From: Becker Scott <>
Subject: [Becker's ASC E-Newsletter] The Empire Strikes Back: N.Y. Probes Underpayments by Insurers to Out-of-Network Providers, Patients; Per-Click Concerns Here to Stay
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February 19, 2008
In This Issue
The Empire Strikes Back: N.Y. Probes Underpayments by Insurers to Out-of-Network Providers, Patients
Per-Click Concerns Here to Stay
News and Notes
Companies to Watch
May-June issue promo
The Empire Strikes Back: N.Y. Probes Underpayments by Insurers to Out-of-Network Providers, Patients

After several years of insurance companies aggressively setting limiting rates as to what they will pay out-of-network providers, New York has launched an investigation into whether insurance companies are unfairly setting those rates and causing patients to pay disproportionately high amounts of provider bills. Health insurers are being probed as part of an healthcare industry-wide investigation to determine whether they have schemed to "defraud consumers by manipulating reimbursement rates," according to the N.Y. attorney general's office.

A six-month investigation found that Ingenix, the nation's largest provider of healthcare billing information, "operates a defective and manipulated database that most major health insurance companies use to set reimbursement rates for out-of-network medical expenses." Further, the investigation found that two subsidiaries of United "dramatically under-reimbursed their members for out-of-network medical expenses by using data provided by Ingenix," according to a release.

As a result, state Attorney General Andrew M. Cuomo has issued 16 subpoenas to the largest insurers in the country, including Aetna, Cigna, and Empire Empire BlueCross BlueShield; he has announced that he intends to file suit against Ingenix, its parent UnitedHealth Group and three additional subsidiaries. You can read the notice of proposed litigation here.

In one example cited by the attorney general's office, United insurers knew most simple doctor visits cost $200, but claimed to members that the typical rate was only $77 -- a rate manipulated to be "remarkably lower than the actual cost of typical medical expenses," despite the fact the Ingenix database was supposed to be used to calculate a "reasonable and customary" rate. The insurers then applied the contractual reimbursement rate of 80 percent, covering only $62 for a $200 bill, and leaving the patient to cover the $138 balance.

Further, "When members complained their medical costs were unfairly high, the United insurers hid their connection to Ingenix by claiming the rate was the product of 'independent research,'" says the attorney general's office. This created "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."

Interestingly enough, New York is the same state that is aggressively attacking centers that may be waiving or reducing out-of-network payments. On the positive side, this is one of the few situations we're aware of where a state is actually taking issue with insurance company underpayments.

Audio of Mr. Cuomo's announcement of the investigation results and subpoenas is available to download here.

Spring Group 2nd/4th through July
Per-Click Concerns Here to Stay

We have been hearing more of late about interest in per-use, or per-click, space and equipment leases. Such arrangements should be handled with a very high level of caution.

Settlements in recent years, have increased federal scrutiny of per-click leases. One example is the Office of Inspector General settlement worth $270,000 with Dominican Health Services, d/b/a Holy Family Hospital, in which "The OIG alleged that Holy Family paid remuneration to induce referrals from an entity owned by urologists. The OIG alleged that Holy Family entered into a series of contracts with an entity owned by urologists under which Holy Family paid the entity in excess of fair market value for the lease of a lithotripter and contracted lithotripsy services. The OIG alleged that Holy Family's payments were to induce Federal health care program referrals from the urologists who owned the entity."

In a second example, the OIG also described the improper conduct that led to a $405,000 settlement with Inland Empire Lithotripsy as follows: "The HHS/OIG alleged that Inland, an entity owned by urologists, received payments from a hospital in excess of fair market value for rental of a lithotripter and provision of lithotripsy services in exchange for Inland's referral of Medicare patients to the hospital. The OIG has alleged that Inland terminated some of its physician members in retaliation for their failure to refer a sufficient number of patients to the hospital."

Medtegrity 12 weeks consec
News and Notes

Periodic disclosure of interests. We have made this disclosure in our ASC Review periodically re: serving as general counsel or serving on boards; it also appears at under "About Scott Becker," and will appear in the March/April issue of the ASC Review.

