Opinion ID: 2785100
Heading Depth: 2
Heading Rank: 3

Heading: Cigna’s investigation and response

Text: Cigna was concerned when it learned of North Cypress’s prompt pay discount, believing the program would undermine plan incentives designed to encourage providers to join Cigna’s network, and patients to seek care within that network. Despite Cigna’s concerns, it initially paid North Cypress based 7The parties appear to dispute whether North Cypress would bill or attempt to collect the patients’ full non-discounted portion of the bill (e.g. their full 40% of the total Chargemaster cost) if they failed to pay the discounted amount on time. 5 Case: 12-20695 Document: 00512963599 Page: 6 Date Filed: 03/10/2015 No. 12-20695 on the Chargemaster rates as billed. 8 However, even as it was paying these charges, Cigna mobilized an “interdisciplinary team” to address North Cypress’s billing practices and pressure North Cypress to come in-network. 9 The team came up with a multi-pronged approach, which contemplated making “[n]o payment or reduced payment” to North Cypress and convincing plan sponsors to switch to cheaper MRC2 reimbursement, among other measures. 10 Cigna’s Special Investigations Unit (“SIU”) also surveyed a few dozen members about their experience with North Cypress and eventually received 27 responses, 11 assertedly confirming its suspicion that North Cypress was engaging in “fee forgiving.” 12 In November 2008, Cigna informed North Cypress of SIU’s investigation and adopted its “fee-forgiving protocol.” Cigna began reimbursing North Cypress for medically necessary services at drastically reduced rates. The sharp reduction was based on two key claims: (1) Cigna claimed that patients were not insured for medical costs unless North Cypress billed them for the patient coinsurance responsibility contemplated by their plans; (2) Cigna posited that most North Cypress patients were billed only $100 or less. 13 To reiterate, Cigna’s claim was that if North Cypress did not bill patients for their 8 In other words, Cigna accepted the Chargemaster rate as the total cost of care (subject to the plan’s Maximum Reimbursable Charge), and calculated its share of the cost based on that rate. 9 R. 9006, 9021. 10 R. 9009. 11 The parties dispute whether the survey was random. The district court found that the results showed 12 members were billed nothing, 6 members were billed $102 or less, and 7 members were billed amounts of $320 or more. Two members could not remember what they were billed. No members were billed the amount contemplated by their insurance plans. Cigna also points to other evidence, such as notices from North Cypress, phone calls with North Cypress employees, and a North Cypress flier. 12 Cigna refers to the practice of not charging members the full rate for their share of costs under the plan, while continuing to charge Cigna its share as “fee forgiving.” 13 A position drawn largely from the results of its modest survey. 6 Case: 12-20695 Document: 00512963599 Page: 7 Date Filed: 03/10/2015 No. 12-20695 coinsurance responsibility, the patients’ had no insurance coverage for their medical costs. Given its position that North Cypress billed each patient $100 or less—a miniscule proportion of the plans’ anticipated patient coinsurance responsibility—Cigna asserted that patients were only insured for a likewise miniscule proportion of their medical costs. Cigna justified its interpretation primarily based on language in at least some of the plans excluding from coverage “charges which you are not obligated to pay or for which you are not billed.” In practice, if a member’s plan required Cigna to pay 60% of the cost of out-of-network care, and North Cypress reported a $10,000 total cost of care, Cigna would not pay $6,000. Instead, Cigna would assume the patient was billed $100; working backwards from that assumption, Cigna would calculate the “total cost of care” to be only $250. Accordingly, it would reimburse the hospital only $150—sixty percent of $250. Cigna told North Cypress it would calculate payments this way until clear evidence was presented that (1) the charges shown on the claim forms were actual charges for services rendered, and (2) the plan member had paid the applicable out-of-network coinsurance and deductible in accordance with the relevant plan. 14 North Cypress did not disclose the amount it billed any particular patient. 15 The hospital appealed some of Cigna’s payment decisions, and argues that it would have been futile to appeal the rest. Under the plans funded by Cigna rather than employers, it seems clear that Cigna directly benefited from its drastic reductions in reimbursement— Cigna kept the money. The parties dispute whether Cigna likewise stood to 14 When reduced payments were appealed, Cigna would likewise explain that it would not increase payment unless it was given evidence that the patient was held financially responsible for her portion of the total charge reported by North Cypress. 15 Mem. and Order of August 10, 2012, 14. 7 Case: 12-20695 Document: 00512963599 Page: 8 Date Filed: 03/10/2015 No. 12-20695 gain a portion of the “savings” when it reduced payments under the more numerous Administrative Services Only plans.