Trying to recover $120 million, the nation's third largest insurer is fighting back against an alleged scheme of kickbacks, out-of-network billing and the marketing of supposedly luxurious healthcare.
In greater Houston, Aetna is suing North Cypress Medical Center and its CEO, seeking $120 million in recoupments. Lawyers for insurer argue that the 175-bed physician-owned hospital violated the Racketeer Influenced and Corrupt Organizations Act and numerous contract breaches through a business strategy based on maximizing referrals and out-of-network billing.
"The financial harm inflicted on Aetna and the healthcare system was not by happenstance, but by pure design," write Aetna's lawyers John Shely and Jeffrey Migit, of Andrews Kurth, in a complaint in the U.S. District Court for the Southern District of Texas.
Part of the evidence, they argue, is North Cypress Medical Center's annual revenue of $1.5 billion--more than twice that of other local hospitals with comparable size and service offerings.
"North Cypress' extraordinary revenues, which make it an extreme outlier in the healthcare industry, were not achieved by creating a higher quality and more efficient hospital facility, but rather, through a fraudulent billing scheme that was masterminded by Dr. Robert Behar," the CEO.
A bilingual radiation oncologist originally from Chicago, Behar founded North Cypress in 2007, to serve the affluent northwest suburbs of Houston. The general acute hospital is "designed with patients and physicians in mind," the website boasts, and offers "the latest, state-of-the-art medical technology and equipment, well-respected area physicians, and an upscale 5-star hotel-like ambience."
According to Aetna, under Behar's leadership the hospital has pursued an aggressive profiteering strategy supporting a "lavish" lifestyle for the physician owners--allowing Behar to earn $25 million in the last 8 years and others to become "millionaires virtually overnight." Since 2009, Aetna argues that the hospital has collected $120 million more than it should have through a range of problematic practices.
To start, according the lawsuit, North Cypress recruited physicians with the promise of ownership interest if they referred patients to the hospital, even if it was out-of-network.
"Once physicians are admitted into North Cypress' exclusive ownership club,' Dr. Behar exerts substantial pressure on them to continue referring their patients to North Cypress or else face dire consequences," the lawsuit argues.
The hospital allegedly has used metrics called "Physician Vital Statistics" to track the volume of patients and resulting billed charges for each referring-physician investor. "Those physicians who do not refer patients or a sufficient number of patients to North Cypress are reprimanded, threatened, and even forced by Dr. Behar to relinquish their ownership interest," according to the lawsuit.
In tandem, Aetna alleges, the hospital has tried to "generate maximum revenues" as an out-of-network provider with "excessive fees"--among them $200,000 for an abscess treatment, $83,000 for a nasal polyp removal, $29,000 for a hammertoe procedure, $25,000 for a rash, and $3.1 million for surgery anchor screws priced at $2,500 each.
North Cypress has also made questionable use of observation care, keeping patients in the hospital for as long as a week without admitting them, and then billing at $200-$230 per hour, "three times the market average," the lawsuit claims.
On the patient end, Aetna alleges that North Cypress convinced its members to use the hospital as an out-of-network provider through a prompt pay program, billing them about what they would owe at an in-network provider.
"By entering into these illicit "side deals" with patients to reduce or waive their out-of-pocket costs as an inducement to choose North Cypress over available and reputable, in-network facilities, North Cypress interferes with the health care benefit plan between the patient and plan sponsor, violates Texas law, and reaps substantial windfalls," lawyers for Aetna write.
The insurer is seeking a trial by jury and the back payment of $120 million, plus attorneys and court fees.
For its part, North Cypress believes it has been the victim of "libelous statements" in the court and local media, according to spokesperson Karen Hinton. North Cypress argues that Aetna has "engineered a scheme to sue out-of-network providers throughout the nation to coerce them into financially burdensome in-network contracts."
In 2013, the hospital sued Aetna in federal court in Houston for "gross underpayments of health claims." Aetna then filed a separate suit alleging that North Cypress had violated federal Anti-Kickback and Stark laws. That was rejected by the court, but Cypress' suit against Aetna is scheduled for a trial later this year.
In Cypress' view, Aetna is trying to do an "'in-run' around the federal court's adverse ruling," said Hinton. "This is nothing more than the rewrite of an earlier complaint that has been dismissed. Aetna's pressure campaign will not work."
There are a number of other legal disputes about out-of-network providers and billing at discounts working their way through the courts--including another against North Cypress.
Cigna accused North Cypress of using patient discounts to "virtually eliminates patients' responsibility to pay for their medical care while still charging enormous and unjustified costs to the employers who fund the patients' plan."
Cigna has also sued the La Peer Surgery Center in California, arguing that the center reduced and waived employee-member's co-pays as a way to garner higher, out-of-network reimbursements and circumvent goals of incentivizing members to use in-network providers.
At the same time insurers have been targeted for trying to curb the practice. A recent lawsuit alleges that Cigna retaliated against PPO-covered patients receiving total parenteral nutrition from an out-of-network provider.