Ingenix, a mega health information technology and services company recently acquired Executive Health Resources, a provider of medical necessity compliance and physician medical management solutions for hospitals. The transaction, valued at about $1.5 Billion, is subject to regulatory approval and other customary closing conditions and is expected to close before the end of 2010.
Ingenix is a subsidiary of one of the country’s largest insurance companies, UnitedHealth Group. In the private health insurance industry, Ingenix has been the predominant source of information about the market price of medical services. Despite this, the industry has long represented the “usual and customary” estimates of medical charges compiled by Ingenix as “independent” and objective. Moreover, the insurance industry both contributes medical charge data to Ingenix and purchases Ingenix’s products. This close, conflicted business relationship between Ingenix and the health insurance industry existed for more than a decade before industry officials publicly acknowledged that it created the appearance of a conflict of interest. The method of calculating usual and customary costs has always been a sore spot for physicians and hospitals because of the total lack of transparency and therefore credibility by payors.
In 2008 New York’s Attorney General Andrew M. Cuomo conducted an industry-wide investigation into this scheme by health insurers to defraud consumers by manipulating reimbursement rates. At the center of the scheme was Ingenix.
The six-month investigation found that Ingenix operates a defective and manipulated database that most major health insurance companies use to set reimbursement rates for out-of-network medical expenses. Further, the investigation found that two subsidiaries of United (the “United insurers”) dramatically under-reimbursed their members for out-of-network medical expenses by using data provided by Ingenix. .
The United insurers and many other health insurance companies relied on the Ingenix database to determine their “reasonable and customary” rates. The Ingenix database used the insurers’ billing information to calculate a “reasonable and customary” rate for individual claims by assessing how much a similar type of medical service would typically cost, generally taking into account the type of service, physician, and geographical location. However, the investigation showed that the “reasonable and customary” rates produced by Ingenix were remarkably lower than the actual cost of typical medical expenses.
UnitedHealth Group settled (in 2009) buy saying that it would pay $350 million to customers and medical providers for out-of-network medical services going back nearly 15 years. They also agreed to provide $50 Million to fund a new independent database to determine reimbursement rates.
So now Ingenix buys EHR, a company that works with hospitals to determine medical necessity compliance. They also do provider appeals. Ingenix, therefore United Healthcare, will have access to their vast database of appeals and audits. This seems to be more than just an appearance of a conflict of interest.
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