Highmark demands $1.7 million repayment from Bridgeville surgical center

Provider says insurer chokes competition

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Highmark Inc. and its Keystone Health Plan West HMO say an independent surgical center in Bridgeville overbilled the Pittsburgh insurer by $1.7 million over a two-year period, a dispute that recently landed in court while highlighting the rapid growth of such centers and the potential conflict with a company expanding its own surgical network.

As a result of the billing dispute with Radiance Surgery Center, Highmark on May 1 began requiring a review of every Highmark patient's medical records and procedure before it would pay the Bridgeville center, a move that center officials said violated their contract and could delay payments to the point that it might put them out of business.

Last week, Allegheny County Common Pleas Judge Judith Friedman ordered Highmark to pay Radiance those claims, pending a hearing scheduled for Nov. 12-13. That hearing was put on hold Tuesday while the two sides attempt to negotiate a settlement.

The dispute is not the first of its kind for Highmark. Other surgical centers have been hit with payment demands, too, after the insurer's audits determined that the centers improperly billed separately for surgical supplies that were supposed to be part of a bundled reimbursement payment for procedures.

With more attention being paid to holding health care costs down, many insurers, including Medicare, are devoting more time to reviewing claims to make sure they are both accurate and appropriate.

While declining to comment on the specifics of the Radiance case, Highmark spokesman Michael Weinstein said, "Generically speaking, Highmark works on a daily basis with all types of providers to resolve any billing issues, to ensure appropriate billing for services received by our customers and to ensure that we are protecting the health care spending of our customers."

At least one center -- Laurel Surgical Center in Greensburg -- was sold after Highmark, in September 2012, demanded a repayment of $2.78 million for what it said were overpayments made between Jan. 1, 2010, and May 23, 2012, although it is not clear if the sale was triggered by the Highmark claim.

In court filings seeking an injunction against Highmark, the Westmoreland County provider said the repayment demand equaled about half of its total annual revenue.

The disputed Radiance claims also cover the January 2010 to May 2012 period.

Radiance's majority owner, physician Lori Cherup, declined comment on her attorney's advice, but William Prentice, CEO for the national Ambulatory Surgery Center Association in Alexandria, Va., said he found aspects of the audits troubling.

"While we cannot comment on ongoing litigation, efforts by insurers to recover payments from providers for services rendered to covered patients -- particularly when they involve many claims over a long period of time and/or involve a number of providers -- can call into question the insurer's own business practices," he said in an email.

"Why would an insurer pay so many claims if they were inappropriate? Why would it take [an insurer] so long to make such a determination and take action? In addition, we would be very concerned if insurers only sought such recoveries from [ambulatory surgery centers], which are generally the lower cost setting for outpatient surgery in most communities."

Although the parties in the Highmark-Radiance dispute won't comment on specifics, court documents filed with Allegheny County lay out the details of the case.

The dispute relates to supplies that had historically been billed separately. But in a series of bulletins going back to 2005, the insurer says it notified surgical centers that payments for those supplies would be bundled into the reimbursement for the surgical procedure. The Bridgeville center says the Highmark bulletins were unclear.

Court documents include a Sept. 9 email to Radiance Center attorney Michael A. Cassidy at Tucker Arensburg, Downtown, in which Highmark executive W. Dennis Cronin said the insurer had reviewed claims "across a large number of facilities and there was no facility that had nearly as many surgery claims billed inappropriately as Radiance."

Mr. Cronin, Highmark's vice president for financial investigations and provider review, added, "We are concerned that there are more inappropriate billing schemes being perpetrated by Radiance that will result in additional recovery disputes and we cannot continue chasing Radiance and hoping they are willing to refund the overpayments."

Mr. Cassidy declined to comment or elaborate on the court filings.

The documents show that Radiance executives believe they had billed correctly and that Highmark was taking advantage of its position as the dominant insurer in the market by unilaterally changing how it reimbursed centers -- bundling surgical supplies into one payment without raising the payment amount.

Radiance estimates that it derives 65 percent to 70 percent of its revenue from Highmark.

The complaint also suggests that Highmark may have a competitive incentive, noting that the insurer has initiated similar audits and refund demands with "dozens" of other ambulatory surgery centers in the region while "simultaneously planning to develop or acquire proprietary surgery centers in Western Pennsylvania."

Laurel Surgical, also represented by Mr. Cassidy, noted in its court filing that four months before Highmark stopped payments, the insurer had won approval to open a new ambulatory surgical center of its own in Monroeville.

Ambulatory surgical centers are the new darlings of the medical facility world. Their numbers have more than doubled statewide in the past decade and now easily surpass the number of acute-care hospitals.

Because they limit their service to outpatient procedures, such centers don't carry the massive overhead costs of an acute-care hospital. They also attract a greater percentage of insured patients.

In 2012, ambulatory surgery centers in this region saw operating and total margins average in excess of 17 percent, and ranged up to 36.7 percent in northeast Pennsylvania, according to a report released today by the Pennsylvania Health Care Cost Containment Council.

The report indicates that Radiance took in $3.7 million in net patient revenue and had a 17.91 percent operating margin in fiscal 2012, while Laurel Surgical had $5.6 million in net patient revenue with a 23.68 percent operating margin.

Five ambulatory surgery centers opened in Allegheny and the seven surrounding counties that year, bringing the total of such centers in southwestern Pennsylvania to 47. Statewide, the number of surgery centers has more than doubled in the past 10 years, according to the report.

Steve Twedt: stwedt@post-gazette.com or 412-263-1963.

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