By Philip H. Lebowitz, Esq.
If you are a physician who has provided services to patients insured by Aetna, Inc. or its subsidiaries, you are about to settle all claims you may have against Aetna, whether you know it or not. A proposed settlement of a class action case pending in Florida will sweep in all physicians who do not request to be excluded by the opt-out deadline of August 29, 2003. Prompt action is required of physicians who may have claims against Aetna they want to pursue.
Beginning in approximately 2000, many lawsuits were filed in federal courts around the country on behalf of physicians against managed care organizations (MCOs). The defendants included several of the nation’s largest insurers, such as CIGNA, Aetna, Humana and Prudential. These cases were consolidated for pretrial purposes by the Judicial Panel on Multidistrict Litigation into one large case called In re Managed Care Litigation, MDL No. 1334, and transferred to the Southern District of Florida in Miami. The judge in charge of the litigation, Hon. Federico A. Moreno, subsequently ordered that the cases could proceed as a class action on behalf of all physicians in the United States who had submitted claims to the defendant companies. The physicians who brought the complaints became the class representatives.
The most significant allegations in the lawsuits were financial: that the companies used hidden systematic methods to reduce or deny reimbursement to which physicians were entitled under their agreements with the companies. Examples included “downcoding,” where a service was automatically reduced to a lower level of complexity and reimbursement, and “bundling,” a claims processing procedure in which the companies would group together for a single lower reimbursement amount several services that by contract should have been reimbursed separately resulting in a higher total payment. It was also alleged that the MCOs improperly concealed their manipulation of reimbursements and fraudulently misrepresented their criteria for coverage determinations, treatment decisions, payments and reimbursements.
These factual allegations were combined in the lawsuits to assert that the MCOs had breached their provider agreements and, more prominently, violated the Racketeer Influenced and Corrupt Organizations Act (RICO). The RICO allegations were based on claims that the MCOs violated federal criminal statutes prohibiting fraud, extortion and bribery.
Early stages of the litigation have extended over the past three years, in which various preliminary legal issues have been argued and decided. In addition to its conditional certification of a class of all physicians who had sought reimbursement from Aetna, the Miami district court also decided that the plaintiffs could proceed with their RICO claim with certain changes to the allegations, and that claims based on provider agreements that included an arbitration clause should be resolved through arbitration instead of in a court.
Although the development of the factual underpinnings of the claims is just beginning, one of the defendant MCOs, Aetna, has entered into a settlement agreement with the attorneys representing the physician class representatives. The Agreement includes procedural changes, called “business practice initiatives,” that are intended to improve physician-company relations going forward. Some of these initiatives had already been implemented while the parties were discussing settlement.
The initiatives include greater automation by Aetna of claims handling to reduce the average time for payment of “clean claims,” increased use of the Internet to enable physicians to conduct certain Aetna business transactions electronically, publication of Aetna fee schedules for certain CPT codes on an annual basis, reduced pre-certification requirements for certain procedures, 90 days’ notice of changes in Aetna policies and procedures, and disclosure of payment rules. The settlement also defines “medically necessary” for use in Aetna agreements in physician-oriented terms, as “health care services that a physician, exercising prudent clinical judgment, would provide to a patient.”
While this prospective program appears beneficial, the financial relief for physicians with substantial claims against Aetna for past reimbursement problems may be less than adequate. The total amount that Aetna has allocated toward payment of claims is $100 million. Each physician class member must submit a claim to receive payment. Payments will be made on a per capita basis within three general groups of physicians based on the aggregate payments during the years 2000, 2001 and 2002 made to them by Aetna. The three groups will be those who received payments of less than $5,000; of $5,000 to $50,000; and of more than $50,000.
Physicians in the lowest group will receive a “Base Amount,” those in the next group will receive twice the Base Amount, and physicians in the top group will receive three times the Base Amount. According to the Wall Street Journal, which evaluated the settlement strictly on a per capita basis (without reference to the three groups), the settlement will likely result in payments on average of approximately $150 per physician.
Each physician wanting to receive a portion of the settlement amount must submit a claim form. The amount of the award of each physician who submits a claim is not dependent on the number submitting claims, but is based on the physician’s allotted portion of the entire settlement amount, assuming that all eligible physicians would make claims. Unclaimed amounts will be placed in an independent private foundation, created for the settlement, to be used for health care purposes, but will not be available to provide additional physician reimbursement.
