Insurance & Technology is part of the Informa Tech Division of Informa PLC

This site is operated by a business or businesses owned by Informa PLC and all copyright resides with them. Informa PLC's registered office is 5 Howick Place, London SW1P 1WG. Registered in England and Wales. Number 8860726.


08:21 AM
Connect Directly

Healthcare Claims Tech Under Fire

Class action lawsuits are being brought against health insurers that are using McKesson's claims analysis software.

The next round in the seemingly never-ending legal battle between health insurers and providers and policyholders is well underway. This time the focus in many class action lawsuits brought against insurance companies is on software that insurers use to automate the claims process.

"This is part of the love-hate relationship insurers have with their providers and insureds," says Lauri Ingram, senior program director in the insurance group at Stamford, CT-based META Group. "It's also part of a cyclical relationship. In the '70s and '80s, HMOs paid every claim. Now they are managing too much."

Class Action Suits Abound

At the center of many of the class action suits-including a pending case in Florida against Cigna, Aetna US Healthcare, United Healthcare, Humana, Foundation Health Systems and Prudential, and a case in Connecticut against Cigna-is software from McKesson Corp. (San Francisco). Various insurers involved in the lawsuits were not able to comment specifically about the cases.

"The case focuses on the use of McKesson's ClaimsCheck software that carriers use to make edits to claims so they don't have to pay them," according to Edith Callis, an attorney representing the Connecticut State Medical Society in its case against Cigna. The Florida class action suit says insurers that are using McKesson's auditing and compliance software, including CodeReview, Claims Check and Pattern Review, "have implemented claims processes" and "have the ability to manipulate CPTCurrent Procedural Terminology codes, down-code and unbundle claims, delay and wrongfully deny payment," by using the software. Down-coding is a term for classifying a claim as a less-costly treatment, although the doctor has already performed a more-expensive treatment.

McKesson representative Carolyn Staudenmeier, vice president and general manager, clinical auditing and compliance division, told Insurance & Technology at press time that, because she was not familiar with the cases, she could not comment specifically. But she did say that the lawsuits are a result of conflicts between doctors and carriers, not because of her company's software.

"There are many conflicts between the healthcare organizations and doctors," Staudenmeier says. "That is why the lawsuits are happening. The complaint is that some claims that appear the same get paid in different ways by payors. Each payor operates in the fashion they see best for their organization."

However, because McKesson has such a large marketshare and all of the carriers named in the suits are using McKesson's products, it should be easier for "plaintiffs to prove that something is not right," according to Mike Bruyere, an attorney with Lord Bissell Brook (Atlanta). "How can payors rely on software to determine payments? Determining medical necessity is based more on what is written in medical documents. If you rely on a software program without people looking at the claims, that is where you get into trouble."

Attorney Callis says that research for her case against Cigna has found just that. "The claims are being rejected or down-coded on an automated basis," she says. "This is happening over and over again. We are asking the health plans to stop making inappropriate edits."

Nowhere To Turn

But insurance companies are caught between a rock and a hard place as increasing claims volumes force carriers to adopt more automated processes. "This is not an enviable position for payors," Lord Bissell Brook's Bruyere adds. "Claims is a cumbersome process and without automation, it can't be done."

McKesson's Staudenmeier says that the vendor's tools are designed to "increase the accuracy and consistency of payments. Without automation, you will see healthcare costs rise even faster than they are now," she says. "If you go back and just pay claims, there will be fraud."

In most cases, says META Group's Ingram, doctors are not trying to defraud payors, they simply do not know how to code. "Coding is complicated," she says. "And fraud detection is different than claims analysis. But now payors are...trying to manage the way providers are managing patients. They have set the levels so high in the software, to reject claims," Ingram adds. "In the long run, it is going to cost payors anyway, since doctors and patients will just resubmit the claims over and over again."

Greg MacSweeney is editorial director of InformationWeek Financial Services, whose brands include Wall Street & Technology, Bank Systems & Technology, Advanced Trading, and Insurance & Technology. View Full Bio

Register for Insurance & Technology Newsletters