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Legal News
Insurer Pays Millions to Settle Lawsuit by Physicians
Psychiatric News
Volume 40 Number 22 page 11-11

Health insurer Humana Inc. reached an agreement with representatives of more than 700,000 physicians to settle a nationwide classaction suit pending in the U.S. District Court in Miami.

The suit was brought against several health plans under the Racketeer Influenced and Corrupt Organizations (RICO) Act and has been led by the California Medical Association (CMA). Filed five years ago, the class-action suit accuses several for-profit HMOs of using coercive, unfair, and fraudulent means to control physician-patient relationships.

In the ensuing years, physician associations in Connecticut, Georgia, Louisiana, Texas, Florida, and other states have joined with the CMA.

According to a statement released by the company, Humana has agreed to pay $40 million to physicians and up to $18 million in legal fees to be determined by the court.

"Humana is pleased that we have been able to reach an agreement to settle this litigation," said Michael McCallister, Humana's president and chief executive officer. "We have devoted significant time and resources to improving the quality and timeliness of our transactions with physicians who care for our health plan members. Humana has undertaken systems and infrastructure improvements in connection with how the company relates to providers, enhancing, among other things, the speed and accuracy of claims reimbursement to providers and setting the stage for real-time adjudication of claims filed electronically. This has all been part of Humana's ongoing efforts to strengthen its collaborative relationships with providers."

The Connecticut State Medical Society (CSMS) released a statement about the settlement noting that, in addition to the monetary component of the settlement, physician groups and Humana have agreed to "new levels of transparency and communication." Below are some of the provisions to which Humana has agreed, according to CSMS:

At press time, the agreement still had to be approved by U.S. District Judge Federico Moreno.

The settlement by Humana follows one in July by Wellpoint (Psychiatric News, August 5). In that settlement, Wellpoint agreed to use a patient-friendly definition of medical necessity and to cease using software programs that systematically lowball or deny payment for legitimate patient claims.

The Wellpoint settlement also provided $135 million in direct payments to physicians to resolve allegations of unfair reimbursement for more than a decade. Previous settlements had been reached with Aetna, Cigna, Prudential, and Health Net (Psychiatric News, July 16, 2004; October 15, 2004).

In addition, Wellpoint agreed to apply the "patient-friendly" definition of medical necessity outlined in the settlement to mental health care, including substance abuse, and to treat participating psychiatrists like other participating physicians with respect to provider directories and referrals.

"We have a good settlement in terms of psychiatric services being treated the same as other services," psychiatrist Catherine Moore, M.D., a member of the CMA Board of Trustees, told Psychiatric News at the time. "This kind of action shows the importance of physicians working together so that we can more effectively fight these huge businesses that are taking us to the cleaners." ▪

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