Scott Becker exclusively provides legal and counseling services through McGuireWoods. He is not separately available for hire. Mr. Becker over the years has provided counsel to hundreds of physician-owned ASCs, served on the boards of directors of a few companies in the ASC business, served as general counsel to several management and development companies, and has invested directly in a small number of ASCs, owning very small interests therein -- usually 0.25 to 2 percent (on the very high side). When Mr. Becker has invested in an ASC, he pays for any units in cash (he cannot trade interests for advice or services of any sort), he discloses it fully to the partners, and the partners are advised to have independent counsel review and negotiate the agreements. Mr. Becker does not seek investment opportunities, nor does he own interests in any management and development companies with the exception of one (in which he owns a very small amount) with a very limited focus that is generally not competitive with any other management company Mr. Becker works with on a regular basis. Mr. Becker has chosen not to invest in other ASC management companies.

Understanding the business side of ASCs through these roles has been invaluable to Mr. Becker in advising clients and in developing a high-quality and insightful publication. You cannot know the business in the way an advisor might know it until you, like Scott Becker, have lost all of one's investment in a couple of early investments. It is hard to create the same insight as solely an advisor and not in part being a participant. He is very, very thankful and proud to have the chance to work closely with many of the best physician leaders, best leaders and finest administrators in the ASC business.

If you have any questions about this, please contact Scott Becker.

Handling Complex Orthopedic and Spine Procedures in an ASC audioconference. ASC Communications will present an audioconference, "Handling Complex Orthopedic and Spine Procedures in an ASC," on Wednesday, March 19, at 2 p.m. Central. Attendees of the 60- to 90-minute program will learn

  • which spine procedures can be safely and properly performed in an ASCr;

  • which knee, hip and shoulder procedures can and can't be performed in an ASC;

  • how to assess patient selection criteria for spine and advanced orthopedic procedures;

  • how to determine which special safety procedures an ASC should have in place as it handles more complex spine and orthopedic procedures; and

  • the requirements for reimbursement for more advanced spine and orthopedic procedures.

Speakers include Dr. John Caruso, who has more than 16 years' neurological surgery experience; Dr. Phillip A. Davidson, the founder and CEO of Tampa Bay Specialty Surgery Center; and Mr. Jeff Leland, the CEO of Blue Chip Surgical Partners. Attendees can earn 1.5 CME or AEU credits. If you are an orthopedic physician, neurosurgeon, ASC administrator, ASC director of nursing, medical director or anesthesiologist, this program is not to be missed. Registration is limited to 60 attendees.

There are four easy ways to enroll:

Make checks payable to ASC Communications.

Three great upcoming events. Please note there are three great upcoming events that touch on the ASC industry.

First, there is Outpatient Outlook, a gathering from Feb. 24 to 26 in Tucson, Ariz., of 100 executives from cancer, imaging and surgery center developers and hospital and healthcare systems, presented by a5, a Chicago-based firm with significant healthcare and event marketing experience. For more information, e-mail John Harris or visit Outpatient Outlook online.

Second, there is the ASC 100, an executive business forum for freestanding ambulatory surgery, hosted by Lincoln Healthcare Events, from March 16 to 18 in Scottsdale, Ariz. For more information, e-mail Rachel Brenha, call her at (203) 846-2600 x114, or visit the ASC 100 online.

Finally, the annual meeting of the ASC Association will be held in May 15 to 18 in San Antonio, Texas. It promises to be a huge and terrific meeting covering a wide variety of business and clinical issues for ASCs. Please contact the ASC Association at (703) 836-8808, or visit the ASC Association 2008 meeting site for more information.

