[Senate Hearing 111-37, Part 2]
[From the U.S. Government Publishing Office]
S. Hrg. 111-37, Part 2
DECEPTIVE HEALTH INSURANCE INDUSTRY
PRACTICES: ARE CONSUMERS GETTING
WHAT THEY PAID FOR?--PART II
=======================================================================
HEARING
before the
COMMITTEE ON COMMERCE,
SCIENCE, AND TRANSPORTATION
UNITED STATES SENATE
ONE HUNDRED ELEVENTH CONGRESS
FIRST SESSION
__________
MARCH 31, 2009
__________
Printed for the use of the Committee on Commerce, Science, and
Transportation
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50-467 PDF WASHINGTON : 2009
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SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION
ONE HUNDRED ELEVENTH CONGRESS
FIRST SESSION
JOHN D. ROCKEFELLER IV, West Virginia, Chairman
DANIEL K. INOUYE, Hawaii KAY BAILEY HUTCHISON, Texas,
JOHN F. KERRY, Massachusetts Ranking
BYRON L. DORGAN, North Dakota OLYMPIA J. SNOWE, Maine
BARBARA BOXER, California JOHN ENSIGN, Nevada
BILL NELSON, Florida JIM DeMINT, South Carolina
MARIA CANTWELL, Washington JOHN THUNE, South Dakota
FRANK R. LAUTENBERG, New Jersey ROGER F. WICKER, Mississippi
MARK PRYOR, Arkansas JOHNNY ISAKSON, Georgia
CLAIRE McCASKILL, Missouri DAVID VITTER, Louisiana
AMY KLOBUCHAR, Minnesota SAM BROWNBACK, Kansas
TOM UDALL, New Mexico MEL MARTINEZ, Florida
MARK WARNER, Virginia MIKE JOHANNS, Nebraska
MARK BEGICH, Alaska
Ellen L. Doneski, Chief of Staff
James Reid, Deputy Chief of Staff
Bruce H. Andrews, General Counsel
Christine D. Kurth, Republican Staff Director and General Counsel
Paul Nagle, Republican Chief Counsel
C O N T E N T S
----------
Page
Hearing held on March 31, 2009................................... 1
Statement of Senator Rockefeller................................. 1
Statement of Senator Pryor....................................... 14
Statement of Senator McCaskill................................... 17
Statement of Senator Klobuchar................................... 21
Statement of Senator Begich...................................... 22
Statement of Senator Udall....................................... 24
Statement of Senator Warner...................................... 26
Witnesses
Stephen J. Hemsley, President and Chief Executive Officer,
UnitedHealth Group............................................. 3
Prepared statement........................................... 5
Andy Slavitt, Chief Executive Officer, Ingenix................... 6
Prepared statement........................................... 8
Appendix
Response to written question submitted by Hon. Mark Pryor to
Stephen J. Hemsley............................................. 37
DECEPTIVE HEALTH INSURANCE INDUSTRY
PRACTICES: ARE CONSUMERS GETTING
WHAT THEY PAID FOR?--PART II
----------
TUESDAY, MARCH 31, 2009
U.S. Senate,
Committee on Commerce, Science, and Transportation,
Washington, DC.
The Committee met, pursuant to notice, at 10:21 a.m. in
room SR-253, Russell Senate Office Building, Hon. John D.
Rockefeller IV, Chairman of the Committee, presiding.
OPENING STATEMENT OF HON. JOHN D. ROCKEFELLER IV,
U.S. SENATOR FROM WEST VIRGINIA
The Chairman. The hearing will come to order.
This is the second hearing that this Committee has had on
so-called usual, customary, and reasonable rates, payment to
the health insurance industry. Last week we heard from the New
York Attorney General's Office, and I think you know those
folks and who she was. And they conducted a year-long
investigation into these practices. They had done that. And
then they also heard from doctors and consumers. Today we are
going to hear from the insurance industry.
So let me say that I am very pleased to welcome Mr. Andy
Slavitt, CEO of Ingenix, and Mr. Stephen Hemsley who is the CEO
of UnitedHealth Group. There are a variety of UnitedHealths,
but ``Group'' is sort of the overall one. Before we go any
further, I would like to thank you for taking the time to come.
I doubt this is something you are looking forward to, but you
are standing-up people. I have read your testimony very
carefully. I have some questions about it. But you are here and
I honor you for that and respect you for that.
Last Thursday, we heard some very strong language, and I
think you were in Europe and could not be here. So we decided
to bifurcate it, which has actually worked out, I think, quite
well. The Consumers Union, Mr. Chuck Bell, had to say that the
insurance industry reimbursed consumers for out-of-network
Medicare, which is medical care, which is all we are talking
about, as a rip-off. Ms. Linda Lacewell from the New York
Attorney General's Office said the insurance industry practice
amounted to a ``fraudulent and conflict of self-interest-ridden
reimbursement scheme.'' In my own statement, I was utterly
discreet and temperate, and I merely called the practices
``deceptive.''
Because our witnesses today are going to take issue with
these characterizations, I want them to have every chance to
defend themselves and explain why they do not think it was
deceptive or whatever approach you wish to take.
Consumers and their health insurance companies have a
contractual relationship. It is not casual. Consumers promise
to pay a certain premium, and in return, the insurance industry
promises to provide a certain level of health coverage. It is
very plain, very direct, very straight-ahead.
So as we learned last Thursday, more than 100 million
Americans have paid for health insurance coverage that gives
them the option of going outside of their network, which is all
we are talking about, outside of network. And obviously, that
would be to get care. There could be a variety of reasons for
that.
So let us be very clear about this. The insurers are not
letting their policyholders see a non-network doctor out of the
goodness of their hearts. Consumers are paying for this option
through higher premiums and higher cost-sharing.
There are many reasons American consumers decide to pay the
extra money for health insurance with an out-of-network option.
I have been there myself. One New York consumer we heard from
last week, Dr. Mary Jerome, actually could not come because she
has been battling cancer for a number of years, and she just
physically was not up to it. She was going to come but then she
could not come. But she said that she paid this extra for out-
of-network for ``peace of mind''--those were her words--so that
she could feel that she was getting the absolute best of health
care possible.
What we learned at our first hearing was that while
consumers held up their side of the bargain, it appeared from
their testimony that insurance did not. The insurance industry
promised to base their out-of-network payments on what they
call the usual, customary, and reasonable cost of medical care
in a particular area. Thanks to the New York investigation and
other lawsuits, we now know that the insurance companies were
not delivering what they promised. That was the conclusion that
we reached.
In Erie County, New York, for example, insurance companies
were reimbursing their policyholders for doctor visits at rates
that were 15 to 25 percent below the local prevailing rates. A
Federal judge recently concluded that the reasonable and
customary data insurers used in New Jersey was 14.5 percent
lower than the prevailing market rates. And the question, of
course, is how does one get at these rates.
Everywhere experts have looked at this data, they have
found what statisticians called a ``downward skew'' in the
numbers. For 10 years or even longer, this skewed data was used
to stick consumers with billions of dollars that the insurance
industry should have been paying, and if they had been paying
would have still been making a terrific profit.
The source of this skewed data was Mr. Slavitt's company
Ingenix. Ingenix markets two usual and customary database
products that every major player in the health insurance
industry used to calculate what their reimbursement payments
were going to be. I mean, there were not other folks out there.
You had two sections of them, and then it sort of became one
section. And it became what everybody used. It was sort of a
monopoly of this wisdom of what would be fair to pay.
Now, Ingenix is a wholly owned subsidiary of Mr. Hemsley's
company, UnitedHealth Group. UnitedHealth not only owns
Ingenix, but it also used the skewed Ingenix data to under-
reimburse its own policyholders. A direct connection. Total
ownership.
Now, I am pleased that as a result of the Attorney General
of New York's investigation, Ingenix and UnitedHealth have
agreed to close down their database. I have read both of your
statements very carefully and both talked about how everything
is going to be so much better in the future because people are
going to have a real understanding of, et cetera, et cetera.
But our business on this committee is about accountability.
It is about making sure that things that have not worked right
in the past or have not worked fairly do not happen again. And
you cannot simply always look to the future. You have to
sometimes prove that the past instructs why the future has to
be different, and if you do not do it, maybe it will not be. In
fact, it is not all fixed yet.
So I am pleased that they have done this, and I do think
accountability is important. And I think people deserve to know
how these practices harmed them and who was responsible for
them, and that is the goal of today's meeting.
There being no Ranking Member, there being no anybody--they
will come. We are a slow but sturdy group here. We welcome your
statements. We will start with you, Mr. Hemsley.
STATEMENT OF STEPHEN J. HEMSLEY, PRESIDENT AND CHIEF EXECUTIVE
OFFICER, UNITEDHEALTH GROUP
Mr. Hemsley. Thank you, Chairman Rockefeller, Senator
Hutchison, and Members of the Commerce Committee. My name is
Steve Hemsley, and I am the President and the Chief Executive
of UnitedHealth Group.
