UnitedHealth Probe Reveals History of Pricing Questions

For starters, the court noted, Ingenix collects pricing information only from those health insurers that are willing to volunteer it as clients of the company. Furthermore, it observed, Ingenix requests valid data but lacks the power to enforce any real demands. Finally, it added, Ingenix does not audit the data on a regular basis and has never tested its UCR prices for real-world accuracy at all.

"These are legitimate issues for a court to examine," says Jack Janov, an attorney at Locke Lord Bissell & Liddell, a law firm that has represented UnitedHealth in the past.

"But UCR is a good tool," Janov said. "In fact, for out-of-network pricing, it's one of the best things that we have."

History Lesson

UnitedHealth recognized the value of UCR pricing data a long time ago.

When the company set out to build an information empire in the late 1990s, it started by purchasing the two most popular UCR databases around. The Health Insurance Association of America, an industry trade group, controlled one of those before that.

"Some health insurers use one or the other system, some use both, and some have developed their own price benchmarking systems," Bestwire wrote after Ingenix bought the second system in October of 1998. "Combined, the two products have more than 50% of the market."

Doctors saw a conflict of interest and sensed an abuse of power. Less than 18 months after Ingenix acquired its second UCR database, the AMA filed its class-action lawsuit.

In a nutshell, the AMA accused Ingenix of selling manipulated UCR data with prices so low that it could promise subscribers a 16:1 return on their investment. The AMA claimed that Ingenix users had unfairly pocketed "hundreds of millions of dollars" as a result.

Since then, Ingenix subscribers have come under attack. One of them, Health Net , paid an especially high price. Last fall, the company shelled out nearly $300 million -- more than half of its full-year profits -- to settle complaints about its low reimbursement rates.

Now, with Cuomo sniffing for fraud, health insurers could face regulatory penalties as well.

"To the extent that a plan uses unadjusted data out of the database and sets it equal to the UCR for their out-of-network claims, then that plan might well be understating its medical costs and might have exposure to this investigation," writes Sheryl Skolnick, senior vice president of CRT Capital Group. "That might cause the plan to cancel its contract with Ingenix or at least to more closely scrutinize its exposure to the database and its use of it."

Several health insurers, including Liberty, Aetna and Cigna (CI - Cramer's Take - Stockpickr), face class-action lawsuits over their out-of-network prices already.

ProClaim, a New Hampshire firm that collects bills for physicians, welcomes such battles.

The firm says that it "always" fights denials that were based on Ingenix's UCR rates. It likes to tout a big win against Liberty, in particular. In that case, Liberty wound up paying more than $30,000 in claims that it previously tried to reject.

"Ingenix had a problem," says ProClaim President Jon Feins. "They get all of their data from the Liberty Mutuals of the world. But how do they know if that data is correct?

"They were asked about that," Feins continues. "They didn't have a good answer. They didn't have an answer at all."

Mixed Views

For his part, Janov sees a system worth salvaging. Outside the health care arena, he notes, payment disputes often erupt when no contracts exist. To settle those cases, he says, courts rely on the going rates for the services involved.

For medical care, he concludes, UCR prices simply establish those benchmarks in advance.

"Many physicians would accept 80% of UCR on a regular basis," Janov says. "They just want valid UCR rates. From my perspective, from what I've seen, the UCR data is usually fair."