With all of the laws and regulations around the healthcare industry, it's no surprise that there seems to be a constant stream of new lawsuits taking place every day. One such case has Optum and Aetna under-fire for questionable billing practices where they used "dummy" CPT codes to bundle in administrative services with regular medical charges. This lawsuit originated in 2015 from plaintiff Sandra Peters, where it was originally ruled on in October, 2020, before being reversed in June, 2021. Now, in 2022, the Supreme Court recently denied Optum's writ of certiorari, or, their appeal for Supreme Court review.
I did some leisurely reading and went through the entire court transcript so that I can explain a bit about the case for you.
Aetna, Optum Relationship
Before reviewing the case, it is important to understand the relationship between Aetna and Optum in this scenario. Aetna, ranked as one of the largest health insurance companies in the United States, acts here as the provider of Peters’ health insurance plan, but they subcontract with Optum for Optum to provide specialty services at more cost-effectives prices than Aetna alone could provide in exchange for an administrative fee. Through this relationship, Aetna requested that Optum conceal their fees in the dummy procedure code 97039 for "unlisted physical therapy modalities" so that “the Plan and its participants effectively would pay part or all of Optum’s administrative fee”.
The Claim Basis for Lawsuit
To demonstrate this agreement, I've pulled an example claim scenario that occurred within the 2-year span of affected claims from Peters, the plaintiff, and created a table to follow along.
In this scenario, a $40 claim is submitted to Optum and the provider's negotiated charge is $34. The left column shows the breakdown of what occurred, where Optum added their dummy charge to bundle together the administrative fee with the medical charge, resulting in a higher total.
This, in turn, results in the plaintiff paying a higher coinsurance based on their plan (highlighted below), and Optum keeping a large portion of the total amount (essentially recouping their Administrative Fee).
| With Dummy Charge | Without Dummy Charge |
Negotiated Rate | $34 | $34 |
Administrative Fee | $36.89 | $0.00 |
Rate Total | $70.89 | $34 |
20% Coinsurance | $14.18 | $6.80 |
Optum to Provider | $19.82 | $27.20 |
Optum Keeps | $36.89 | $0.00 |
Peters asserts in the lawsuit:
a level of financial injury they incurred as a result of these practices
a breach in Optum and Aetna's fiduciary duty by violating the Employee Retirement Income Security Act (ERISA)
Class certification in order to represent other participants of similar insurance plans under Optum-Aetna
The North Carolina district court where the case was heard denied the plaintiffs remarks, deciding that there was no financial injury (asserting that the patient actually saved money overall through this process), no breach of fiduciary duty under ERISA (as Optum-Aetna were not acting as fiduciaries at the time), and no commonality requirements met to attain class certification.
Peters' Appeal
Peters promptly filed a timely appeal to challenge the courts decisions about the aforementioned remarks, which a federal appeals court decided had enough merit to hear and review the decisions.
For example, the court was willing to review the aspect of financial injury because, if you analyze the claims at an individual instead of an aggregate level, you can clearly see increased costs per claim.
Financial Injury
However, despite the federal appeals court disagreeing with the methodology of the previous court, they still reached similar conclusions in some areas. To continue with the financial injury example, the court found that in these cases, Peters was indeed saving money overall. As marked above in the table, the full rate total ($70.89) was still being applied to the Peters' deductible, even though they were only paying $14.18, resulting in the patient reaching their deductible max sooner where they were then no longer responsible for any payments. In fact, Peters actually came out with a net gain of $114.71, based on their analysis.
Fiduciary Duty
In contrast to the district court, the appeals court decided that Aetna was acting as a fiduciary at the time, making it plausible that they breached those fiduciary duties under ERISA. After a few bouts of legalese later, the appeals court further decided that Aetna also did breach their fiduciary duties through their use of Optum, intentional use of dummy CPT codes, misrepresenting the patient's total billed amount by including the administrative fee, and masking the administrative fee by bundling it in with other charges.
For Optum, the appeals court concluded that they were not acting as a functional fiduciary during these engagements due to their administrative role as a third-party vendor, but are liable as "a party in interest involved in prohibited transactions" due to their knowledge of Aetna's practices.
Class Certification
Finally, for Peters' motion for class certification, the appeals court vacated and remanded the district court's decision, asserting a full reevaluation for class certification.
So What's the Verdict?
After the Supreme Court’s denial of Optum's writ of certiorari on March 7, Peters' class-action case will be sent back to the Fourth Circuit Court of Appeals for a decision. The verdict will not only affect Peters and the other 87,000 people impacted by the case, but will also likely result in some interesting legal precedent for billing practices overall moving forward.
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