Our mission at UnitedHealth Group is to help people live
healthier lives. Our more than 80,000 employees do this every
day for more than 70 million Americans. Our businesses touch
broadly on the services enabling health delivery and financing.
We appreciate the opportunity to testify before your
committee about our out-of-network reimbursement practices and,
most importantly, the need to provide consumers with timely and
accurate health information so they can make more informed
health care decisions. These topics are of critical importance
as the debate about how to modernize our health care system and
to contain its costs to the consumer intensifies in Washington
and around the country.
Mr. Chairman, as you know, we recently announced agreements
with the New York Attorney General and the American Medical
Association that resolved disputes over the reimbursement of
our out-of-network services based on reasonable and customary
rates. In determining these rates, we have long utilized
databases of physician-billed charges licensed by Ingenix, one
of our subsidiaries.
There has been a good deal of commentary about our recent
nationwide agreements. Some of it is accurate and some of it is
not. So I am pleased with the opportunity to clarify the facts
for the Committee.
First, the Ingenix databases did not set the reimbursement
rates used by any health insurer. The role of the databases was
solely to collect data and then provide the data to a broad
audience of users, including physicians, hospitals,
researchers, insurers, who in turn independently used the
information across a range of applications. Similar to other
insurers, our subsidiary UnitedHealthcare used the data only
when our health plan beneficiaries sought care from physicians
outside of our network and where UCR protocols applied.
Second, the primary database at issue in these settlements
has been in existence for more than 35 years. During this time,
the database has consistently performed an essential function
to our health care economy by establishing a reasonable
standard for the reimbursement of physicians who do not
participate in managed-care networks. This Committee knows
better than most that physician reimbursement based on nothing
but the doctor's bill is simply not economically tenable for
consumers nor sustainable for our health care system. The
databases were created with the goal of appropriately managing
costs and ensuring consumers are protected.
Third, we want to make it clear that we stand behind the
integrity of the Ingenix database. We also stand by the way in
which our benefits businesses, UnitedHealthcare, used the data
to make reimbursement decisions. Our recent agreement with the
New York Attorney General did not relate to the manipulation of
data, and we disagree with any suggestion or allegation of
fraud. To the contrary, working with the Attorney General, we
agreed to transfer the databases to an independent nonprofit
entity in the hopes of increasing information transparency and
public confidence in the quality of and access to the data that
will be used to set future out-of-network reimbursement rates.
Finally, the agreement with the Attorney General, which is
national in scope, reflects our role as a leader in health care
and our desire to strengthen the all-important trust consumers
have in us and affirm our ongoing commitment to transparency.
Since 2005, UnitedHealthcare's Premium Designation program
has provided millions of our beneficiaries with the ability to
access online costs and efficiency data for physicians and
hospitals through myuhc.com. And for nearly 2 years, we created
the Claim Estimator that provides physicians with online
estimates of whether the cost of a procedure will be covered at
that amount and what level the claim reimbursement will be.
Our national agreement with the New York Attorney General
reflects and builds upon our longstanding commitment to reduce
costs and improve care through the dissemination of
information. And the new not-for-profit entity that we agreed
to fund with others in our industry will establish a website to
allow consumers to search for medical services by geographic
area, showing the prevailing charge or range of charges. In
addition, the site will alert consumers when insurers apply
other policies to determine out-of-network rates, including
terms in each plan document, other reimbursement policies, co-
insurance, deductibles, et cetera.
These are positive steps, but we believe even more can and
should be done beyond the parameters of the agreement to
enhance consumers' access to health information. Meaningful and
comprehensive transparency will only be achieved when parties
are equally accountable for the accuracy of the information and
equal access is provided to all stakeholders. In the end, every
consumer, each patient, must believe the costs for the care
they receive is fair and consistent regardless of geography,
insurance carrier, health care provider. At UnitedHealthcare we
are eager to be part of a national discussion to modernize the
health care system.
And we thank you for this opportunity to address the
Committee and will be pleased to answer your questions through
the course of the day.
[The prepared statement of Mr. Hemsley follows:]
Prepared Statement of Stephen J. Hemsley, President and
Chief Executive Officer, UnitedHealth Group
Chairman Rockefeller, Senator Hutchison and Members of the Commerce
Committee, my name is Steve Hemsley and I am President and CEO of
UnitedHealth Group. Our mission at UnitedHealth Group is to ``help
people live healthier lives.'' We do so by providing high-quality
health services and products to more than 70 million people each year
in partnership with over 5,000 hospitals and 600,000 doctors and
thousands of other care providers across the Nation. Our businesses
touch broadly on the services enabling health delivery and financing
and we tailor our approach to respond to the ever-changing needs of
different clients, markets and geographies in all 50 states.
We appreciate the opportunity to testify before your Committee
about out-of-network reimbursement practices and, most importantly, the
need to provide consumers with timely and accurate health information
so they can make more informed healthcare decisions. These topics are
of critical importance as the debate about how to modernize our health
care system, and to contain its costs to the consumer, intensifies here
in Washington and around the country.
Mr. Chairman, as you know, we recently announced agreements with
the New York Attorney General and the American Medical Association that
resolved disputes over reimbursement of out-of-network services based
on ``reasonable and customary'' rates. In determining these rates, we
have long utilized databases of physician charges licensed by Ingenix,
one of our subsidiaries. There has been a good deal of commentary about
our recent agreements--some of it accurate, some of it not. So, I am
pleased with the opportunity to clarify the facts for the Committee.
First, the Ingenix databases did not set the reimbursement
rates used by any health insurer. The role of the databases was
to solely collect data and then provide the data to a broad
audience of users, including physicians, hospitals, researchers
and insurers, who in turn independently used the information
across a range of applications. Similar to other insurers, our
subsidiary UnitedHealthcare, used the data only when our health
plan beneficiaries sought care from physicians outside of our
network and UCR protocols applied.
Second, the primary database at issue in these settlements
has been in existence for more than 30 years. During this time,
the database has performed an essential function in our health
care economy by setting a reasonable standard for the
reimbursement of physicians who do not participate in managed
care networks. This Committee knows better than most that
physician reimbursement based on nothing but the doctor's bill
is simply not economically tenable for consumers nor our health
care system. The databases were created with the goals of
appropriately managing costs and ensuring that consumers are
protected from exorbitant medical bills.
Third, we want to make clear that we stand behind the
integrity of the Ingenix data. In addition, we stand by the way
in which our insurance business, UnitedHealthcare, used the
data to make reimbursement decisions. Our recent agreement with
the New York Attorney General did not relate to the
manipulation of data or other similar misconduct. To the
contrary, working with the Attorney General, we agreed to
transfer the databases to an independent, non-profit entity in
the hopes of increasing information transparency and public
confidence in the quality of and access to the data that will
be used to set future out-of-network reimbursement rates.
Finally, the agreement with the Attorney General reflects
our role as a leader in health care and our desire to
strengthen the all important trust of consumers, and affirms
our ongoing commitment to transparency.
Mr. Chairman, to understand the problems facing consumers and
health plans with respect to payment for out-of-network services, one
must first understand the critical role that physician networks perform
in restraining health care costs. Our extensive network--one of the
largest physician networks in the country--provides consumers with many
options to obtain the highest quality medical care at an affordable
cost. But our network also provides beneficiaries with another
important benefit. It gives them visibility and certainty about the
cost of health services before they seek care due, in large part, to
in-network physician discounts. Unfortunately, the same is not true
when consumers seek care out-of-network with doctors who have not
agreed to discount his or her services.
This scenario is obviously not good for consumers. But, it's also
not good for our health care system--nor our broader economy--when the
costs of a routine, identical medical procedure can vary widely within
the same geographic region and between private and public insurance,
such as Medicare.
UnitedHealth Group has led the way in developing innovative
programs that aim to provide valuable, easy-to-use health information
to consumers and health care providers, among others. Since 2005,
UnitedHealthcare's ``Premium Designation'' program has provided
millions of our beneficiaries with the ability to access online cost
and efficiency data for physicians and hospitals through myuhc.com.
In addition, nearly 2 years ago we created the ``Claim Estimator''
that provides physicians with an online estimate of whether the cost of
a procedure will be covered. at what amount and what level the claim
reimbursement will be.
Our agreement with the New York Attorney General reflects and
builds upon our longstanding commitment to reduce costs and improve
care through the dissemination of information. The new not-for-profit
entity that we agreed to fund with others in our industry will
establish a Website to allow consumers to search for medical services
by geographic area showing the prevailing charge or range of charges.
