inherently complicated like this, there is always room for disagreement.”

Direct violation of those procedures is not always the reason legal action is pursued in reimbursement litigation cases, Gogel said. But some of the measures taken in the past five to 10 years to streamline the process, such as the use of computer systems by payors in order to examine bills, has, in some instances, reduced the number of actual people reviewing each claim.

“It’s a way of making sense out of something that makes no sense,” said Kessler of the use of new technology to organize billing and paying processes. “It’s one answer to dealing with problems in the system, and taking a more global approach to solving them.”

The programs commonly used by many major payors employ a number of automated systems to organize and simplify information, such as ‘bundling,’ which groups procedures together into one line of code, or ‘downcoding,’ which automatically reclassifies procedures into lower reimbursement brackets.

But the automated procedures can result in lower reimbursement payments for health care providers, Gogel said. These individuals, usually professionals such as surgeons or specialists like chiropractors, psychologists, or ophthalmologists, who commonly perform multiple procedures on individual patients, will often notice that the reimbursements they receive for procedures are not meeting what they consider to be an acceptable level.

“Since there is no human looking at the records, no one knows this is happening,” said Gogel. “Billing is its own discipline in health care, and everyone uses the same guidelines. People know what they can and cannot bill for; otherwise, it’s health care fraud.

“But reimbursement litigation is occurring more and more because insurance companies are relying on their computers more and more.,” he continued. “There used to be individual insurance adjusters reviewing each reimbursement; not anymore. Now, computers do it all, and that is creating some problems.”

From a provider’s standpoint though, new coding systems and practices do not necessarily factor into the equation.

“Most health care providers only know their reimbursements are down at first,” said Gogel. “They don’t necessarily understand why. It’s still a fairly recent development that health care providers are feeling the need to do something about it.”

Dibble concurred. “It seems that for a while, companies were doing well controlling their costs with measures like these. But changes come at a price, and this is it.”

Gogel said the effect these computer systems have on health care providers is not only one of the primary driving forces behind many cases involving reimbursement today, but the most notable difference between current cases and those of the past.

“The principal difference between reimbursement litigation now and what occurred in the late ‘80s and early ‘90s is the rise in problems with reimbursements because of these computer systems,” he said, noting that many health insurance companies contend that the automated systems used to simplify operations are an appropriate addition to billing and paying procedures. “The problem is, it has never been the standard in health care, and providers are distressed.”

Settling Down

Gogel has been involved with reimbursement litigation and health care law in general for several years, both locally and nationally. He said that when a reimbursement issue does reach the stage at which a health care provider believes legal action might be necessary, the usual course of action is to file for breech of contract.

Groups of health care providers can also opt to make a Racketeer-Influenced Corruption Organization Act (RICO) allegation, but such cases are extremely rare because they essentially involve attempting to prove a conspiracy.

If the courts do become involved, Gogel said, filing for breech of contract is not only the most viable option for large groups of providers, but often the only reasonable, accessible option for smaller groups or individual providers.

“With a breech of contract, it’s party against party,” he explained. “With a RICO allegation, we’re talking a much larger burden to prove some serious allegations on the part of the plaintiff. It takes a lot of proof, and a lot of resources.”

Although a more conservative approach to litigation is recommended in reimbursement cases, Gogel said the rise in the number of overall cases nationally is drawing some attention to the specialty, and some visibility to the outcomes.

There have been some notable settlements in the recent past; Cigna HealthCare, for one, settled out of court in 2002 for an amount of $540 million, following a class action suit that alleged the company “improperly denied, delayed, and or reduced payment to physicians and other health care providers for medically necessary covered services.” Aetna settled in a similar class action suit for $470 million in 2003; both figures represented monetary compensation for health care providers, attorney costs, and funding for internal changes within each company, among other costs.

Taking Action

Like the Cigna and Aetna cases, the legal focus of reimbursement litigation both large and small seems to be moving in the direction of addressing bigger-picture problems rather than through several individual cases.

“There is a group of attorneys out there actively looking for the next big bonanza,” said Kessler, referring to the high-profile class action suits that have involved tobacco companies and other large corporations in the recent past. “It’s unclear if this will be the next big thing. Only time will tell how things sort out. I am sorry that arrangements can’t be made, and that there aren’t better ways for these physicians to be paid.”

Since the beginning of the decade, there has been more frequent use of larger lawsuit vehicles to stop uniform practices, rather than focus on individual disputes,” said Gogel. “That has certainly changed the ball game significantly.”

Dibble, who has represented hospitals, physicians, and insurance companies in reimbursement litigation cases, agreed, noting that as awareness of health care law and reimbursement litigation grows, however, the issue is becoming no less problematic.

“Class action suits are more common now. There are a variety of claims being made, and we are also seeing counterclaims being made by payors,” he said. “A lot of political judgments are being made. It’s an intractable problem.”