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New database to replace Ingenix

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SYRACUSE, N.Y.—Syracuse University's Maxwell School will be home to a new, independent database to determine out-of-network provider reimbursements that will replace a controversial system used by most of the health care insurance industry, officials said last week.

Syracuse will be part of a network of research facilities developing the database that will replace the much-criticized Ingenix Inc. system. Others include State University of New York at Buffalo, Cornell University, University of Rochester and SUNY Upstate Medical University.

Deborah A. Freund, distinguished professor of public administration at Syracuse, will head the project dubbed FAIR Health Inc.

The new database is the result of a settlement reached in January between New York's attorney general and Minnetonka, Minn.-based UnitedHealth Group Inc., which agreed to spin off operations of the Prevailing Health Charges System and Medical Data Research database products, both of which are operated by Ingenix, an Eden Prairie, Minn., subsidiary of UnitedHealth.

The settlement culminated an industrywide investigation that New York Attorney General Andrew Cuomo initiated after receiving complaints from provider and consumer groups that the Ingenix systems resulted in underpayment to physicians and additional cost-shifting to consumers.

“FAIR Health...will bring much-needed transparency, accountability and fairness to a broken consumer reimbursement system we have called Code Blue,” Mr. Cuomo said in a statement. “By transforming this system for consumers nationwide, New York proves its reputation as a reform leader.”

The investigation concluded that the Ingenix databases “intentionally skewed usual and customary rates downward through faulty data collection, poor procedures and lack of audits,” and that the rate of underpayment to out-of-network providers ranged from 10% to 28%.

The attorney general also found that UnitedHealth's ownership of the databases created a conflict of interest.

The probe prompted the U.S. Senate Commerce Committee to hold a hearing at which Ingenix Chief Executive Officer Andy Slavitt acknowledged UnitedHealth's ownership of his company may have created a perception of a conflict of interest, but denied that the databases were flawed and understated charges.

The attorney general also reached settlements with several other insurers using the databases, including Aetna Inc., CIGNA Corp. and WellPoint Inc. Under terms of those agreements, the insurers will discontinue using the Ingenix system once a replacement is available and contribute to a fund to finance development of the new system.

Nearly $100 million collected from insurers as part of the settlements will be used to finance the new reimbursement system, which officials said they hoped to have operational in about nine months.