In addition, the site will alert consumers when insurers apply other
policies to determine out-of-network rates, including terms in each
plan document, other reimbursement policies. co-insurance and
deductibles.
These are positive steps, but we believe even more can, and should
be done beyond the parameters of the agreement, to enhance consumer
access to health information. Consumers should be able find information
online not only about how much they will be reimbursed by their insurer
but also the cost of a medical visit or procedure at the time care is
delivered. Meaningful and comprehensive transparency will only be
achieved when all parties are equally accountable for the accuracy of
the information and equal access is provided to all stakeholders. In
the end, every consumer--each patient--must believe the costs for the
care they receive are fair and consistent regardless of geography,
insurance company, or health care provider.
At UnitedHealth Group, we are eager to be part of the national
discussion to modernize our health care system. Thank you for this
opportunity to address the Committee and we will be pleased to answer
any questions that you may have.
The Chairman. Thank you, Mr. Hemsley.
Mr. Slavitt?
STATEMENT OF ANDY SLAVITT,
CHIEF EXECUTIVE OFFICER, INGENIX
Mr. Slavitt. Thank you, Chairman Rockefeller and Members of
the Committee for the invitation to be here today. I am Andy
Slavitt. I am the CEO of Ingenix.
I appreciate the opportunity to be here to discuss the
challenges consumers face when they seek care from out-of-
network providers. Two of our database products, MDR and PHCS,
are sometimes used in the out-of-network reimbursement process.
I want to convey three points in my testimony today.
First, Ingenix stands behind the integrity of these
databases and the databases used in this process. We would be
pleased to, naturally, answer any questions you have about
that.
Second, the agreement we reached with the New York State
Attorney General to transfer ownership of the two database
products to a nonprofit will increase public trust in these
databases.
Third, this nonprofit that we and others have funded has
the opportunity now to shine a brighter light for consumers
both on what physicians charge and on how they will be
reimbursed by their insurance companies before they receive
treatment. This is the kind of consumer advancement that
deserves broad support.
Advances like this are consistent with our everyday work at
Ingenix. Since 1996, our job has been to put information to
work for people to improve the quality and the safety of their
care and to reduce their costs. Ingenix works for over 250,000
clients: physician practices, academic researchers, hospitals,
health plans, employers, State and Federal agencies, and
pharmaceutical and biotech companies. Whenever people use
information, our job is to make sure it is accurate,
transparent, and understandable, that it is handled in a way
that is private and secure, and that it can be put to use to
improve the quality and the cost of the health care people
receive.
Here are some examples. We recently helped the State of
Michigan decrease the number of children with lead poisoning 35
percent by working with their data. We helped increase organ
donations in this country 11 percent by creating an information
exchange for donors. We work with the FDA to protect patients
from potentially harmful side effects by using data to monitor
the safety of new treatments, and we provide tools for over 100
million Americans to help them find the best health care
provider for their needs.
Now, the agreement that we reached that we announced with
the New York Attorney General concerned two database products
which have been in use since the 1970s to provide the health
care system with benchmarks on what physicians charge.
Thousands of doctors license these benchmarks to assist in
setting their fee schedules. And commercial health care payers
license these benchmarks to help them make decisions about how
to reimburse out-of-network benefits under what they call a
reasonable and customary standard in their insurance policies.
Health plans use many different methods to reimburse out-of-
network claims. Our clients use these database products on
occasions when they prefer a market basis for reimbursement
rather than a more static and typically lower reimbursement
method such as Medicare.
Ingenix's role in all of these activities have been a
limited, but important one: to collect, organize, and keep
current the charges that physicians bill for their services. We
do not set reimbursement rates. Rather, like information
companies in many industries, we gather information from
disparate sources, we validate it, and we publish it.
Now, under the agreement we reached with the New York State
Attorney General, we will soon transfer the databases to an
independent nonprofit. During the Attorney General's review,
his office raised a concern that Ingenix's ownership of the
databases presented an inherent conflict of interest. We do not
want this concern to hamper the ability of the health care
system to get access to this information.
We would like to make clear, however, that there is an
important difference between an inherent conflict and the
actual practice of bias. The latter is something neither I nor
my employees nor our parent company would ever tolerate.
Ingenix is a business that has always prided itself on our
reputation for integrity and innovation. Our 8,000 employees
are scientists, doctors, and nurses, biostatisticians,
economists, actuaries, epidemiologists. They have dedicated
their careers to building a more transparent, higher-quality
health care system. They are good people. I am pleased to
represent them today.
Ultimately, trusted, accurate data and information
technology comprise one of the keys to modernizing the health
care system, particularly when combined with national quality
standards and properly aligned incentives. Ultimately, we all
need a system where both physicians and health plans have a
venue to disclose what they charge patients so that consumers
can compare and weigh the different costs and coverage
implications of their decisions. We are hopeful that removing
concerns over these databases will prove a meaningful step
forward in creating such a system.
I want to close my statement by thanking the Committee for
providing oversight on this important topic. We pledge to
continue to focus our resources to make health care work better
for people.
[The prepared statement of Mr. Slavitt follows:]
Prepared Statement of Andy Slavitt, Chief Executive Officer, Ingenix
Thank you, Chairman Rockefeller, Ranking Member Hutchison and
Members of the Committee for the invitation to be here today. I'm Andy
Slavitt, the CEO of lngenix. I appreciate the opportunity to be here to
discuss the challenges consumers face when they seek care from out- of-
network providers. Two of our database products, MDR and PHCS, are
sometimes used in the out-of-network reimbursement process.
I want to convey three points in my testimony today:
First, Ingenix stands behind the integrity of the databases
used in this process.
Second, the agreement we reached with the New York State
Attorney General to transfer ownership of the two database
products to a non-profit will increase the public trust in the
databases.
Third, this non-profit that we and others have funded has
the opportunity to shine a brighter light for consumers both on
what physicians charge and on how they will be reimbursed by
their insurance companies before they receive treatment. This
is the kind of consumer advancement that deserves broad
support.
Advances like this are consistent with our every day work at
Ingenix. Since 1996, our job has been to put information to work for
people to improve the quality and safety of their care and reduce their
costs. Ingenix works for over 250,000 clients--physician practices,
academic researchers, hospitals, health plans, employers, state and
Federal agencies, and pharmaceutical and biotech companies. Wherever
people use information, our job is to make sure it is accurate,
transparent and understandable, that it is handled in a way that is
private and secure, and that it can be put to use to improve the
quality and cost of the health care people receive.
Here are some examples. We recently helped the state of Michigan
decrease the number of children with lead poisoning by 35 percent by
working with their data; we helped increase organ donation in this
country by 11 percent by creating an information exchange for donors;
we work with the FDA to protect patients from potentially harmful side
effects by using data to monitor the safety of new treatments; and we
provide tools for over 100 million Americans to help them find the best
health care provider for their needs.
The agreement we announced with the New York State Attorney General
concerned database products which have been used since the 1970s to
provide the health care system benchmarks on what physicians charge.
Thousands of doctors license these benchmarks to assist in setting fee
schedules. And commercial healthcare payers license these benchmarks to
help them make decisions about how to reimburse out-of-network benefits
under a ``reasonable and customary'' standard in their insurance
policies. Health plans use many different methods to reimburse out-of-
network claims. Our clients use these database products on occasions
when they prefer a market basis for reimbursement, rather than a more
static and typically lower reimbursement method such as Medicare.
Ingenix's role in all of these activities has been a limited, but
important one: to collect, organize, and keep current the charges
physicians bill for their services. We don't set reimbursement rules;
rather, like information companies in many industries, we gather
information from disparate sources, validate it, and publish it.
Under the agreement we reached with the New York State Attorney
General, we will transfer the databases to an independent non-profit.
During the Attorney General's review, his Office raised a concern that
lngenix' ownership of the databases presented an inherent conflict of
interest.
We do not want this concern to hamper the ability of the health
care system to get access to this information.
We would also like to make clear that there is an important
difference between an inherent conflict and the actual practice of
bias; the latter is something neither I, nor my employees, nor our
parent company would ever tolerate. Ingenix is a business that has
always prided itself on our reputation for integrity and innovation.
Our 8,000 employees are scientists, doctors and nurses,
biostatisticians, economists, actuaries and epidemiologists. They have
dedicated their careers to creating a more transparent, higher quality
health care system.
Trusted, accurate data and information technology comprise one of
the keys to modernizing the health care system, particularly when
combined with national quality standards and properly aligned
incentives. Ultimately, we need a system where both physicians and
health plans have a venue to disclose what they charge patients, so
that patients can compare and weigh the different cost and coverage
implications of their decisions. We are hopeful that removal of
concerns over these databases will prove a meaningful step forward in
creating such a system.
I want to close my statement by thanking the Committee for
providing oversight on this important topic. We pledge our assistance
to continuing to focus our resources to make health care work better
for people.