McGuireWoods teleconference: "Structuring Physician Hospital ASC Joint Ventures." McGuireWoods is holding a teleconference, "Structuring Physician Hospital ASC Joint Ventures," on Tuesday, March 13, from 12:30 to 1:30 Eastern. Speakers include Brett Brodnax, the executive vice president and chief development officer of United Surgical Partners International; Joseph Zasa, managing partner with Woodrum/Ambulatory Systems Development; Amber McGraw Walsh, an associate at McGuireWoods; Elissa K. Moore, an associate at McGuireWoods; and Scott Becker, co-chair of the healthcare department at McGuireWoods, who will moderate the conference. Join members of the healthcare industry to discuss the development and maintenance of effective hospital joint-ventures, including best practices and case studies -- register today.

Becker's ASC Review special offer. The Becker's ASC Review is published six times a year. To receive a hard copy delivered and never miss an issue, subscribe. As a special introductory offer, the next 100 new subscribers can subscribe for two years for $199 -- a discount of $100 off the usual $299 price. To subscribe, either fax this form to (866) 678-5755 or mail to ASC Communications, 315 Vernon Ave., Glencoe, IL 60022. Please mark on the subscription form "special offer -- $199." Subscription forms must be received by Feb. 20.

As a bonus, each subscriber will also receive a PDF version of the entire and extremely useful useful VMG Health Intellimarker, the single best benchmarking resource. Please call (214) 369-4888 for more information on VMG Health, a leading healthcare valuation firm.

What's on tap for May/June. The May/June issue of the Becker's ASC Review will feature two core subjects: an ASC's guide to orthopedics and spine (clinical and business issues), and an ASC administrator's guide to anesthesia in ASCs -- a focus on business, clinical and product issues. It will also feature 10 products ASC administrators and medical directors should know about for orthopedics, and 10 they should know about for ambulatory anesthesia. The issue will be distributed at the June conference.

March Webinar
Companies to Watch

We are delighted to highlight the following companies in this week's E-Weekly.

ASCs Inc. ASCs Inc. helps physician-owners of ASCs form strategic relationships with leading ASC management companies and hospitals. Physician-owners of ASCs who are seeking a sale of their center, an exit strategy, improved management, resyndication and recruitment of new physicians, or expansion of their centers will benefit from a strategic relationship with a corporate partner. ASCs Inc. helps the physicians find the best long-term partner and the highest negotiated price. The principals of ASCs Inc. have been helping physicians form relationships and maximize profits from their ASCs since 1983. For more information contact Jon Vick, president, at 760-751-0250 or visit the company's Web site.

Eveia Health Consulting & Management Company Founded by I. Naya Kehayes, MPH, Eveia Health Consulting & Management is comprised of a team of seasoned professionals who are experts in reimbursement management, managed care contracting, and business management with a specialization in ASCs and surgical practices. Senior Management serve as advisors to national corporations and provide leadership in health policy initiatives related to reimbursement on behalf of ASCs at both state and federal levels. Eveia's services include contracting and contract analysis, acting as administrator and manager, customizing revenue management, financial analysis, and enhancing and maximizing the financial position of clients. In addition, Eveia implements training and reimbursement calculators, and it provides feasibility studies, payor due diligence, fee schedule development and coordination of business related activities. Eveia has serviced more than 100 clients in 25 states since its inception in 1998. For more information, call her at (425) 657-0494, or visit

HealthCare Appraisers. HealthCare Appraisers is a nationally recognized valuation and consulting firm providing services exclusively to the healthcare industry. Services include the following:

  • Fair Market Value opinions for compensation and service arrangements (including but not limited to employment; on-call; medical directorships; collection guarantees; "per click" equipment leasing; billing under arrangements; and block leasing);
  • Business Valuation (including but not limited to ASCs, hospitals, dialysis centers; home health, diagnostic and other treatment facilities, physician practices, and intangible assets);
  • Consulting and Advisory Services; and
  • Litigation Support.

Please visit Healthcare Appraisers' Web site or call the Delray Beach, Fla., office at (561) 330-3488 or the Denver, Colo., office at (303) 688-0700.

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If you have any questions on any of the items listed in this letter, please contact Scott Becker at (312) 750-6016 or by email at

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