A Chicago affiliate of health insurer Anthem won't yet be able to escape a lawsuit accusing it of improperly and regularly rejecting coverage claims, allegedly violating Medicare rules.
However, a federal judge said Anthem itself shouldn't be held accountable for the affiliate's actions.
The decision was issued March 26 by Judge Jorge Alonso, of U.S. District Court for the Northern District of Illinois.
Alonso’s ruling kept Chicago-based American Imaging (AIM) in a suit brought in 2015 by a former employee, Dr. Susan Nedza. However, Alonso cut loose AIM’s parent company, Anthem Inc., of Indianapolis. Alonso's ruling was in response to a motion to dismiss by AIM and Anthem.
Anthem is the largest for-profit managed health care company in the Blue Cross Blue Shield Association.
Nedza filed the action as a qui tam suit, meaning it was filed ostensibly on behalf of the federal government. In such a suit, the government lets a private party, who has insider knowledge, press a case to expose alleged fraud on the government. In exchange, the party gets a share of recovered funds and damages.
Nedza was AIM's chief medical officer from 2012 to 2015. The company reviews requests for coverage of medical treatment, on behalf of health insurers, who contract with the government to furnish Medicare coverage, according to court papers.
Judge Alonso found Nedza’s allegations plausible that AIM violated Medicare requirements, by arbitrarily denying a certain number of coverage requests simply to meet “denial targets” called for in its contracts with insurers, who are contracted to furnish Medicare coverage. AIM promised to deny at least 5% to 9% of requests, Nedza alleged.
According to Nedza, AIM’s in-house testing showed denial rates, without its allegedly “rigged” procedures, would be no more than 1%.
One “procedural gimmick” allegedly used by AIM, was to set its fax machine to print only the first 10 pages of medical records sent by medical providers, Nedza said. This tactic would help AIM deny requests, because AIM did not receive necessary information with which to approve requests, Nedza alleged.
Nedza further claimed AIM would train its nurse and physician reviewers to deny requests, tying their bonuses to denials.
AIM’s denial process allegedly violated Medicare rules, which requires “individualized coverage determinations based on medical necessity,” according to court papers.
Judge Alonso acknowledged Nedza’s allegations did not address specific instances of coverage denial. However, Nedza could not be expected to do so, in Alonso's eyes, because Nedza was “not involved with the ‘day-to-day review of pre-authorization requests,'" the judge said, quoting from Nedza's lawsuit.
While the judge determined the allegations against AIM were plausible, he said these allegations did not reasonably extend to Anthem.
Nedza alleged the parent company had “regular oversight” of AIM, but did nothing to stop AIM’s allegedly incorrect practices. However, Alonso noted, quoting a 1998 U.S. Supreme Court opinion, that parent companies “‘are not generally liable for the misdeeds of their subsidiaries.’”
Alonso added: “Nedza includes only conclusory allegations that Anthem ‘directed’ its subsidiary insurers to use AIM during certain time periods. Standing on their own, these ‘facts’ are not sufficient.”
Nedza is represented by Cohen Law Group and Hughes, Socol, Piers, Resnick & Dym, both of Chicago, as well as by Phillips & Cohen, of Washington, D.C.
Anthem and American Imaging are defended by Foley & Lardner, of Chicago.