Payer Sues Pathologists For Clin Path Fee Refund

Health plan sues three Virginia pathology groups in dispute over professional component fees

CEO SUMMARY: In September, Anthem filed three lawsuits against pathology groups in Virginia, seeking refunds and punitive damages of up to $1million from each pathology group for pathology professional services provided in hospital labs by these pathology groups during the period 2001 through 2005. These three cases have disturbing implications for pathologists, as well as all providers with payer contracts.

FOR YEARS, THE PATHOLOGY PROFESSION HAS FOUGHT ATTEMPTS by private payers to cease paying for clinical pathology professional services.

But it is unusual, startling, and disturbing for one of the nation’s largest health insurance companies to sue pathology groups in an effort to recover clinical pathology professional service fees paid to the groups going back as far as five years! Yet this is what is unfolding in Virginia for three pathology groups. It represents a new threat to the pathology profession.

Pathologists and pathology practice administrators will be keenly interested in the outcomes of three lawsuits filed in September by Anthem Health Plans of Virginia Inc. That’s because Anthem is a division of Wellpoint, Inc., the nation’s largest health insurance company with 34 million beneficiaries nationwide. The legal action initiated by Anthem in Virginia could be the opening move in a chess game by Wellpoint in which it attempts to implement a policy across the country of no payment for clinical pathology professional services.

Anthem’s three lawsuits were filed in Henrico County Circuit Court, in Richmond, Virginia. In one action, Anthem Health Plans and its affiliated HMOs (HealthKeepers, Peninsula Health Care, and Priority Health Care) sued Dominion Pathology Associates Inc. of Roanoke, Virginia, and named Samuel Vance, M.D., William E. Jefferson, M.D., Alfred Campbell, M.D., and Robert E. White, M.D., (all in the pathology department at Carilion Roanoke Memorial Hospital in Roanoke, Virginia).

In its lawsuit, Anthem said it was seeking to recover payment made for automated clinical laboratory tests to the defendants. The lawsuit claims the defendants did not provide the tests to Anthem members, improperly submitted to Anthem for payment for these tests, and unlawfully refused to refund payments that Anthem said were made in error.

Billed By Pathologists

“The lab tests at issue were provided to Anthem members by a hospital that properly billed Anthem for the tests,” declared the complaint. The defendants served as laboratory directors for the hospital and Anthem paid the hospital “the full contracted amount for the tests.” The Anthem complaint alleges that the defendants did not provide the lab tests, but they submitted duplicate claims seeking payment for administrative functions, such as training staff, further stating that these administrative functions are not medical services and Anthem had no obligation to pay for the services.

In the first suit, the claims in question were filed over 30 months, from October 19, 2001, through March 22, 2004. The allegation is that defendants breached the contract they had with Anthem and committed fraud by double billing. The claims in dispute total $410,541.49, and the defendants owe $350,000 in punitive damages plus interest and fees, the complaint said.

The second lawsuit is similar in that Anthem and its affiliated HMOs sued Peninsula Pathology Associates Inc. of Newport News, Virginia, and its pathologists, David M. Smith, M.D., Carolyn O’Connor, M.D., John C. Maddox, M.D., and Jacques F. Legier, M.D. No hospital was named in the second complaint. The dates in question in the second complaint were October 29, 2001, through March 11, 2004, and all other claims in the second complaint are similar to those of the first complaint. The second complaint said the claims in dispute total $423,978.22, along with $350,000 in punitive damages, plus interest and fees.

The third lawsuit is almost identical to the other two, and names Loudoun Pathology Associates, PLC of Leesburg, Virginia and its pathologists, William C. Silberman, M.D., Dervila O. Jonas, M.D., and Nahla E. Acoury, M.D. The claims in question in this complaint range from December 1, 2000 through June 1, 2005. Anthem alleges that the claims in dispute total $623,914.70, along with $350,000 in punitive damages, plus interest and fees.

THE DARK REPORT spoke with several attorneys knowledgeable about past legal actions involving clinical pathology professional billing issues. These individuals wished to remain unidentified, but provided insights into the three lawsuits.

One attorney noted that lawsuits are generally filed only after discussions to resolve the dispute have proven fruitless. “Clearly, these discussions didn’t resolve anything, and Anthem, like many other health plans, now seeks cost savings,” observed the attorney. “The important issue and the one with the most significance for pathologists is that Anthem is seeking payment retroactively! That is a frightening prospect for pathologists and for any provider doing business with a health plan.

Prospective Payer Action

“Two years ago one payer challenging clinical pathology professional fees handled this issue differently,” noted the attorney. “UnitedHealth Care decided it would stop paying pathologists directly for clinical pathology professional services. It sent a notice to all pathology practices under contract. The notices went out in July 2004 and said that, effective in October, UnitedHealth Care would no longer pay clinical pathology professional service fees to the pathologists. As of October 2004, UnitedHealth Care said professional services would be considered part of the hospital payment. This action by UnitedHealth Care was prospective.

