THE CIGNA CLASS ACTION SETTLEMENT

By: Michael J. Schoppmann, Esq.

Kern Augustine Conroy & Schoppmann, P.C.

In an attempt to assist members of the Medical Society in deciphering the terms of what is commonly known as the “Cigna Settlement,” we would offer this brief summary of the settlement terms and structure.

Basically, physicians who are, or have been, a physician or physician group who practiced in the United States between August 4, 1990 and September 5, 2003, and have not filed a timely opt out notice, are a member(s) of the Class in a settlement with the CIGNA Corporation of the class action lawsuit known as “In re Managed Care Litigation.”

The components of the settlement include:

• Prospective Relief-Changes (non-monetary)
• Retrospective Relief (monetary payments)
• Enforcement

However, in order for any physician to be permitted to submit claims for retrospective monetary payment, they must retain billing and medical records relating to medical services provided to CIGNA members - dating back to August 4, 1990, the beginning of the class period.

The Settlement Administrator will send notices to class members that will include detailed instructions regarding how claims can be submitted.

Under the Settlement, class members may choose between two types of compensation:

Category A Settlement Fund

or

Claim Distribution Fund

 A class member may seek compensation from EITHER the Category A Settlement Fund or the Claim Distribution Fund, but not both.

 Category A Settlement Fund: This category is designed for class members who choose not to submit documentation in order to obtain payment. Each member filing a Category A claim may either receive payment from the Category A Settlement Fund or direct that the payment amount be contributed to (a) the medical foundation established under the settlement or (b) a medical foundation established by state medical societies. The amount payable to any one individual under a Category A settlement depends upon the total number of class members who elect to claim under Category A. Any class member filing a Category A Claim will not be eligible to seek Category One, Category Two or Medical Necessity Denial Compensation.

 The Claim Distribution Fund: If a physician chooses not to submit a claim under Category A, the physician may instead seek compensation under the Claim Distribution Fund for certain claims that were denied or for which payments were reduced. The Claim Distribution Fund has three categories:

1. Category One Compensation: Category One Compensation applies to denials of or reductions in payments resulting from certain Claim Coding and Bundling Edits. Denials of or reductions in payment for Category One codes resulting from the application of other payments and benefit limitations (e.g. coordination of benefits rules, violations of pre-authorization requirements, violation of referral requirements) are not eligible for Category One Compensation and a list of specific code combinations which qualify for Category One Compensation has been promulgated.

Acceptable Documentation for Category One Compensation includes:

■ A copy of the relevant CIGNA Remittance Form confirming that Category One Codes were submitted for payment and fall within the date of service limitations;

■ A copy of the HCFA 1500 form (also known as the CMS 1500) or other claim form confirming the Category One Codes were submitted to CIGNA for payment and fall within the date of service limitations;

■ A physician certification that the CIGNA Remittance Form and the HCFA 1500 or other claim form cannot be located and are not available.

2. Category Two Compensation: Category Two compensation applies to denials of, or reductions in, payment resulting from the application of “Claim Coding” and/or “Bundling Edits” (other than those for which Category One compensation applies). Category Two compensation is available for any denials of or reductions in payment of Category One codes that occurred outside the circumstances and/or date of service limitations identified in the Category One Code list. If CIGNA denied the Proof of Claims it will automatically be sent to an external reviewer for a final determination.

Acceptable Documentation for Category Two Compensation includes:

 ■ Documentation (i) that the physician was denied payment, in whole or in part; (ii) that the physician received reduced payment, including payment for a different billing code than the one(s) billed, for one or more CPT codes or HCPCS Level II Code(s); or (iii) the physician received reduced payment based upon the application of Multiple Procedure Logic. Also accepted will be a copy of the relevant CIGNA Remittance Form confirming that payment was denied on the CPT Codes or HCPCS Level II Codes. In the event that the physician cannot locate the CIGNA Remittance Form, the physician may submit copies of internal accounting records (such as printouts of accounts receivable records or paid account records) if those records show for the underlying claim and specific date of service the CPT codes or HCPCS Level II codes that were submitted to CIGNA for payment and remain unpaid.

■ Clinical Information. CIGNA requires the physicians provide a complete copy of the relevant medical records.

Exceptions to Clinical Information Requirement:

The requirement that clinical notes, operative reports or other clinical information be submitted does not apply to requests for payment based on claims that:

• CIGNA failed to recognize modifiers 50, RT, LT, FA-F9, or TA-T9, and thus denied payment for one or more CPT Codes as duplicative of other CPT Codes reported;
• HCPCS Level II “J” code was translated into an incorrect or overbroad CPT code.