Any physician meeting the broad definition of the class in the settlement agreement is presumed to be included within the class and bound by all the terms of the settlement agreement. The settlement class is defined as all physicians who provided services to an Aetna plan subscriber from August 4, 1990 through the date of preliminary approval of the settlement, which was May 30, 2003.
The breadth of this definition is significant because the settlement will also provide that all past claims of class members against Aetna (including all its subsidiaries) for improper reimbursement will be released and withdrawn. Thus, physicians who have substantial financial claims against Aetna will lose their right to recover any of the amounts they are owed by Aetna (except for current claims for reimbursement) if the settlement is approved.
Physicians who have such claims and wish to preserve them can do so only by electing to “opt out” of the settlement. The “opt-out” right is provided by the rules governing class actions and Judge Moreno specifically provides for the opportunity to opt out in his order establishing the procedure for final approval of the settlement. The court order states that “All members of the Class who wish to opt-out of the Class must do so by sending written notice of their election to opt-out” to a settlement administrator who will be appointed by the court.
By June 30, 2003, the lawyers for the class are to have sent notice of the settlement by first-class mail to any physician in Aetna’s list of providers during the period since 1990. There will also be legal notice published in some newspapers, and at least once in a nationwide periodical addressing issues of concern to physicians. The notice will provide the form to be used to “opt out” of the settlement.
There is, however, only a short period in which physicians may opt out of the settlement – the opt-out deadline is August 29, 2003. By that date, physicians will need to have filed the appropriate form or they will be bound by the settlement. This result is clearly spelled out in the court’s most recent order: “Any potential member of the Class that does not properly and timely request exclusion from the class…shall be bound by all the terms and provisions of the Settlement Agreement, including but not limited to the releases, waivers and covenants not to sue.” These releases and waivers of claims apply whether or not the physician objects to the settlement, makes a claim or receives any amount from the settlement fund.
A physician who opts out of the class will not be considered as part of the class. That physician may then continue to negotiate individually with Aetna regarding reimbursement issues or bring his or her own lawsuit against Aetna for past reimbursement. These claims are typically pursued in narrowly defined lawsuits based on alleged breach of the terms of the provider agreement. In many cases, lawyers are willing to take such cases on a contingent fee basis, depending primarily on the amount in dispute. Lawsuits of this sort have generally been successful in obtaining additional provider reimbursement.
It is unlikely that by opting out, any physician will be upsetting the entire settlement. While Aetna has reserved the right to deny the prospective relief of the settlement to physicians who exclude themselves from the class, most of the procedural changes Aetna is planning to make (and in some cases has already made) will be difficult to apply to some physicians and not others. Moreover, Aetna is only permitted to terminate the settlement agreement if opt-out requests have been filed by more than 25,000 individual physicians who are class members or by physicians whose aggregate dollar payments from Aetna total at least five percent of the total dollar payments that Aetna made to physicians in calendar year 2002.
While the August 29, 2003 deadline only applies to physicians with claims against Aetna, learning the opt-out drill may be useful if other insurers follow a similar route. Currently, a settlement negotiated by CIGNA and one set of plaintiffs’ lawyers is being worked on by lawyers in several of the other combined cases. A hearing on whether to start the approval process for the CIGNA settlement will be held on July 8, 2003.
The remaining defendants – Humana, United Healthcare, Health Net, Foundation Health Systems, Pacificare, Prudential, and Wellpoint – have vowed to continue opposing the claims asserted against them.
For the moment, physicians with claims for Aetna reimbursement should evaluate the settlement and their own potential individual recovery in order to make an informed decision regarding the settlement. If in doubt, a physician will protect his or her options by submitting the opt-out notice by the August 29 deadline. If the physician later decides to be included in the settlement, the agreement permits the physician to revoke the request to opt-out, so long as the revocation occurs before the final hearing to determine the fairness of the settlement, currently scheduled for October 14, 2003. Opting out by August 29 is the key to retaining what the Aetna settlement might otherwise take away.
Philip H. Lebowitz, Esq., is a partner in the Health Law Department of Duane Morris LLP, specializing in health law regulation, litigation and managed care issues.