Dispute between Aetna, California Medical Assn. heats up


Two healthcare heavyweights are exchanging sharper blows and more patients may be caught in the middle of this fight over medical payments.

This week, the California Medical Assn., the largest physician group in the state with 35,000 members, accused health insurance giant Aetna Inc. of refusing to negotiate with member doctors or kicking physicians out of its insurance network as retaliation for a lawsuit filed last month. As a result, the association said, Aetna may be limiting patients’ access to their regular doctors.

In a sharply worded response, Aetna disagreed and said it is the one fighting on behalf of patients against some physicians’ “egregious and improper billing practices” that drive up costs for consumers.

The nation’s third-largest health insurer said it remains committed to offering an extensive network of physicians but “it is limited in its ability or willingness to negotiate with those physicians with whom it is in active litigation.”

Battles between insurers and doctors are nothing new, but these disagreements are taking on added importance as both sides try to collaborate more in response to changes under the federal healthcare law that reward coordinated care.

Insurers also face added scrutiny of their hospital and physician networks from state insurance exchanges in California and elsewhere where millions of consumers will purchase health coverage starting in 2014.

Experts say more patients may be affected as the acrimony escalates.

“One of the main reasons why people choose their insurance is to remain with the doctor they already have,” said Shana Alex Lavarreda, director of health insurance studies at the UCLA Center for Health Policy Research. “In the long run, Aetna may suffer a loss of customers.”

Aetna has been aggressive in recent months at suing doctors and surgery centers that the doctors partly own in California, Texas and New Jersey for allegedly overbilling insured patients who go outside the company’s network.

In February, Aetna filed a suit against Bay Area Surgical Management and several affiliated physicians and surgery centers in Northern California and accused them of overcharging the insurer $20 million in the last two years. Bay Area Surgical Management has denied Aetna’s claims.

For instance, the insurer said, one surgery center charged $66,100 for a bunion procedure when the average in-network fee was $3,677.

Aetna said those inflated bills drive up out-of-pocket costs for patients and add to premium costs for all consumers.

“Physicians and their business partners secure outsized and improper windfalls at the expense of Aetna’s plan members and employer plan sponsors,” Ed Neugebauer, an Aetna lawyer, said in a letter this week to the California Medical Assn.

Last month, the California Medical Assn. and more than 60 individual doctors joined with Bay Area Surgical in a suit against Aetna in Los Angeles County Superior Court. The suit alleges that Aetna illegally threatens doctors and patients who want to use out-of-network medical providers even though that is a permitted insurance benefit.

The medical group said Aetna then cancels the contracts of some physicians who persist in those referrals, some of which received prior authorization from the insurance company.

Long Do, litigation director for the California Medical Assn., said his group complained to Aetna this week after hearing from member physicians in San Jose who said Aetna broke off contract negotiations because of the pending lawsuit.

“We’ve never seen anything like this,” Do said.

Dr. David Aizuss, an ophthalmologist in Los Angeles, said Aetna notified him earlier this month that his contract would be terminated in November, citing 12 cataract surgeries he performed at an out-of-network surgery center in the last two years. Aizuss is also a plaintiff in the California Medical Assn. suit against Aetna.

“It’s retribution for participating in that case,” he said. “They are impacting the doctor-patient relationship for thousands of people.”

Aetna counters that doctors are referring patients to out-of-network facilities that they partly own — without informing patients about this conflict of interest as required by federal law.

Aizuss said he discloses his 2% ownership stake in the surgery center that Aetna has objected to. Aizuss said he earns about $2,000 a month from the facility.

“It’s an insignificant amount,” Aizuss said. “I’m sure there are outlier physicians and surgery centers that do bad things, but that is not the case for most medical providers.”

Neugebauer, the Aetna lawyer, said those types of financial interests often go undisclosed and “the financial impact of the misconduct on the citizens of California will shock the conscience of the community.”