Exhibit 1: Methodology Comparison
The Chairman. Thank you, Mr. Slavitt.
Senator Pryor, did you have any comments you wanted to
make? Senator Pryor is head of our Consumer Protection, Product
Safety, and Insurance Subcommittee.
Senator Pryor. I do not, Mr. Chairman, but thank you for
having this hearing. I think it is very informative and
helpful. Thank you.
The Chairman. Inherent conflict of interest. I am just
interested in the way that some conflicts of interest are
important and others are not. I want to plumb that just a bit.
Mr. Slavitt, you are the CEO of Ingenix. Ingenix is a
subsidiary which is wholly owned by UnitedHealth Group. Is that
correct?
Mr. Slavitt. That is correct.
The Chairman. Is it also correct that you will be basically
out of business in about 6 months?
Mr. Slavitt. That is not correct. May I clarify?
The Chairman. Of course.
Mr. Slavitt. These databases represent less than 2 percent
of our overall revenue.
The Chairman. Oh, no, I do not mean the other thing. I know
you do lots of other things. But this aspect of your work.
Mr. Slavitt. Yes. We will be transitioning these two
databases to a not-for-profit once it has been selected.
The Chairman. Now, was that something that you were going
to do anyway and there was a confluence of somehow magical
convenience between the settlement with the New York State
Attorney General, $350 million, $50 million of that to go to
some university or some other research organization which could
do what I always said you were not doing?
Mr. Slavitt. No, we were not planning on otherwise
transferring the databases.
The Chairman. And so why did you not?
Mr. Slavitt. Well, I think----
The Chairman. You knew what was going on. You knew about
the bulk material that came in to UnitedHealth Group and how a
lot of that was just skimmed off the top so that there would be
a low ball.
Mr. Slavitt. With all due respect, Mr. Chairman, I do not
accept the premise of that question. I would be happy to, in
whatever detail you would like, talk through the statistical
methods that have been alleged and what, in fact, are some
other facts that I think you ought to be aware of.
And I understand that you have very deep concerns about the
database and about making sure that consumers are protected
when they go out of network. I share those concerns as well. I
also equally care about the reputation of the work of our
people and the integrity of the people that work for me on this
database product. And I would like to give you an opportunity
to have all of the facts available.
So while I would say we learned from the Attorney General
that we were myopic in focusing only on whether or not this
database had integrity and whether we were, indeed, acting
appropriately, those things I have never come to question, and
we have been very self-reflective in this process.
What we did learn--and you learn a lot of things going
through processes like these, Mr. Chairman--is that to the
outside world, this appeared to be too close for comfort. We
are analytical types and we analyzed each accusation and each
concern as it came in. I never once had a reason to believe
that anything that was said was an indication of bias. Again, I
am happy to walk through those details.
We did--however, when we learned and were made to see from
the Attorney General that this looked to consumers to be
something that could not be trusted, it was important for us to
make sure to rectify that situation.
The Chairman. Let me continue with my question. Mr.
Hemsley, as you know, the Attorney General of New York and
other consumer groups had a lot of concerns about the business
practices in the relationship with Ingenix. I think their
concern was that Ingenix held itself out as an independent
source of usual, customary, and reasonable health charge data
specifically. But at the same time, Ingenix was wholly owned by
you, which had a financial interest in generating low
reimbursement rates. You can disagree with that, but that is
clearly the conclusion of many.
Now, let me give you an example. During the New York
Attorney General's investigations, they discovered a letter
written in 2005, which I think we are going to distribute, to a
New York consumer by UnitedHealthcare. UnitedHealthcare is
another division of the UnitedHealth Group. Now, the letter
informs the consumer that UnitedHealth has determined that the
amount of his or her claim exceeded what is called ``an
allowable and reasonable standard.'' UnitedHealth says it
reached this conclusion after consulting ``independent research
across the health care industry.''
[The information referred to follows:]
But here is the problem, Mr. Hemsley. This so-called
independent research came from your wholly owned subsidiary
Ingenix. We can find no other. The people who testified said
they had never heard of anybody being called up and asked
``what is going on here,'' ``what do you think.''
So, Mr. Hemsley, do you see why Attorney General Cuomo and
others might be concerned about a conflict of interest?
Mr. Hemsley. Chairman, I think we do, and that is why we
responded the way that we did. This database has been in
operation for more than 35 years.
The Chairman. What does that prove? It could be that you
were wrong for 35 years.
Mr. Hemsley. It could, Mr. Chairman. But this database has
been used as a reference database only, which means it only
collects raw billed charges across--served by a billion claims
per year in 500 different geographic zones and is a reference
database only that is used and made available to other
companies for a broad set of applications, including the
reimbursement of out-of-network.
The Chairman. Well, with respect----
Mr. Hemsley. The issue of conflict had not surfaced in the
context that the Attorney General had positioned it, and when
that issue of conflict presented itself, we understood the
issue with respect to consumer trust and we responded
accordingly. That was really at the core of our discussions
with the Attorney General from the very beginning.
The Chairman. That is interesting because, as I see it, you
have already acknowledged there was a conflict of interest in
the relationship. And you have done that through your general
counsel, UnitedHealth's general counsel, Mr. Mitch Zamoff. And
he said on January 13, interestingly, of this year, ``We regret
that conflict of interests were inherent in these Ingenix
database products.'' That is what he said. I doubt that was a
casual statement. I bet that was vetted and gone over. I bet
that was in a formal setting.
Now, let me ask you, Mr. Hemsley, do you regret there were
conflicts of interest in the Ingenix database products, or do
you simply deny what your general counsel said?
Mr. Hemsley. No, Mr. Chairman. We have a number of regrets
related to this. We regret we did not recognize the appearance
of this conflict sooner. We regret that we were not more
forceful in our broad disclosures with respect to the
relationship of this database relative to other aspects of our
company. And we regret that there has been any breach in terms
of the perception of trust in terms of the consumers'
participation in this.
So I would also suggest we regret the fact that there is
not greater transparency with respect to charges that go
outside the domain of networks where there is transparency on
costs and charges and that this plays into the broader context
of a health care dilemma in the country around health care
affordability and the need to modernize the system so that
there is greater transparency and greater information. Clearly,
we regret those and we think that the steps that have been
taken are very positive steps forward with respect to this
aspect of cost reimbursement.
The Chairman. Mr. Hemsley, I am, I think, basically a
polite person, but you are making it hard on me. I just do not
see how there can be any other interpretation of the fact that
Andrew Cuomo, a not insignificant or shy Attorney General,
entered into this with all four hands and feet and did a heck
of a job with a heck of a staff, ran down all kinds of numbers.
And I have follow up questions, and I hope that Senator
Pryor will forgive me for a second, and he can use 10 minutes
too because he will have questions to ask.
Suddenly the future is rosy and this is a wonderful thing.
It is in both of your statements. This is going to be so much
better. There is going to be so much transparency. It is going
to be so much better for the out-of-network consumer. And yet,
this was said as you were about to get hit with a $350 million
fine. And I have to assume that that was not sort of picked out
of the air, that there was some other statement that said, you
know, if you are not willing to pay that--I was not there. I am
not a lawyer. But as a citizen and as somebody who has been
working on health care all of my life, this is very suspicious
to me, this sudden glowing view of the future, completely
putting aside what I consider a very sordid past.
And I do not know why it was that you did not stop it
because you knew what was going on.
Mr. Hemsley. Well, Mr. Chairman, the reimbursement of out-
of-network services entails a billing related to entities that
are not within the domain of our network. So----
The Chairman. I missed that.
Mr. Hemsley. That are not in the domain of our network. And
therefore, consumers do not know, when they go outside the
network, what those services will cost. And the usual and
customary database--I think back to its original origins in the
early 1970s--was built in response to establishing what costs
are across 8,000 service codes established by the AMA so that
there would be a reference point of actual activities in
markets in geographic zones so there would be some point of
reference.
So the lack of transparency is from the portion of the
medical community with respect to those billed charges. Then
when a consumer uses those services, there is a reimbursement
mechanism that is applied, a variety of them, across this base
and they may or may not make reference to that database.
So I would suggest that that database is an effort to
actually bring some information to the marketplace. The dilemma
was that it is not as easily or readily accessible.
So the concept brought forward with the Attorney General
was to create a place where that information could come
forward, come forward from a neutral party. And we participate
in that and that is where our $50 million is an investment into
the transition of that database to an academic center and for
the use of a much broader, much more robust transparency
nationwide.
The Chairman. All well and good.
I close simply by then saying that you must, therefore,
reject what your General Counsel said on January 13 of this
year that he regrets that conflicts of interests were inherent
in this Ingenix database products. You reject that.