“Several Blue Cross plans have acted in a similar fashion, saying that they were paying for clinical pathology professional services as part of the hospital payment and that they would no longer pay pathologists directly for such services,” continued the attorney. “To my knowledge, in most cases, the health plans announced that they would make a change and then changed their policies. These other payers did not try to recoup any money paid in the past. They made prospective decisions.”

To Recoup Past Payments

“The prospective approach is different than Anthem’s approach in handling this issue,” noted another attorney. “What’s unique and deeply troubling to pathologists and any hospital provider is that Anthem seeks to recoup past payments. When a major payer says to you, ‘We didn’t mean to pay you for this service because we changed our policy a while back and now we want our money back,’ that’s difficult for any provider.

“If the court upholds this approach, then a payer could apply that logic to any payments it has made in the past,” the attorney said. “That is why the implications in this case are much broader than just the clinical pathology professional pathology component fees. If Anthem prevails, the court decision could conceivably stand as a proposition that payers could start retroactively recouping money, claiming that they had made policy changes years ago. For that reason, I hope Anthem does not prevail in these three lawsuits, and that this litigation takes a long time.

Two More Legal Concepts Affect Pathology Services

CERTAINLY THE THREE LAWSUITS FILED in Virginia by Anthem against three pathology groups are serious challenges to clinical pathology professional service payments. But there are two other noteworthy legal dimensions that may play a role in how this legal challenge is eventually resolved.

One attorney who discussed the issues involved in the Anthem lawsuits made two points. “First,” he said, “the pathologists are not being paid. Yet they are in a rather difficult position with the hospitals because there is a potential compliance issue. Since the payer now claims that the hospital is holding money owed to thepathologists–and because this hospital is the source of referrals to pathologists–one could argue that the hospital is withholding money (assuming it has the money) that’s owed to the pathologists.

“Therefore, it looks like the hospital is keeping that money, possibly as a kickback forgiving the pathologists the exclusive contract to do services at the hospital,” he explained. “So this situation puts the two parties into an interesting compliance bind. The hospital should be upset because the payer has put it into this awkward position and they are not getting additional money (for the pathology services) from the payer. Yet the payer is claiming the hospital is getting additional money.”

The second noteworthy fact is that disputes over professional pathology fees can be traced to 1983. That’s when Medicare instituted the DRG system and paid providers based on diagnosis-related groups. At the time, Medicare said it would not pay pathologists directly for the clinical pathology professional component and instead would pay the fee to the hospitals. That made hospitals responsible to pay pathologists for clinical pathology professional services rendered to Medicare patients.

Pay For Physician Services

“In addition to the significant implications of this case, the basic Anthem con- tracts don’t give Anthem the right to pay a third party for the services of a physician,” the attorney said. “And, hospitals will have not received any additional payment for the professional service component. So, contractually it seems like a weak argument for Anthem to make, but nonetheless they are suing.”

One attorney told THE DARK REPORT that, in other states in which Anthem has contract disputes with pathologists, Anthem has what are called “offset provisions” in its contracts. Therefore, when the health plan seeks to recoup payments made in the past, it can simply take those funds out of current payments until the payments in dispute have been paid off.

In Kentucky and Ohio, Anthem is believed to be recouping significant dollars from pathologists by using this off-set provision. Pathologists in Kentucky and Ohio are disputing the right of Anthem to use this offset provision, but the dispute is in arbitration and so the proceedings of the case are not public, the attorney said.

Payments Stopped in 2004

Curiously, there are other pathologists in Virginia who were paid in the same time period, and they apparently have not been contacted by Anthem, the first attorney noted. “In those cases, Anthem stopped paying the professional component fees in 2004—as it did for other pathologists. But the pathology groups haven’t been involved in this kind of court action,” he said.

The attorney representing Anthem in Virginia is W. Barry Montgomery of Kalbaugh, Pfund & Messersmith in Richmond, Virginia. When reached in his office last week, Montgomery said he would discuss the matter with his client before answering questions about the case. As of press time, Montgomery had not responded.

Two Decades Of Battles

During the past two decades, the pathology profession has fought continuous battles against payers attempting to cease payment to pathologists for clinical pathology professional services. In court cases involving this issue, pathologists have generally gained a decision which recognizes that pathologists pro- viding medical directorship of a clinical laboratory are providing professional services that directly benefit patients whose specimens are processed and tested in the laboratory.

Maintaining Lab Standards

Despite this consistent success in legal actions by pathologists, health insurance companies continue to take steps to deny payment to pathologists for such services. At the same time, these same health insurance companies require clinical laboratories to be accredited and under the directorship of a board-certified specialist in laboratory medicine. These requirements are in place because payers recognize that a poorly-run laboratory can be the source of poor medical care and result in expensive malpractice claims.

The contradiction in the position of payers attempting to deny reimbursement for such services has never been effectively addressed by pathologists. Now, because payer consolidation has created behemoth firms, pathologists face an even tougher battle to defend their scope of medical practice and their right to appropriate reimbursement for services that benefit patients.

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