Physician-Owned Hospital Bites Cigna for $13 Million

Physician-owned Humble Surgical Hospital, a multi-specialty surgical center (including spine and orthopedics, ) opened in August 2010 in the north Houston area.

The physicians immediately began submitting claims for reimbursement to Cigna Health Insurance. Cigna paid the hospital’s claims for a few months based on negotiated agreements between the hospital and MultiPlan, Inc. or Viant Holdings, Inc., two third-party repricing entities that determined “allowable” amounts.

Then the insurer stopped paying and sued Humble in 2013 for overbilling for out-of-network services. Humble countersued.

On June 1, 2016, U.S. District Judge Kenneth Hoyt found that Cigna had subverted the plan administrator’s role for its own benefit by imposing a method of claims processing that was not part of its plan and was designed to deny the hospital’s claims. He then awarded the physicians more than $13 million for almost 600 unpaid claims.

The judge found that Cigna inappropriately applied exclusionary language to deny covered services.

“Cigna’s method for processing Humble’s claims was simply disingenuous and arbitrary, ” Hoyt wrote. “It was focused more on accomplishing a predetermined purpose: denying Humble’s claims.”

Hoyt found that Cigna owes Humble Surgical $11.4 million in unpaid claims, and because it stepped out of its role as a third-party claims administrator by rejecting the hospital’s proper claims and denying the hospital important plan documents, it owes another $2.3 million in penalties under the Employee Retirement Income Security Act (ERISA).

“In essence, ” Hoyt wrote, “Cigna ‘hijacked’ the plan administrator’s role and subverted it for its personal benefit.”

In its original complaint, Cigna demanded $5 million. It claimed that Humble Surgical had been overbilling it since 2010 by charging more than its share under the benefits plans, but charging patients only “nominal amounts, ” or nothing at all. It sought recovery under ERISA and Texas law.

“Indeed, ” wrote Hoyt, “Cigna’s unprecedented claims processing methodology and incessant related acts were extraordinary acts of bad faith.” In fact, according to a June 6, 2016 report from Courthouse News Service, Cigna could not identify any specific overpayments.

In addition to the $11.4 million in damages and $2.3 million in ERISA penalties, the insurer will also pay the hospital’s attorney fees, which will be determined at a later date.

It’s one for the little guy.