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NEW YORKHIP Health Plan of New York and Group Health Inc. are working with New York state officials on a plan to merge as a for-profit entity.
The two New York-based nonprofit insurers finalized an affiliation last November despite a lawsuit filed by the City of New York, the combined entity's largest employer client, to stop the union. City officials expressed concern that the combined entity would have a dominant share of the municipal health care market, resulting in substantially higher premiums. The two now plan to become a for-profit entity, a HIP spokesman said.
Meanwhile, HIP now also is facing a federal racketeering complaint for allegedly improperly denying payment for health care provided to HIP members treated by Brookdale University Hospital & Medical Center.
HIP, its subsidiaries and units of Nashville, Tenn.-based Cogent Healthcare Inc., a health care consulting firm employed by the insurer, were named in a suit filed Monday under the Racketeer Influenced and Corrupt Organizations Act in U.S. District Court for the Eastern District of New York.
According to the lawsuit, the companies "utilized fraudulent business practices to deprive Brookdale Hospital of millions of dollars in compensation by manipulating the utilization review process to deny payment for hospital services that are medically necessary."
The lawsuit cites examples of denials of coverage of HIP members treated at the Brooklyn hospital between 2001 and 2006, often as a result of utilization reviews conducted by HIP and Cogent personnel who lacked legally mandated medical qualifications.
"This is a deliberate scheme," said Michael Brown, an attorney with Garden City, N.Y.-based Ohrenstein & Brown L.L.P., which represents the hospital. "We'd like to see HIP start following the law. We'd like to see HIP make recompense for the damages done to the hospital."
The hospital is seeking at least $44 million in damages, $50 million in punitive damages as well as attorney fees and costs.
In a statement, HIP rejected the "profoundly dishonest and defamatory accusation" made by the hospital, calling it an effort to distract attention from its own financial distress and possible mismanagement.
In a separate statement, Cogent expressed surprise and disappointment at the suit, saying that all reimbursement decisions are handled exclusively by the hospital and the insurer.
The hospital is seeking at least $12 million in damages and $50 million in punitive damages from Cogent.
As further evidence of HIP's allegedly fraudulent business practices, Mr. Brown cited a 2001 agreement between HIP and then-Attorney General Eliot Spitzer in which the company agreed to conditions regarding its utilization review practices and procedures. An investigation by the attorney general found violations of state laws by HIP during the utilization review process, including failure to provide clinical reasons for denying coverage for medical procedures in adverse determination letters.
A spokesman for HIP, though, said Mr. Spitzer's finding was part of a broad-ranging inquiry in which the attorney general sent subpoenas to all health maintenance organizations in the state to monitor compliance with a newly enacted section of the state's public health law. "Every HMO under the new law got a similar finding from the attorney general and everyone undertook to do better," the spokesman said. "We would maintain they did."
Brookdale hospital treats an estimated 2,000 HIP patients per year.
As a combined entity, HIP and GHI have a membership of more than 4 million people and combined revenues of more than $7 billion. GHI operates mainly in New York, while HIP also has operations in Connecticut, Massachusetts and New Jersey.