Ingenix Under Investigation
New York Attorney General Andrew Cuomo has announced an industry-wide investigation of health care claims consultant Ingenix, a UnitedHealth Group subsidiary, for manipulating reimbursement rates provided to their clients, such as BlueCross BlueShield. The investigation has exposed Ingenix’s intent to under reimburse their clients and members, and collect funds unrelated to relevant medical expenses for private gain. Cuomo issued 16 subpoenas to insurers and benefit plans that have been affected by the conduct. He also plans to file suit against Ingenix and its parent company, UnitedHealth Group.
“We believe there was an industry wide scheme perpetuated by some of the nation’s largest health insurers to deceive and defraud consumers,” Mr. Cuomo stated. The suit by the New York attorney general echoes complaints that doctors’ groups and some other critics have raised in recent years. It is likely to place greater scrutiny on health insurers at a time when the industry has been reporting big profits, even as the rising cost of medical insurance has left an estimated 47 million uninsured.
Cuomo’s investigation focuses on a fundamental industry practice: analysis of medical provider bills and determination of payable claims when a patient receives care from a provider not under contract with the insurer. Individuals who treat with providers outside these contractual networks are typically required to pay a certain percentage of the usual and customary charges (ordinarily around 20%). This charge is a calculation that is supposed to reflect the prevailing market rate in a given geographic area for a doctor visit or other medical service.
To determine the market rates for services, insurers generally rely on data provided by Ingenix. Mr. Cuomo contends that Ingenix and some of the insurers it works with manipulated this information to arrive at artificially low rates. He further stated that the insurers were inherently conflicted since it was in their interest to understate the true rates.
The UnitedHealth insurers and many other health insurance carriers relied on the Ingenix database to determine their “reasonable and customary” rates. The Ingenix database used the insurers’ billing information to calculate a “reasonable and customary” rate for individual claims by assessing how much a similar type of medical service would typically cost, taking into account the type of service, physician, and geographic location. However, the investigation showed that the “reasonable and customary” rates produced by Ingenix were remarkably lower than the actual cost of typical medical expenses.
Under the UnitedHealth insurers’ health plans, members pay a higher premium for the right to use out-of-network doctors. In exchange, the insurers promise to cover up to 80% of either the doctor’s bill or of the “reasonable and customary” rate depending upon which is cheaper. The Attorney General’s investigation found that by distorting the reasonable and customary rate, the UnitedHealth insurers were able to keep the reimbursements due to insureds artificially low and force patients to absorb a higher share of the costs.
When members complained their medical costs were unfairly high, the UnitedHealth insurers hid their connection to Ingenix by claiming the rate was the product of “independent research.” The Attorney General’s notice to United expressed concern that the company’s ownership of Ingenix created a clear conflict of interest because their relationship gave Ingenix an incentive to set rates that benefited United and its subsidiaries.
Cuomo’s investigation unearthed a clear example of the scheme: UnitedHealth insurers knew most simple doctor visits cost $200, but claimed the typical rate was only $77. The insurers then applied the contractual reimbursement rate of 80% to this “typical” rate, covering only $62 of a $200 bill, leaving the patient to cover the $138 balance.
The subpoenas served today request production of documents showing how the insurers served with subpoenas compute reasonable and customary rates, copies of their member complaints and appeals, correspondence with their members, and correspondence between Ingenix and the insurers.
Cuomo continued, “The lack of accuracy, transparency, and independence surrounding United’s process for setting a ‘reasonable and customary rate’ is astounding. United’s ownership of Ingenix coupled with the inherent problems with the data it is using clearly demonstrate a broken reimbursement system designed to rip off patients and steer them towards in-network-doctors that cost the insurer less money.”