Mr. Hemsley. No, Chairman, I do not. The work with the
Attorney General helped us understand the perception of the
fact that one of our businesses was involved in the development
of this reference database, and it was used on an arm's-length
basis by another one of our businesses, and we understand that
appearance of an inherent conflict, and we responded.
The Chairman. OK. I will be back.
Senator Pryor?
STATEMENT OF HON. MARK PRYOR,
U.S. SENATOR FROM ARKANSAS
Senator Pryor. Thank you, Mr. Chairman.
Mr. Slavitt, let me start with you, if I may, and that is
during your testimony, I did not count how many times, but I
lost track after five or six times of you using the word
``transparency'' in your statement. Are you saying that your
system has been transparent?
Mr. Slavitt. I am saying that--no, I am not saying that it
has been transparent enough to the consumer, and I think this
has been an awfully confusing process for the consumer. I think
our clients, both physicians and health plans, would consider
that a failure, a very difficult area of health care, no doubt,
but a failure.
I think our notion has been to try to make essentially a
good thing happen, which is, as you well know, the health care
industry sometimes gets criticized for not pooling its
information together to create one version of truth or to
combine information across a variety of sources to people. So
our hope and our goal has been to take sources from many
different health plans so that every health plan does not have
its own reasonable and customary rate based on much less
information and put it all in one place and make it available.
And we have made it available through various products to
doctors, to health plans, and to consumers. I think, obviously,
it has not succeeded as well as we hope it will in the future.
Senator Pryor. So let me ask. Your company is a wholly-
owned subsidiary of UnitedHealth Group. As I understand it,
that is not generally made known or made clear to policyholders
and even doctors. We had a couple of folks in last week to
testify to us, and they said they had tried to figure out how
these reasonable and customary charges were calculated, and
they were basically stonewalled and could not get an answer.
So basically today before the Committee, you are telling us
that your operation has not been transparent and has not worked
in a way that it should for consumers. Is that fair to say?
Mr. Slavitt. Senator, what I am saying is that we go
through a very thorough process of ensuring that the data we
present to people is as accurate as possible. We take in a lot
of information. We go through a very thorough verification
process, which I would be glad to outline to you. We publish
information much in the same way a company like A.C. Nielsen or
companies in other industries publish information. We certify
the information that comes in. We run tests. We ensure that
nothing happens in the course of that process that are biased,
and we turn that information over to various people to use it.
It includes health plans, including one of our sister
companies. It includes other health plans. It includes
physicians. And what I am testifying today is all of that was
done properly.
Senator Pryor. Well, let me ask this. There is some
disclaimer language I want to focus on, and it is a document
that you have, I think the Committee has. You may have it in
front of you, but if not, we will make sure you have it.
Basically it says, ``The database is provided for informational
purposes only and Ingenix disclaims any endorsement, approval,
or recommendation of data in the database.'' Now, to me, that
sounds like you are not standing behind the data in your
database. And to me, it sounds like you are not standing by the
integrity of your own database, although in your testimony a
few minutes ago, you said you are.
[The information referred to follows:]
Mr. Slavitt. Sure.
Senator Pryor. So explain that for me.
Mr. Slavitt. No, I understand why you are asking the
question.
Our clients, many, many health plans, write policies and
their own policy language and refer to our database in that
policy language. We are explicit about what the database is and
what it is not. However, we cannot warrant that if a health
plan says something about our database that is not, in fact,
true, that therefore they are using it in a reasonable and
customary way.
What we can warrant is that our database that lists, for
example, what a doctor visit costs in a certain location for a
certain service for a certain price is, in fact, derived the
way we indicate that it is derived.
Senator Pryor. So in other words, just a minute ago in
answering my question, you said that you publish information
like A.C. Nielsen and others, and you go through this rigorous
testing and this examination and this process that you go
through, and you are like other database or information
providers. But that is not true because A.C. Nielsen and others
actually can get inside their numbers. They can verify the
accuracy of the numbers. But you did not at Ingenix. Is that
fair?
Mr. Slavitt. No. With all due respect, to the contrary. We
run a very thorough process. And I think on Thursday in this
room, you heard some facts, and I think there are other facts
that would be useful to hear. For example, I think you heard
that high values are removed from the database, and the other
half of that statement is that about 5 percent on average of
the data that comes into this billion-record database is
excluded as being outliers.
So what is an outlier? An outlier is a number that comes in
that does not make any sense. In plain terms, if a bill for a
certain service is $75 week in, week out, year in, year out
from a doctor, and you get a record that comes in at .075 or
$7,500 or $75,000, which happens, naturally we exclude it. And
as a matter of fact--and this is important--we exclude four
times as many low values as we do high values.
Why that other part of the sentence has never been talked
about I am not exactly sure. But criticism after criticism has
not entirely told the entire story about these methods and
these processes. The processes that we use we always go back
and test to see whether or not what we did created a bias or a
downward skew, to use your expression, of the information, and
it does not.
Senator Pryor. Mr. Hemsley, let me ask. And I am really out
of time here, but with the Chairman's indulgence, let me ask
you. You mentioned in your opening statement that the database
did not set rates.
Mr. Hemsley. Yes, sir.
Senator Pryor. Well, who did set the rate then?
Mr. Hemsley. The individual user, if they are using it for
reimbursement purposes----
Senator Pryor. So in other words----
Mr. Hemsley.--the database itself----
Senator Pryor.--UnitedHealthcare would set the rate.
Mr. Hemsley. Whatever insurer would use it as a point of
reference. It is a static database that collects billed charges
from across the country with about 100 contributors to it, and
it merely takes those data points in and sorts them by service
code, AMA service code, 8,000 service codes, along 500
geographic areas, and then presents it in terms of percentile
terms as a reference point.
Senator Pryor. So it is up to the individual insurance
company to set the rate.
Mr. Hemsley. Yes, sir.
Senator Pryor. And you also mentioned that the primary
database in question has been in existence for 35 years, but I
want not to parse words with you but when you say the primary
database, the truth is it has changed a lot in the last 35
years. Is there not a different ownership structure with this
database than there used to be?
Mr. Hemsley. The original database was created and put in a
trade association of health benefit purveyors and operated
until that trade association merged with another in the late
1990s, at which point in time we took responsibility for that
database and have operated it since.
Senator Pryor. And would you agree with me that by virtue
of the change of ownership and the change in the structure of
the database, then it does open the door for this inherent
conflict of interest that we have talked about and also may add
to the lack of transparency with the database?
Mr. Hemsley. As I think we said before, it does create the
appearance of a conflict, and that is why we responded as we
did with the Attorney General.
Your other question was?
Senator Pryor. Does it--this conflict of interest and also
this lack of transparency.
Mr. Hemsley. The use of the reimbursement and the reference
to the database, et cetera is set forth in plan language, plan
documentation, et cetera, all reviewed by regulators and passed
by regulators. I do suggest, as I had responded to the
Chairman, that we wish we had done more with respect to being
more aggressive in terms of the relationship between the
businesses, yes.
Senator Pryor. In other words--I am sorry, Mr. Chairman--if
I am John Q. Policyholder with UnitedHealthcare and I have a
policy with UnitedHealthcare, and when I get my insurance and
it says, you know, something to the effect of if it is an in-
network service, United pays for 90 percent, but if it is out-
of-network you pay for 50 percent, the truth is that in most
cases you are not paying 50 percent. You are paying 48 percent,
45 percent, 40 percent, 35 percent, something like that, but
you are paying less than 50 percent because of the way this
deal was structured.
Mr. Hemsley. No, Senator, I would not agree with that. We
generally pay much higher, and I will use the case of Dr.
Jerome, the witness. Ultimately, this was a self-funded case,
so it was sponsored by her employer. We paid 86 cents on the
dollar for the services she received at Sloan-Kettering, very
costly, but also a very high-quality institution. 86 cents on
the dollar.
Senator Pryor. Mr. Chairman, thank you.
The Chairman. Thank you.
Senator McCaskill?
STATEMENT OF HON. CLAIRE McCASKILL,
U.S. SENATOR FROM MISSOURI
Senator McCaskill. I am a little confused. You all settled
a lawsuit and a complaint--an investigation by the Attorney
General's Office for hundreds and hundreds and hundreds of
millions of dollars. I think between the agreement with Cuomo
and the agreement in New Jersey, are we not talking about a
half a billion dollars that you all are paying?
Mr. Hemsley. Yes, Senator.
Senator McCaskill. And Mr. Slavitt, you are maintaining
there is absolutely nothing wrong with this data?
Mr. Slavitt. Yes, Senator.
Senator McCaskill. Do your shareholders know that you have
settled this amount for a half a billion dollars when you have
done nothing wrong?
