Aetna sued over out-of-network pay and referrals

By Alicia Gallegos

American Medical News, July 23, 2012

The California Medical Assn. and more than 50 physicians are suing Aetna over alleged retaliation against doctors who refer patients for out-of-network care.

The medical society and doctors say Aetna is underpaying out-of-network physicians, refusing to authorize some out-of-network services and illegally terminating the contracts of doctors who make such referrals.

The insurer’s practices violate California law and interfere with doctors’ medical decisions, said Long X. Do, CMA legal counsel.

The plaintiffs claim some of Aetna’s insurance policies enable patients to receive out-of-network care. However, Aetna discourages such practices and regularly refuses to pay for them, the suit claims.

Similarly, doctors’ contracts with Aetna do not specifically forbid all out-of-network referrals, the suit said. Yet, when doctors make such referrals, Aetna frequently threatens them with a “rate adjustment” or termination from Aetna’s network, according to the suit.

In a statement, Aetna spokeswoman Anjanette Coplin called the suit baseless and denied the insurer is mistreating physicians.

“Doctors who entice patients to have procedures performed at out-of-network facilities that they own without the patient’s knowledge are putting profits over their patients,” she said. “The wildly inflated bills of these facilities drive up the out-of-pocket costs for unwitting patients and needlessly add to premium costs for everyone.”

The CMA is aware of Aetna’s lawsuits, but said its suit has nothing to do with them. CMA’s claim centers on Aetna’s policies and practices, Do said.


Silicon Valley Surgeons Risk ‘Moral Authority’ For 200% Returns

By Peter Waldman

Bloomberg, July 18, 2012

The anesthesiolgists’ ball in December 2010 was already raging when Dr. Thomas Elardo and his wife arrived. It was 11 p.m., and the Opera House in downtown Los Gatos, California, was packed with nurses and doctors dancing to ’80s covers by The Microbes, an all-doctor band. Elardo climbed the stairs to the mezzanine bar and was immediately gladhanded by Bobby Sarnevesht, a local entrepreneur, and orthopedist Samir Sharma, who pulled Elardo aside.

Elardo had known Sharma for years, but the orthopedist had never given him the time of day. That night was different — he had something to show Elardo. At the bar, Sharma flaunted a $960,000 check, Elardo recalls. Sharma said it was for his work as a surgeon and investor in an outpatient surgery center in Los Gatos, operated by Sarnevesht.

“They were saying, ‘This is the kind of money you can make. You’ve gotta come in!” recalls Elardo. “I was speechless.”

Founded by Sarnevesht and his mother, Julia Hashemieh, Bay Area Surgical Management has marshaled decades of doctor rage against insurance carriers into a profitable business.

By rejecting the discounted contracts that participating in-network providers sign with insurers, the surgery centers bill insurance companies at their own out-of-network rates, which are 5 to 35 times as much as the in-network facilities charge, and make a killing.

Knee arthroscopies that cost $3,000 in Aetna Inc. (AET)’s network earn nearly $20,000 in facility fees at Bay Area’s surgery centers, according to Aetna, the Hartford, Connecticut-based health insurer. A bunion repair that costs $3,700 in-network got almost $53,000 for Bay Area Surgical Group, one such center. A disc surgery for lower-back pain, called a laminectomy, costs about $6,000 in network yet reaps nearly $120,000 for Bay Area Surgical.

Fed up, Aetna sued Hashemieh and partners in February, claiming they gouge on rates, pay surgeons excessive compensation for referrals and defraud health plans.


By Don McCanne, MD
Although it is always tempting to take on the abuses of private insurers such as Aetna, this time we should look further: the system by which we finance health care in the United States.

Perhaps the most important contribution of the private insurance industry in the past several decades has been the slowing of health care price increases through the process of provider contracting. Of course, public insurers such as Medicare are more effective, though through administered pricing rather than contracting. Nevertheless, health care prices would be even higher had the private insurers not engaged in contracting.

A problem that has never been satisfactorily resolved, in spite of many efforts, is what to do about charges by physicians and facilities that do not have contracts with the insurers – out-of-network providers. In some instances, the insurers pay nothing, except when required by law in certain emergency situations. In other instances, the insurers may pay at lower rates than they do for in-network providers, leaving the high balances as the responsibility of the patients. Often insurers will attempt to negotiate rates after the fact in order to prevent their clients from being stuck with these very high balances.

It is the latter situation that has become a problem. The Bloomberg article above (a very long, ugly story) goes into detail explaining how some entrepreneurial types in the health care delivery system have leveraged out-of-network care into a very lucrative operation. I dare say that Aetna looks like a saintly organization in comparison.

Why should we care? To quote Anderson, Reinhardt and colleagues, “It’s the prices, stupid!” In spite of the limited success of provider contracting, the private insurers have not been capable of adequately controlling price escalation, which is far greater than in all other nations – nations that depend on some sort of government role in establishing fair prices that cover costs and provide fair margins. We all pay more through higher insurance premiums when gougers are rewarded by the private insurers.

Seeing that everyone receives the care that they need, and controlling prices, are the most important functions that the private insurers should be carrying out. Yet they are doing neither competently. The defect is in the design of our health care financing system. The flaws in a system of competing private plans cannot be repaired. The private insurers will never have enough power, and even if they did, how would they use it? And those greedy health care providers who place business interests above professionalism will always be with us.

By replacing the private insurers with our own universal public financing program – an improved Medicare for all – we can include everyone, set prices at their proper level, and shut down the gougers. What are we waiting for?

Re-posted with permission from