Bloomberg News

Aetna Suit by Doctors Escalates Out-of-Network Dispute

July 05, 2012

A group of California doctors and medical groups accused Aetna Inc. (AET:US) of reneging on medical benefits, escalating a dispute over payments for care in facilities that don’t have discounted contracts with the insurance provider.

More than six-dozen physicians, medical associations and surgery centers sued Aetna in state court July 3. They alleged that the Hartford, Connecticut-based company retaliated against doctors and patients for using outpatient units that aren’t in the company’s network of preferred providers. The plaintiffs asked a court in Los Angeles to stop Aetna from terminating doctors for referring patients to out-of-network facilities.

The complaint is part of a controversy over the out-of- network medical centers, which charge more for procedures than Aetna pays its contracted providers. Earlier this year, Aetna sued six California surgery centers not in its network, alleging they paid illegal kickbacks to doctors and charged too much for health care.

In the new lawsuit against Aetna, the doctors and medical groups allege that Aetna violates state fair-business and false- advertising laws by selling insurance policies that allow for out-of-network care, and then intimidating doctors and patients to keep them from gaining access to the benefits.

“Aetna’s practice of forcing doctors to preclude Aetna patients with out-of-network benefits from actually using those benefits constitutes a clinical gag clause,” the plaintiffs allege. The group suing Aetna includes 60 named doctors, nine surgery centers, the California Medical Association and the medical associations of Los Angeles, Santa Clara and Ventura counties.

Self-Referral

Anjanette Coplin, an Aetna spokeswoman, said the provider of medical benefits is aiming to reduce costs driven by so- called physician self-referral -- the practice of sending patients to facilities owned by the referring doctors. Aetna filed its earlier complaint in state court and with the Medical Board of California against six surgery centers in the Silicon Valley, Coplin said.

Aetna accused those centers, managed by Bay Area Surgical Management LLC of Saratoga, California, of gouging on rates and paying illegal kickbacks to owner-doctors for self-referrals. Bay Area Surgical and the six surgery centers it manages are named as plaintiffs in the suit against Aetna.

The company says it paid those out-of-network centers $52,880 for a bunion repair that usually costs $4,000 at in- network facilities, and $120,000 for lower-back disk surgeries that cost $6,000 at contracted centers.

Profits, Patients

“Doctors who entice patients to have procedures performed at out-of-network facilities that they own without the patient’s knowledge are putting profits over their patients,” Coplin said in a statement.

The California doctors and medical groups allege in their suit that Aetna discouraged patients from using their out-of- network benefits by phoning and sending letters warning that a planned procedure was out-of-network, urging patients to use in- network facilities and withholding payments to non-contracted units.

The suit alleges Aetna threatened physicians with network termination for referring patients to non-contracted facilities, and terminated at least 10 doctors for making such referrals. One of the physicians dropped from Aetna’s network was Michael Dillingham of Redwood City, California, the orthopedist for the San Francisco Giants professional baseball team and the San Francisco 49ers professional football team.

Transparency Demand

Doctors in Los Angeles County abide by their ethical and legal obligation to inform patients when referring them to facilities the doctors own, said Rockard Delgadillo, chief executive officer of the Los Angeles County Medical Association and the former city attorney of Los Angeles. The suit, which Delgadillo called “historic” because he said it is the first time the Los Angeles doctors’ group has sued a health insurer, is aimed at forcing greater transparency by Aetna.

“Tell the world you’re not going to pay for something if it goes over $10,000 or whatever; don’t say it’s not ’medically necessary’ or out-of-network,” Delgadillo said. “We believe Aetna is impairing the critical relationship of trust between the patient and the physician in its relentless campaign to cut costs and boost profits.”

The case is Los Angeles County Medical Association v. Aetna Health of California Inc. BC487670, Los Angeles County Superior Court.

To contact the reporters responsible for this story: Peter Waldman in San Francisco at pwaldman@bloomberg.net; Edvard Pettersson in Los Angeles at epettersson@bloomberg.net.

To contact the editors responsible for this story: Gary Putka at gputka@bloomberg.net; Michael Hytha at mhytha@bloomberg.net.


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Companies Mentioned

  • AET
    (Aetna Inc)
    • $80.6 USD
    • 0.85
    • 1.05%
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