For claims of the type, the physician must submit:

• A copy of the HCFA 1500 or other claim form used to submit the original claim to CIGNA.
• Documentation showing that payment was denied, in whole or in part, for the CPT codes or HCPCS Level II Codes concerned (such as a copy of the relevant CIGNA Remittance Form or the physician’s internal accounting records.)

The requirement that clinical notes, operative reports or other clinical information be submitted also does not apply to requests for payment based on the contention that CIGNA incorrectly processed one or more modifier 51 exempt CPT Codes and/or add-on CPT Codes using Multiple Procedure Logic when those codes were exempt from multiple procedure reduction. For such claims, the physician must submit a copy of the documentation showing that payment was denied, in whole or in part, for the CPT codes concerned. Such documentation may include a copy of the relevant CIGNA Remittance Form or the physician’s internal accounting records.

3. Compensation for Erroneous Denials on Medical Necessity Grounds: Medical Necessity Denial compensation may be sought for claims that physicians believe were improperly denied as not medically necessary or as experimental or investigational. If CIGNA denies the Proof of Claim, it will automatically be sent to an external reviewer for a final review and decision.

 Acceptable Documentation for Erroneous Denials includes:

 ■ Documentation showing that the physician submitted claims for payment to CIGNA for services or supplies where payment was denied for one or more CPT Codes or HCPCS Level II Codes due to CIGNA’s determination that the medical services, procedures or supplies corresponding to such codes were either not medically necessary or were experimental or investigational. The physician may submit the relevant CIGNA Remittance form and if the physician cannot located the CIGNA Remittance form applicable to a given claim, the physician may submit copies of internal accounting records (such as printouts of accounts receivable records or paid account records) if those records confirm that the CPT codes or HCPCS Level II codes in question were submitted to CIGNA for payment and remain unpaid, and

 ■ A complete copy of the clinical information generated in connection with the services. Clinical, operative or other medical records that relate to dates of service occurring more than 90 days before the date of service at issue in the Proof of Claim do not need to be submitted.

It should be noted that the forms for filing each of the various types of claims (and the other documents attendant to the settlement) have been posted on the Medical Society of the State of New York website at http://www.mssny.org/ClassAction. Regardless of which direction is chosen, every physician should weigh their rights, potential remedies and options carefully.

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The following memorandum is from Donald Moy, Esq., General Counsel, MSSNY, regarding the recently announced process to file retroactive claims to recover money denied by CIGNA.

The following is regarding the Notice of Commencement of the Claims Period in Settlement of Class Action Among CIGNA Healthcare and Physicians. I believe the Settlement Administrator will be mailing the Notice between July 1-July 8. The Claims Period begins August 23, 2004 and will end on February 18, 2005.

A class action member may seek compensation from EITHER the Category A Settlement Fund or the Claim Distribution Fund but NOT BOTH. Please note that once a physician submits a claim under Category A, he/she cannot change his/her mind. The exception is if the Settlement Administrator receives a Category A Claim and a Claim Distribution Fund claim on the same day, the physician will be given an opportunity to clarify which claim he/she would like to have processed.

In some cases, it will make good sense for the physician to claim under Category A, e.g. the physician submitted no claims, or very few claims to CIGNA.

A physician who claims under Category A may direct that his or her share be contributed to the Physicians’ Foundation for Health Systems Innovations (“PFHSI” or “CIGNA Foundation”). PFHSI is a nation wide medical foundation established as a result of the CIGNA settlement. As a “Signatory” Medical Society, MSSNY is represented on the Board of Directors of PFHSI.

A physician may also direct that his or her share be contributed to a not-for-profit foundation established by a Signatory Medical Society. The foundation established and sponsored by MSSNY is the Medical Educational and Scientific Foundation of New York, Inc. (“MES Foundation”).

In the case of physicians who have submitted a substantial number of claims to CIGNA during the class period, we hope that the physician will not reflexively make a Category A claim. The physician may potentially recover much more money under the Claim Distribution Fund, but may be tempted to claim under Category A because of its simplicity. As mentioned earlier, if the physician makes a Category A claim, he/she cannot subsequently change his/her mind.

MSSNY and the other Signatory Medical Societies have been busy identifying potential vendors who will be able to assist physicians to review their CIGNA claims. If the physician engaged in electronic claims submissions, it may not be that difficult to access and analyze the data. We are currently negotiating with a vendor to offer a substantial discount to state and county medical society members.

