Court ruling could spotlight questionable practices by health care companies

By: - July 6, 2021 12:50 am

A group representing small pharmacists says large chains, especially CVS, are moving patients’ prescriptions to their own stores without consent. CVS adamantly denies that. Photo by Marty Schladen, Ohio Capital Journal.

When you’re emailing about medical billing, it’s probably best not to write about using “dummy codes” to “bury” administrative fees. But two huge health care companies did just that between 2012 and 2016, and now it’s an issue that is poised to get new attention.

Ohio is already suing one of the companies, claiming improper billing. Also, Ohio does billions of dollars worth of annual business with both, as do many other states.

So the case ruled upon last week by the U.S. 4th Circuit Court of Appeals in Richmond, Va., could have implications beyond just that lawsuit. 

The court ordered a district judge in Asheville, N.C., to reopen a case accusing health insurer Aetna and middleman Optum Healthcare Solutions of scheming to create a system of “dummy codes” so they could “bury” Optum’s administrative fees and improperly pass them on to Mars Inc.’s self-funded health plan as well as its employees.

The district judge, Martin Reidinger, dismissed the case on Sept. 16, 2019, ruling in part that the plaintiff, Sandra Peters, didn’t show that she had been harmed by the arrangement. 

But writing for the appellate court, Circuit Judge G. Steven Agee wrote that Reidinger didn’t use the right standard in dismissing the case. Agee said a jury could easily have found that Aetna violated its duty to act in good faith on behalf of Mars and its employees.

Aetna and Optum didn’t respond to requests for comment. But the ruling could be of interest in Ohio and many other states. 

Aetna is now part of CVS Health, the fourth-largest corporation in the United States by revenue. Optum is part of UnitedHealth Group, the nation’s fifth-largest corporation.

In 2017, those two companies operated as pharmacy middlemen for Ohio Medicaid, managing billions in prescription-drug benefits for the poorest Ohioans. They used a secretive reimbursement scheme that allowed them to pocket $244 million more for the cheapest class of drugs than they paid the pharmacies that dispensed them, a later analysis showed.

Aetna wasn’t part of CVS when that took place, but in April it was selected to be managed-care provider for OhioRISE, an ambitious new program intended to provide wraparound services for kids with “the most complex behavioral health and multi-system needs.”

In 2019, Ohio Attorney General Dave Yost sued Optum on behalf of the Bureau of Workers Compensation, claiming that the company failed to provide the state with $16 million in contractually guaranteed discounts. The case is pending.

Optum’s corporate parent, UnitedHealth, is poised to keep its managed care business with Ohio Medicaid even as the department is jettisoning its drug middlemen that marked up generic drugs so much in the past.

Most recently, Yost this month settled a suit against managed-care provider Centene for $88 million. He accused the company of working through a chain of middleman contracts — including one with CVS — to hide tens of millions of dollars worth of double billing. Centene denied wrongdoing despite saying it will pay Ohio and 21 other states $1.25 billion.

The newly revived North Carolina suit accuses Aetna and Optum of playing hide-the-ball there as well.

It says that in late 2012, six years before a judge allowed the $70 billion merger between it and CVS, Aetna was looking for a way to get somebody else to pay Optum’s administrative fees, according to court documents. 

As insurer for Mars, Aetna was hiring Optum to manage physical therapy and chiropractic care. Problem was, its contract with Mars required Aetna to pay Optum’s fees.

In a brief filed with the appellate court, the American Medical Association said too many documents remain sealed at the lower court in Asheville. But it said enough are unsealed to constitute “direct evidence” that “Aetna and Optum personnel devised a scheme to pass on administrative fees to patients and their insurance plans.”

The AMA holds the copyright to the “Current Professional Technology Code,” a set of designations for medical procedures that are used in medical billing. The association said that as its licensees, Aetna and Optum intentionally misused them to hide improper billing.

The medical association pointed to a Dec. 2, 2012 email from Theresa Eichten, Optum’s product director for physical health, to Cyndy Kilpinen, senior network manager for Aetna’s contracting unit. The subject line read, in part, “per-diem dummy code.” Referring to an earlier conversation, Eichten recounted it this way:

“Theresa — When you ask for suggestions on the coding to be used for the Chiro(practic) deal to allow for the flat rate reimbursement + admin(istration) fee, I want to make sure I understand your question. You are looking for a CPT code that could be used as the ‘dummy code’ to trigger payment in your system when we send it over on the 837 claims file? When we determined this dummy code for the therapies deal, your team gave us the dummy code. Do you want us to look through our CPT codes and give you some suggestions on what is not being used on our end? Or would it be easier for you to determine that from your system?”

It also recounted this: “Cyndy – I was hoping that you had some sort of idea of what chiro code would be good to use that is not typically used too frequently but would still be considered valid for the chiro. I am not an expert in chiro and this will be my first chiro vendor deal. I have done other PT/OT programs. If you don’t have a resource, then I’ll research and come up with a code to use, no problems.”

And this: “Theresa – I will work with my team to get some suggestions for a Chiro CPT code that falls within Chiro services but is very seldom used so that we could use it as our ‘dummy code’ for this program.'” 

If that exchange shows that the companies were conspiring to conceal that they were improperly billing Mars for Optum’s administrative fees, the companies might not be liable only to Mars and its employees. Peters’ attorneys assert it’s a violation of the federal Employee Retirement Income Security Act to falsely dress up administrative charges as medical services.

And if there was any doubt that the companies were trying to hide the fees, Optum’s Ellen Gallagher, a client-payer management official, might have cleared it up in a Jan. 28, 2016 email to Aetna’s Shiron Hagens.

“Finally, as we also discussed this morning, one of Aetna’s original goals of the service model was to ‘bury’ the admin fee within the claims process (to ensure that Aetna didn’t have to pay… out of their own bank account.) If this goal is no longer critical, this opens up our service model options. Meaning, we have more levers to pull and subsequently lower the cost of the program.”

The AMA called it a gross misuse of the codes it assigned medical services.

“There are no ‘dummy’ codes in the CPT code set, and each code is specifically tied to a medical service or procedure,” it told the appellate court. “The fact that some codes are explained in terminology that may be difficult for laymen to understand is no reason to use them as a front for other charges that Aetna and Optum wanted to conceal.”

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Marty Schladen
Marty Schladen

Marty Schladen has been a reporter for decades, working in Indiana, Texas and other places before returning to his native Ohio to work at The Columbus Dispatch in 2017. He's won state and national journalism awards for investigations into utility regulation, public corruption, the environment, prescription drug spending and other matters.

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