Mr. Slavitt. Maybe I could put a context to that. The
discussions with the Attorney General have been around the
issue of conflict and a better positioning of that database,
which really is essential for the health care system, and to
position that database in a center that would have no business
interests associated at all. And to help transition that and to
deal with the root issue of lack of transparency on out-of-
network bills and charges from the provider community and the
solution with the Attorney General and the investment
associated with that to bring that capability to bear
nationwide as an industry utility is what our discussions with
the Attorney General have been about.
Our resolution with the American Medical Association really
relates to a conflict that has been in place with them for
nearly a decade, and we are interested in cultivating a much
more constructive relationship with the medical community at
large. About 85 percent of the health care community, about
5,000 hospitals, 6,000 physicians, and so forth, are part of
our network infrastructure. We procure about $100 billion in
health care services a year through that, and we are not
interested in having a contentious relationship with that very
vital aspect of the health care----
Senator McCaskill. I guess my concern, Mr. Hemsley and Mr.
Slavitt, is that I anticipated, after the hearing last week,
that your testimony today would be ``we did not do this
right,'' not just it did not look good, but ``we did not do it
right.'' Now, you are admitting, Mr. Hemsley, that it did not
look good. But what I am not hearing is any acknowledgement
that you did not do it right.
Let me ask you, Mr. Slavitt. If you were so busy throwing
out the low price outliers, then why were you able to market
this information to insurance companies by saying for every
dollar you spend on our data, you will save $16? How is it that
if this data is so accurate that you would advertise that by
using this data, you are going to save $16 for every dollar you
spend, if you were so busy throwing out the low outliers?
Mr. Slavitt. Senator, we market this data to physicians and
health plans and researchers and governments. The data and the
analytical processes are overseen by Ph.D.s who are people that
have very deep ethical training, very deep analytical
training----
Senator McCaskill. I am not asking about the training of
the people who did it. I am asking you about the marketing of
for every dollar you spend, you are going to save $16. If this
is just accurate data, how can you market that they would save
that kind of money over what they had been paying?
Mr. Slavitt. First of all, Senator, I need to see the
document. I am not familiar with----
Senator McCaskill. It is in the complaint that you settled.
It is in the complaint. It is on page 32 of the complaint, 130.
``In marketing PHCS, UnitedHealthcare promised and continues to
promise that PHCS users will achieve substantial cost savings,
including a 16-to-1 return on investment.''
Mr. Slavitt. Right. So, Senator, if I may?
Senator McCaskill. Yes.
Mr. Slavitt. For a health plan to decide that they would
like to pay less or would like our rates to be lower, the
easiest thing in the world for them to do is to say I do not
want to pay at the 80th percentile. I want to pay at the 70th
percentile. The thing that I find hard to believe is that they
would come to us and suggest that we should cook the data.
Now, promising our clients who buy our software, if they
use data and they use data well, that they will be able to run
their business better and operate better, whether it is on the
physician side or on the health plan side, is not something
that I am embarrassed about.
Senator McCaskill. Well, I guess the point is that your
marketing was we are going to help you not pay.
Mr. Slavitt. No. Excuse me. I am sorry. I did not mean to
interrupt you.
Senator McCaskill. Well, that is certainly what it--if I
were an insurance company and I got a flyer from your company
and it says for every dollar you spend for our data, I am going
to save you $16, that means I am going to be paying out less
money in claims.
Mr. Slavitt. I am sorry. I respectfully disagree with the
statement that that means that we are going to have them not
pay. What our clients want to do----
Senator McCaskill. Pay less.
Mr. Slavitt. What our clients want to do is pay accurately,
and when they license our database, what they are saying they
want to do is pay at something that approximates a market rate
as opposed to what they could do, which is pay at a Medicare
rate or create a schedule of their own. They actually pay
something like 30 percent more when they use our product than
if they were to, in fact, use something closer to their in-
network rate or double what they would if they used the
Medicare rate.
So the links that you are making I do not think are--
appropriately imply that we are finding ways for them to
inappropriately pay less, with all due respect.
Senator McCaskill. Well, I think the problem here is that
there appears to be a disconnect in terms of owning some
responsibility for what clearly the company decided was wrong.
I mean, you cannot tell me in this day and age with the kind of
shareholder scrutiny there is that any company would already
have agreed to pay out a half a billion dollars in settlement
for something that just had an appearance of a problem. Usually
cases get settled because you are afraid you are going to get
nailed if they go to court, and they do not get settled
otherwise.
And it seems to me that--I am just disappointed. I think
this is why the health care reform--you know, there is such a
lack of confidence in so many institutions right now, Congress
being among them, but certainly health insurance is one of the
places where most people that I work for think they are getting
a raw deal.
And I am just disappointed that there is not more of an
acknowledgement today that the way you all did this was wrong,
that the information and the way you disseminated it was not
done correctly, and that consumers were getting the short end
of the stick. If you had come here today and said those things,
I would feel much better going forward. As it is, I think we
need to be vigilant and stay on you like white on rice.
Mr. Hemsley. Well, Senator, we are here because we are
interested in consumer confidence. We are interested in making
sure that all of this is understood. We made a business
decision and we made a decision about the transference of the
database to a neutral site and to invest in a greater
transparency that would benefit the health care domain in total
and consumers and physicians alike. We also made a business
decision to resolve a conflict with the medical community at
large, which is very important to our business, and that
conflict had been in place for some time.
Once we had made a decision to transfer the database, we
were also interested in resolving the conflict with the medical
community. It is very important that we maintain a relationship
with them. We procure a great number of services through them.
In the era that we are moving forward, in terms of health
reform, I think it is more important than ever to have an
appropriate and smooth relationship with the health community,
and we made a decision that to resolve this conflict, which had
been longstanding, was a very good business decision in that
context.
Senator McCaskill. And I appreciate it, Mr. Hemsley, and I
know you are trying to do what is best for your company.
One final question, Mr. Chairman. Are you saying that the
Attorney General's inquiry into your business was, in your
mind, a separate and distinct issue from the lawsuit that had
been ongoing for 7 or 8 years before the Attorney General ever
opened a book on you?
Mr. Hemsley. I am suggesting that the Attorney General
really focused on the issue of the positioning of the database
and the appearance of conflict with that reference database and
our activities in other aspects of our business in health
benefits. And his interest was in resolving that, and that is
what our solution with the Attorney General----
Senator McCaskill. But were the issues not the same, Mr.
Hemsley, in the lawsuit and the information that the Attorney
General uncovered? Were the issues not the same?
Mr. Hemsley. No, Senator. I think the issue in the
litigation was about the validity of the database, and we stand
behind the validity of the database and the appropriate support
of that database.
Senator McCaskill. So the lawsuit was about the validity of
the database which you stand by, and the Attorney General's
inquiry was on conflict of interest. So you decided to settle
the conflict of interest and, in turn, just decided to settle
the validity of the database lawsuit at the same time? And
these are not related?
Mr. Hemsley. To put, in essence, the entire matter and to
move forward in a much more constructive way, absolutely.
Senator McCaskill. Thank you.
Mr. Slavitt. May I?
Senator McCaskill. It is up to the Chairman.
The Chairman. Please.
Mr. Slavitt. Senator, of course, there is no denying that
Mr. Hemsley's company owns my company and another company that
uses our product. And it is clear that we were myopic and being
perhaps so analytical about defending our integrity that we
missed the bigger picture.
But we would not have signed an agreement that contained
accusations of fraud in it because we simply do not agree with
it, and we did not sign an agreement that had fraud in it.
Senator McCaskill. Thank you, Mr. Chairman.
The Chairman. Thank you, Senator McCaskill.
Senator Warner?
Senator Warner. Mr. Chairman, since I missed the last
hearing, I think I am going to pass at this point and listen a
little bit more.
The Chairman. OK.
Then Senator Klobuchar?
STATEMENT OF HON. AMY KLOBUCHAR,
U.S. SENATOR FROM MINNESOTA
Senator Klobuchar. Thank you very much, Mr. Chairman. I
thank both of you for being here.
Just to sort of set the stage here, Mr. Hemsley, there was
a lawsuit or two legal actions. They were settled, as Senator
McCaskill pointed out, for half a billion dollars. But the key
part of this, just from my perspective, is part of this with
the Attorney General of New York was that there was $50 million
devoted to a website to move forward to post and figure out a
way to accurately depict these rates, out-of-network rates.
And just to clarify here the record, your company settled,
but there are other companies that have not settled who are
being sued. Is this correct?
Mr. Hemsley. That is correct. The context of it was the
development of a concept that we had actually brought forward
with the Attorney General about the establishment of a more
universal site so that charges could be transparent when they
were in an out-of-network setting and to use the database,
which is by far the most robust database in the industry, as a
source for this. We adopted that on a national basis for our
business, and I believe the other carriers are in the process
of considering that right now.
Senator Klobuchar. So will other carriers, even if they
have not settled--will their customers be able to access this?
It is going to be a public database?
Mr. Hemsley. It will be a public database.