If you have any questions concerning your recovery of claims, you can call MSSNY legal affairs at 516-488-6100.

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Understanding Physician Employment Contracts

By: Mathew J. Levy, Esq.

Kern Augustine Conroy & Schoppmann, P.C.

Unfortunately, yet understandably, most physicians are reluctant to read all of the provisions in their employment contracts in the belief that they face a “take it or leave it” quandary. However, physicians often do not realize that while there are provisions in such contracts that are standard in the industry, there are many issues which can be negotiated. Those physicians who simply execute the document without an understanding of the issues contained therein (and their potential impact) often find themselves at odds with their employers, actually unemployed, or in increasing numbers – in a court of law. This article is intended to help physicians avoid any such eventuality.

Compensation: Most physicians do not realize that they can negotiate and increase their total compensation through a productivity incentive provision. Employers can readily appreciate the inherent profitability of collecting three (3) times the amount of money paid to their employee and are, therefore, more than willing to share a percentage of the revenue “collected” for those services rendered by the employee, in excess of three times their salary.

Quality of Life Issues: To many, this aspect of the contract is more important than any compensation provision. Physicians should weigh heavily such elements as:

· What is the call policy of the practice? Often, physicians find themselves working far more hours than are set forth in their agreement. For example, an agreement may provide that the employee is responsible for “call”; however, does the agreement provide that “call” will be on an equal rotating basis, or state what will happen if one of the physicians leaves the practice?

· Does the practice have multiple locations? Will you have to travel? If there are multiple locations and traveling is required, physicians can often negotiate a monthly expense account (ex. $500.00 per month for auto expenses, insurance, gas, tolls, etc.).

· How long have the employees been at the practice? What are the partners like? What are their billing procedures? Do the partners have any Office of Professional Medical Conduct or malpractice history?

Duties & Responsibility: Ask your potential employer to allow you to shadow a partner for a day. This will give you an idea of what a typical day might be like and help you understand what will be expected of you.

Malpractice Insurance : Physicians should be aware that there are two types of malpractice insurance, “Occurrence” or “Claims Made”. While Occurrence is the preferred form of coverage, it is also the most expensive in that it covers the physicians for services rendered during and after the term of The Employment Contract.

On the other hand, Claims Made insurance only provides coverage during the term of employment. The moment the agreement is terminated, no matter the reason for the termination, the physician is no longer covered for any of the professional services rendered during the term of the agreement. Therefore, the physician is obligated to purchase additional insurance known as “Tail Coverage”. Tail Coverage is expensive; however, the one-time fee can be paid over time and in most physician employment contracts, negotiations can result in the cost being shared equally with the employer.

Termination: There are normally two types of termination sections within an Employment Agreement - termination without cause and termination with cause.

· Termination Without Cause: Pursuant to New York law, a termination without cause provision relegates a physician to “at will employee” status. Unfortunately, an “at will physician-employee” can be terminated at any time for no reason at all. Such physicians have absolutely no recourse, unless the termination is predicated upon illegality ( i.e. , age, race or gender discrimination).

· Termination With Cause: Every employed physician should be careful of this “catchall provision” that allows the employer to terminate the physician if, in the employer's sole discretion, it is determined that the physician is detrimental to the practice. Such provisions are too subjective and the consequences are too great in that termination under this provision is immediate, and no notice period is required. As a result, such provisions must be removed or an opportunity to cure must be added.

Restrictive Covenants: The restrictive covenant is one of the most litigated issues in the history of employment agreements. The courts in New York , as in most states, do not like to prohibit physicians from offering medical services to patients simply because there is a written employment agreement containing a restriction on the employee's ability to compete with his or her former employer. New York courts will often be flexible and inventive in finding ways to find the restrictive covenants not binding. However, the courts have held that if the restrictive covenant is deemed to be reasonable, the non-compete provision will be enforced.

A restrictive covenant has two elements – Geographic area and time frame. When faced with a restrictive covenant, a physician must consider where they would seek to work, in the (likely) event that they will leave the practice. If the location is within the restricted area, then the restricted area should be negotiated to a smaller region that does not include the future location.

In conclusion, a good contract should be reasonable for both sides. Armed with a fair contract, both parties are on their way to a mutually rewarding and successful future.

Physicians who may have questions regarding contracts, of any kind, can contact Mathew J. Levy, Esq. at 1-800-445-0954.

Health Plans Versus Physicians: New Legal Threats

By: Michael J. Schoppmann, J.D.

