According to Mike Dendy, CEO/President, Advanced Medical Pricing Solutions, “This lawsuit was brought by Dr. Bert Forman as a whistle-blower action, but once Insurance Commissioner Dave Jones reviewed the case, he immediately realized how important it was and the State of California exercised its right to intervene and join the suit. In my opinion, the hospitals and Multiplan/PHCS settled to avoid all of the other things that would have been revealed if they went to court, because this case was focused on charges under just a couple of anesthesia billing codes, and it would be truly naïve to think that the hospitals’ overcharges were limited to a handful of items and aren’t happening on plenty of the other 150,000+ items on the chargemaster that haven’t been scrutinized yet.
Rick Hirsch, CEO/Chief Legal Officer, Claims Delegate Services, agrees with Dendy, but added I believe the hospitals and networks were more worried about the likelihood of the court granting Commissioner Jones’ request for a ruling from the court that PPO contract language that prohibits billing review is unenforceable because it violates existing laws and public policy. If you think about it, $46MM is a drop in the ocean compared to what hospitals and networks will lose when they are finally forced to let health plans examine their bills for errors and overcharges. And of course, they also knew that the precedent of losing the case would open the floodgates to self-funded health plan class action lawsuits.”
Sutter Health Hospitals Agree to Pay Record $46 Million in California DOI Lawsuit Involving Anesthesia Billing
MyHealthGuide Source: California Dept. of Insurance, 11/4/2013, CA DOI Release
Editor’s Note: According to Mike Dendy, CEO/President, Advanced Medical Pricing Solutions, “This lawsuit was brought by Dr. Bert Forman as a whistle-blower action, but once Insurance Commissioner Dave Jones reviewed the case, he immediately realized how important it was and the State of California exercised its right to intervene and join the suit. In my opinion, the hospitals and Multiplan/PHCS settled to avoid all of the other things that would have been revealed if they went to court, because this case was focused on charges under just a couple of anesthesia billing codes, and it would be truly naïve to think that the hospitals’ overcharges were limited to a handful of items and aren’t happening on plenty of the other 150,000+ items on the chargemaster that haven’t been scrutinized yet. Rick Hirsch, CEO/Chief Legal Officer, Claims Delegate Services, agrees with Dendy, but added I believe the hospitals and networks were more worried about the likelihood of the court granting Commissioner Jones’ request for a ruling from the court that PPO contract language that prohibits billing review is unenforceable because it violates existing laws and public policy. If you think about it, $46MM is a drop in the ocean compared to what hospitals and networks will lose when they are finally forced to let health plans examine their bills for errors and overcharges. And of course, they also knew that the precedent of losing the case would open the floodgates to self-funded health plan class action lawsuits.”
SACRAMENTO, CA — Insurance Commissioner Dave Jones today announced that Sutter Health, which operates one of the largest hospital chains in California, agreed to pay $46 million and implement historic changes in its billing and disclosure of anesthesia charges and services to its patients, insurers and other payers.
Sutter has over 20 hospitals in northern California, including California Pacific Medical Center in San Francisco, Sutter General Hospital in Sacramento, and Memorial Medical Center in Modesto. The settlement brings to a close a 2011 whistleblower lawsuit brought against Sutter by billing auditor, Rockville Recovery Associates. The commissioner joined the whistleblower in that lawsuit.
“This settlement represents a groundbreaking step in opening up hospital billing to public scrutiny,” said Commissioner Jones. “The settlement requires Sutter to disclose on its Website every component of its anesthesia billing and what those services cost Sutter. Patients, insurers and the public will now be able to compare Sutter’s costs to what it charges for anesthesia. They will see any mark-ups. I commend Sutter for agreeing to these reforms and this settlement. This new transparency should lead to lower prices and point the way to similar billing reforms for all types of hospital services.”
The whistleblower lawsuit alleged that Sutter included a false and misleading charge in its surgery bills. Sutter patients or their insurers received three separate charges relating to anesthesia, including a charge by an outside anesthesiologist, a charge for the operating room and a charge under an obscure Code 37x Anesthesia. Sutter often charged thousands of dollars for Code 37x Anesthesia for each operation. Yet the services covered by that code were allegedly already captured in the operating room charge, itself a charge in the thousands of dollars. Sutter charged for anesthesia on a time-based or chronometric basis even when no Sutter employee, only the outside anesthesiologist, was present and overseeing anesthesia. Some hospitals also charged separately for anesthesia gasses using code 25x. Sutter’s contracts with insurers also included a clause alleged to unduly restrict insurers from contesting the bills.
The settlement requires that Sutter:
- Pay $46 million
- Stop billing for anesthesia in the operating room on a chronometric basis and instead charge on a fully disclosed flat-fee basis
- Describe every component of its anesthesia billing
- Post on its Website and provide to insurers and the commissioner the cost to each Sutter hospital of its anesthesia services, updated annually
- Clarify the relationship between its master schedule of charges (known as chargemasters in the health care industry) and the bills that consumers and insurers receive. This change will lead to an increase of transparency and accountability in hospital billing
- More readily permit insurers and other payers to contest Sutter’s bills.
Another defendant, Marin General Hospital, has agreed to implement the same changes to its procedures for billing anesthesia services. Marin General Hospital was a member of Sutter Health during the period of the misconduct alleged by the complaint. In 2010, Marin General Hospital became an independent hospital.
Today’s settlement also includes defendants MultiPlan, Inc. (“Multiplan”) and Private Healthcare Systems, Inc. (“PHCS”), whose provider contracts with Sutter included Sutter’s audit policy that allegedly unduly restricted payers’ ability to challenge Sutter’s charges. In addition to paying $925,000, MultiPlan and PHCS agreed to continue to provide notifications to payers about their audit rights.