Senator Klobuchar. OK. And what other changes do you think
would make it easier for patients to understand the true costs?
You know, retail clinics often post prices in their office,
things like that. As we move forward here, when people are
looking at out-of-network costs--and I can tell you I am
devoted trying to get people covered as much as possible, but
if they want to go out-of-network, what are some other ways
they can assess the cost?
Mr. Hemsley. For our network and the vast majority--I mean,
we are talking about a very small percentage of services that
are really rendered out of network. So the vast majority of
services that are rendered in-network we have information about
the service itself and about the physicians and so forth that
assess and report on quality on their service efficiency and
also do this in the context of natural groupings of services
because the services themselves are very technical in terms of
AMA service codes, and so they are then grouped into more
natural, plain English. And that is what we use and we would
use that as a model I think. I think it is the most advanced of
its kind across the industry. We would use that as a model for
this site.
Senator Klobuchar. And I will say I have some statistics.
We will maybe ask you the questions in writing about how
patients can do better bargaining when they have the
information, those kinds of things.
But I have to tell you I just do not think this is the way
we want to go. I do not think you do either in terms of having
individual patients trying to negotiate rates. There is no way
the patients win in this circumstance. And to me, the answer is
to, of course, leverage patients by having them together in a
major group to take on the costs.
And I just want to move to another area that Mr. Slavitt
had raised. Where I look at where can we really save money in
the system--and I know the President is devoted to this as
well, and that is this issue of geographic variation in the
Medicare reimbursements. Mayo Clinic just announced that they
lost $765 million last year because of the Medicare
reimbursements. Yet, they have the highest quality and lowest
cost of health care around. In fact, a Dartmouth study came
out--I mentioned this last week--that showed if every hospital
in the country followed their protocol, we would save $500
billion every 4 years in taxpayer money on Medicare.
And so could you comment as we look to this health care
reform about how we can account better for these geographic
differences where some areas of the country are incredibly
inefficient in how they deliver health care? Miami, Florida,
$15,000 for the same package of Medicare services that is
$7,000 in the Twin Cities. That is a fact. So how can we fix
this where you have these wildly disparate health systems? And
to me, that is going to be a lot of the answer of how we save
costs in this area, Mr. Hemsley.
Mr. Hemsley. Yes, Senator. I think what you reference to--
and our company has been supportive of that as well--is that in
a major area, if you think about reform broadly, you can think
about it in terms of four zones, in terms of health policy,
appropriate use of resources, appropriate alignment of the
health care economy, and citizen responsibility for health.
In the area of appropriate resource use, there is
significant variation of care. It is well established. There
are evidence-based medicine protocols. They are generally
established by the specialty societies. We use those protocols
as a basis for setting the evaluation framework for our premium
networks, and we believe that if the evidence-based medicine
was consistently complied with across the spectrum of care,
that you would get meaningfully better, more efficient use of
resources. And that is very much what our business is engaged
in.
Senator Klobuchar. Thank you very much. I just want to
correct the record. It is $50 billion--$50 billion--every 4
years that we can save. So thank you.
Mr. Slavitt, did you want to add anything on the Medicare
issue?
Mr. Slavitt. No, I think Mr. Hemsley covered it.
Senator Klobuchar. OK. Thank you very much.
The Chairman. Thank you, Senator.
Senator Begich?
STATEMENT OF HON. MARK BEGICH,
U.S. SENATOR FROM ALASKA
Senator Begich. Thank you, Mr. Chairman.
I appreciate you all being here today. I apologize I missed
the first portion of your presentation, but just remind me.
Maybe, Mr. Hemsley, you could do this, or either one of you.
In the settlement that was done, the amount of money in the
settlement--besides setting up the nonprofit and setting up the
new system, what are the chunks of the money? How does that go?
Just so I kind of get the basis----
Mr. Hemsley. In developing the recommendation with the
Attorney General and recognizing that there would be costs to
establish a transparent, robust database for these purposes, we
have indicated that we would make investments over a period of
time--I forget the period--of $50 million and anticipated that
others in the insurance domain would make investments of that.
So that is what the $50 million is about.
Senator Begich. To set up the system.
Mr. Hemsley. Transfer the database, which is an industry--
--
Senator Begich. Owned and operated.
Mr. Hemsley.--essential service.
Senator Begich. I understand.
Mr. Hemsley. And to make sure that service is transferred
to a new setting, fully operational, and then also to get more
proactive in terms of developing the kinds of transparencies
that everybody in the health care community is looking for,
whether that be portals, whatever venues may come forward. So
those would be investments for those purposes.
Senator Begich. And then in that, was there--I could not
ask this to the last week's panel, but maybe you could answer
this. I ran out of time last week. But are there operating
dollars to continue to flow to operate that facility? In other
words, I understand the setup costs and so forth, but what
ensures the continual operation for the staffing and the data
collection and all that it takes to keep that going?
Mr. Hemsley. The database itself should be self-sustaining
so long as it is used broadly in the industry, and we have
committed, as it pertains to reference for usual and customary
rate purposes, that we would continue to use it. So it should
be a sustaining entity.
Senator Begich. But the nonprofit has to operate--how will
the nonprofit fund itself and continue to operate?
Mr. Hemsley. License fees----
Senator Begich. To the insurers who then would pay a fee to
put the data in there and collect it and manage it.
Mr. Hemsley. Yes, sir.
Senator Begich. OK. That is the question I had.
The second one is do you think--I asked this of last week's
panel. I mean, the settlement was kind of regional. You know, I
come from Alaska. So I think almost three-quarters of our
business is Blue Cross. Probably Aetna is our secondary. Do you
think this settlement should be codified into the health care
reform? When I say settlement, I mean the elements of this
independent type of nonprofit that collects the data for the
whole country from Alaska to Florida and everywhere in between.
Mr. Hemsley. We are approaching it on a national basis. We
will do this on a national basis.
Senator Begich. But do you think it should be part of the
health care reform in the sense of codifying it to make sure
that it does not have to be a settlement issue in the future if
there are other issues that come up down the road? Maybe the
nonprofit starts not doing what they should be doing? Should it
be part of the health care reform, or do you think satisfies
it? Do you think all the insurance companies are going to
participate?
Mr. Hemsley. I cannot speak for the other insurance
companies. I would broadly suggest that I think that standards
applied in the health care community would be a positive thing
in a number of areas. And I think----
Senator Begich. This specifically. I am going to kind of
drill down here.
Mr. Hemsley. I believe that this database is the standard
in the industry, so I would agree with that.
Senator Begich. OK. Same thing? Would you agree with that,
or additional comments?
Mr. Slavitt. I have opinions probably on a lot of things,
including reform-related. I do not have an opinion as to
whether this should be codified in reform.
I do think that the Committee is right to focus on ways to
encourage both health plans and physicians to disclose their
charges in advance to consumers in an easy way. Mr. Hemsley
mentioned bundling services, which is an even more friendly way
to do that. But the more that--and I think most of my clients,
who are physicians and health plans, would agree with that,
that more transparency will be better. We will have fewer
situations like the ones that frustrate the Committee and
certainly us as well.
Senator Begich. Let me end with just one last question
because my time is about out, and maybe this could be data
either one of you could get. But I would be curious, over the
last--you know, maybe to the insurance company, but
specifically to both of you--over the last half a dozen years,
do you have some data that can show me your consumer
complaints, as well as your physician complaints and/or
organization complaints, and kind of what volume and what types
of complaints that have come to you in regards to the charges
and so forth? Is that something that either one of you or both
of you could provide?
Mr. Slavitt. We will get with our team and we will get
something out.
Senator Begich. OK. Both? Thank you very much. My staff
will follow up with you. Thank you.
The Chairman. Thank you, Senator.
Senator Udall?
STATEMENT OF HON. TOM UDALL,
U.S. SENATOR FROM NEW MEXICO
Senator Udall. Thank you, Chairman Rockefeller. Once again,
I appreciate you bringing us back to this important issue.
The lawsuit and the settlement that resulted hurt consumers
in a significant way. And my first question is boring in on New
Mexico, but I think this is true for the rest of the country. I
mean, I am wondering are my New Mexico residents--have they
been as under-reimbursed as consumers in New York, as was
proven out in these hearings that we have had? That is the
first question. Do you have any, Mr. Hemsley, on----
Mr. Hemsley. Well, as I said, the context of our resolution
with the American Medical Association and the medical community
at large is to resolve the conflict between our entities that
has been longstanding. It was important to us that if the
conflict resolution involved funds, that those funds be used to
return to both consumers and care providers and to establish a
fair basis to do that. And our resolution is nationwide in
context. It covers all States. It covers all consumers, all
providers.
Senator Udall. But you are talking about going forward.