Over the past few years, a “billing claim review and audit initiative” by United HealthCare (“UHC”) has targeted physicians who have billed office visit codes in the 99211-5 series. Upon compiling the requested data, UHC has generated “Request for Reimbursement” letters to the reviewed physicians, demanding that they return monies paid.

Unfortunately, UHC has also recently, and drastically, raised the stakes in efforts to further reduce physician reimbursement. According to information received by Kern Augustine, physicians receiving these letters have also been reported by UHC to the designated Insurance Fraud Prosecutor for consideration of criminal prosecution. As such, those physicians receiving a Request for Reimbursement are now subject to potential criminal investigation. Given this development, any repayment of monies to UHC could be construed as an admission of wrongdoing.

This dramatic escalation of the dispute between HMOs and physicians on appropriate billing and reimbursement cannot be ignored. Not only are HMOs continuing to reduce reimbursement rates, delay payments and down-code without justification, they now are seeking to enlist the efforts of the State's criminal authorities to bolster their efforts through further intimidation of physicians.

A decision to reimburse UHC is now not only an economic decision; it is a decision that has criminal implications for physicians and their practices. Given this development, no physician should consider responding to a demand for repayment by UHC or any other HMO or third party payor without careful consideration of all of the possible consequences of such repayment, and without appropriate guidance. Assessment of the accuracy of the UHC audit, the ability to challenge its findings and the need to take immediate action to mitigate further liability all need to be addressed. Certainly, no physician who receives communication from any authority, and especially an Insurance Fraud Prosecutor or Investigator, should respond without the assistance of experienced heath care counsel.

Even if the matter does not result in criminal charges, it may still be referred to other entities, such as the Office of Professional Medical Conduct for investigation and potential disciplinary action. Any such action will trigger a report to the National Practitioner Data Bank, investigation by other states in which the physician holds a license, adverse action by health plans and managed care programs with which the physician participates and public disclosure through the New York Department of Health Physician Profile.

Unquestionably, these tactics only serve to re-enforce the need for every physician and/or medical practice to carefully scrutinize their billing practices, weigh carefully their interactions with managed care companies/health plans and never disregard the potential consequences of these ever increasingly complex, and risky, relationships.

OIG EVIDENCES AN INTEREST IN PROBLEMATIC JOINT VENTURE ARRANGEMENTS

1. A hospital establishes a subsidiary to provide durable medical equipment ("DME"). The new subsidiary enters into a contract with an existing DME company to operate the new subsidiary and to provide the new subsidiary with DME inventory. The existing DME company already provides DME services comparable to those provided by the new hospital DME subsidiary and bills insurers and patients for them.
2. A DME company sells nebulizers. A mail order pharmacy suggests that the DME company form its own mail order pharmacy to provide nebulizer drugs. Through a management agreement, the mail order pharmacy runs the DME company's pharmacy, providing personnel, equipment, and space. The existing mail order pharmacy also sells all nebulizer drugs to the DME company's pharmacy for its inventory.
3. A group of nephrologists establishes a wholly-owned company to provide home dialysis supplies to their dialysis patients. The new company contracts with an existing supplier of home dialysis supplies to operate the new company and provide all goods and services to the new company.

New Line of Business. The Owner typically seeks to expand into a health care service that can be provided to the Owner's existing patients.

Captive Referral Base. The newly-created business predominantly or exclusively serves the Owner's existing patient base (or patients under the control or influence of the Owner). The Owner typically does not intend to expand the business to serve new customers (i.e., customers not already served in its main business) and, therefore, makes no or few bona fide efforts to do so.

Little or no Bona Fide Business Risk. The Owner's primary contribution to the venture is referrals; it makes little or no financial or other investment in the business, delegating the entire operation to the Manager/Supplier.

Status of the Manager/Supplier. The Manager/Supplier is a would-be competitor of the Owner's new line of business and would normally compete for the captive referrals.

Scope of Services Provided by the Manager/Supplier. The Manager/Supplier provides all, or many, of the following key services:

• day-to-day management;
• billing services;
• equipment;
• personnel and related services;
• office space;
• training;
• health care items, supplies, and services.

Remuneration. The practical effect of the arrangement, viewed in its entirety, is to provide the Owner the opportunity to bill insurers and patients for business otherwise provided by the Manager/Supplier.

Exclusivity. The parties may agree to a non-compete clause, barring the Owner from providing items or services to any patients other than those coming from Owner and/or barring the Manager/Supplier from providing services in its own right to the Owner's patients.