Wednesday, February 13, 2008

No One Ever Did Understand "Customary and Reasonable"

New York Attorney General Andrew Cuomo is suing Ingenix over its operation of the longtime "customary and reasonable" database.

In the days before provider networks, insurers relied on this survey of insurance company claim data to determine an appropriate payment level. It was a survey of what all participating insurers paid by service in a particular market thereby ensuring that any one payer wasn't getting gouged. Actually, we used to call it, "average gouge."

Typically, all of the fees are stacked top to bottom and an insurer pays something like 90% of the 80th percentile of all of the fees for a particular procedure in a particular place.

In the heyday of fee-for-service health insurance, the system was managed by the then health insurance trade association, HIAA. When the day was done, everyone, providers and insurers, figured out how to live with it--no one sued. But it was fee-for-service and it did nothing to manage costs.

Now the database is under the management of a private company and is only used as a price benchmark when an insured person goes out-of-network.

Hearing that Cuomo is suing the current operator, a division of UnitedHealth, for allegedly "manipulating reimbursement rates" made me chuckle. No one ever could give a lucid explanation of how that damn thing worked!

But it gives Cuomo an opportunity to get some headlines and make health care stocks nosedive for a part of a day. Wall Street was a lot more worried this was about Medicare Private Fee-For-Service marketing than this little problem.

In a few months, we will hear that Ingenix paid a big fine and agreed to fix something (that no one will understand) and Cuomo will have another notch in his belt.

Over at Managed Care Matters, Joe Paduda also updates us on a recent court case involving Ingenix and its provider database.
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