Mr. Hemsley. No, sir. This is----
Senator Udall. You are going to make whole the consumers
from the past. You are going to make them whole. Is that what
you are telling us?
Mr. Hemsley. I do not know what process will be used, but
there will be an effort to distribute these funds to consumers
and providers on a national basis.
Senator Udall. Well, that is fine, but do you think there
is enough in the settlement to make everyone whole that is out
there?
Mr. Hemsley. The settlement is a very significant
settlement, as Dr. Nielsen indicated last week, supported by
the AMA, and very, very significant in its scope.
Senator Udall. Yes, well, it is but it basically dealt with
the State of New York, did it not?
Mr. Hemsley. No, no. It was nationwide.
Senator Udall. This is nationwide. And so you believe that
consumers in Minnesota, New Mexico, Virginia are going to
benefit from this and be made whole as a result of this
settlement.
Mr. Hemsley. It is my understanding that these proceeds
will be used and distributed----
Senator Udall. Well, I know they are going to be
distributed. My point is that in many of these lawsuits where
you have a big settlement like this, the funds that go into the
overall settlement fund to pay out are many times less than the
consumers were hurt.
So I am asking you, first of all, from your view as you
know it as to what happened on a nationwide basis, do you
believe the funds are adequate and do you believe consumers
across the Nation are going to be made whole in this process?
Mr. Hemsley. I cannot respond to that from the perspective
that we do not believe that there are any issues with the
integrity of the database as a reference database. We do not
know how others may have used that database for reimbursement
purposes.
Our solution with the American Medical Association was to
resolve a conflict with them, and I believe that those proceeds
were very significant with respect to a response to that and
has been embraced by the American Medical Association in that
context. Yes.
Senator Udall. Well, I just hope that this committee is
going to continue to look into this and continue to follow up
and to bore in on what has happened in all of our states in
this particular circumstance and find out if in reality,
consumers are going to be made whole. My sense is that probably
if you had a state-by-state basis, that that would not be the
case. But we appreciate having you here today, and I hope we
stay involved in this and make sure that the settlement is
going to make our consumers whole.
Thank you, Chairman Rockefeller.
The Chairman. Count on that.
Senator Warner?
STATEMENT OF HON. MARK WARNER,
U.S. SENATOR FROM VIRGINIA
Senator Warner. Thank you, Mr. Chairman, and again, I
appreciate the chance to hear some of my colleagues since I
missed the setup for this last week.
What I have believed for some time is that--and this case I
think reflects this--as we move toward getting better data and
whether actions from the stimulus program, in terms of health
care IT or the over $1 billion finally in terms of comparative
effectiveness research, we have seen here in this circumstance
that there is data out there, maybe not always used to the
benefit of the consumers.
This is an area that has not been a problem because of lack
of technology. We have had the technology to be able to do this
for more than a decade. I believe it has been an issue of a
lack of will and many all across the health care system may not
want to, one, share this data or, two, be willing to--in
effect, fear that more transparency might curtail people's
ability to practice medicine in an old-fashioned way.
And I guess what I would like to hear from the witnesses
is--I heard Mr. Hemsley say we need national standards. I would
agree with that. I think that is going to have to be defined at
a national basis and not kind of bottom-up-driven. If we wait
for the market to arrive at these national standards in terms
of how we share this data or create these health care IT
standards, then we will be waiting decades more.
I guess I would--in light of your experience and rightfully
or wrongfully being called out for this and a half a billion
dollar settlement, how would you see the ability to create,
one, those national standards?
Two, how would--following up on Senator Klobuchar's
comments about the questions about differential results based
upon geographic disparity in this country, how can we best use
the over $1 billion we have got in comparative effectiveness
research to make sure that we can drive down on that type of
disparity, and not just geographic, but the host of others?
And three, I personally believe we need to look at
disparity in reimbursement rates based upon whether--you know,
if a doc does not want to change and meet these standards or a
provider does not want to meet these national standards, maybe
we reimburse him at 95 cents on the dollar versus if they do
meet these new national standards, $1.03.
There was--I am sure you saw, Mr. Chairman--just this week
an indication out that we have got such a long way to go that
only 9 percent of our hospitals at this point in this country
have any kind of major electronic medical records system,
comprehensive.
So having perhaps not efficiently or effectively or
appropriately used the data that you have been collecting and
being called to task on that, what guidance would you give us,
gentlemen, in terms of, one, how we use this effectiveness
research dollars out of the stimulus; two, how we set these
national standards in terms of health care IT; and three, how
do we make sure that this data, beyond being forced through
adjudication, gets out into the marketplace in a better way?
Mr. Hemsley. I will frame a few themes, and then maybe
Andy, who is more facile with the details.
Our businesses, as we introduced this morning--we serve 70
million Americans. We are connected to about 85 percent of the
care delivery community in this country. And our business is
all about the use of information and technology expertise in
care management, national networks, et cetera to really enhance
care and to make it more affordable and accessible for
consumers. And we believe we do that in the context of our
business, and I think our many decades of success and so forth
offer a model in terms of how information can be used. You are
correct. There is information in the marketplace. We use it
across our business in a standard way.
I think the multiple parties across the health care
community can be brought together to use standards. Evidence-
based medicine is not a new concept. It is well established in
the community. Specialty groups have optimal care protocols, et
cetera. The work done at Dartmouth suggests that adherence to
evidence-based medicine and compensating the care community for
adherence to evidence-based medicine is well established and we
think very positive.
And there are meaningful disparities in the marketplace. I
will just use one example. In the State of New York, a regular
delivery would have billed charges of about $6,000. Those
charges in our experience have been submitted as high as
$40,000. And Medicare pays $1,917. And those are very
significant disparities across the economics of health care,
all in one market, and those need to be dealt with as well.
Senator Warner. Let me just finish. My understanding, at
least, is that while you have some amount of established
protocols within certain specialties, that the evolution of or
the growth of evidence-based medicine across a variety of
specialties and having those protocols adopted as a basis for
fixed reimbursement rates really has not come to pass yet.
Mr. Hemsley. We do have premium networks where we do have
pay-for-performance and have identified those practices that
adhere to evidence-based medicine on a consistent basis and we
do compensate them on a premium for that basis.
Mr. Slavitt. Senator, our Nation's commitment right now,
led by the President and this Congress, to help information
technology has a lot of promise. It is very exciting and the
opportunity to close health disparities across this country if
we put in place, I think, the three components that are in the
stimulus properly. You know, an EMR in every pot or an access
point for every physician so that people can access the best
information that is out there, health information exchanges or
the ability on a national basis to get the information about
any patient to a doctor at the right time, and then as you
referenced, Senator, comparative effectiveness research or a
commitment to pursuing and finding treatments that are most
effective at treating people.
I would offer you that there are three things that I would
encourage us to do as a nation.
One is aggregate data and do everything we can to encourage
people to aggregate data in a way that is safe and secure so it
stays where it needs to stay until called upon. That is
possible, given today's technologies.
Two, use very, very low-cost means of distributing
technology, web-based technology, to doctors that is instantly
updatable so that doctors can become customers. Doctors do not
feel like customers of EMRs, which is why they do not typically
use them. So doctors have to get low-cost EMRs with a lot of
competing vendors that is networked together and can be
instantly updatable.
And then finally, there are about 30 conditions that we
believe evidence-based medicine standards have broad agreement.
Those should be adopted nationally, and then we should be
continuing to research the rest of it. We should have our
scientists, our physicians, and others in this country that can
pursue that knowledge base, update that as we pursue it.
Senator Warner. Well, a piece of that, I believe, as well--
and I guess this goes into how we get this connection between
the various EMRs--you have got to have an interoperability.
Again, I would encourage you, in light of some of the review
and some of the settlements you have entered into recently, the
more you can be advocates across that interoperability and
recognize that if there is not this willingness to meet this
national standard, if there is not this willingness to share
some of your proprietary databases, one, it is going to end up
being forced.
Two, at least as a former Governor, hearing numbers of
hospitals and providers say they understood the importance of
EMR and health care IT, but they had just invested in a legacy
system. And candidly, my sympathy for investments in legacy
systems at some point, if we continue to have that as an
excuse, we are never going to get to a universal national,
truly interoperable system in terms of health care IT. And I
would again encourage you to be more proactive in sharing and
leading this area.
Thank you, Mr. Chairman.
The Chairman. Thank you, Senator Warner.
Mr. Hemsley, could you pull your microphone a little bit
closer? Good. It is important to hear you. Mr. Slavitt is very
audible. You are a little bit less audible.
I am going to continue on this because I love talking about
the future. But I was one who voted to go to war in Iraq. I did
not actually. I voted to give the President authority to go to
the United Nations, but it turned out to be different. I went
on television, because I have been on the Intelligence
Committee for a long, long time and still am, as we did our
weapons of mass destruction studies and discovered that the
whole thing was a fraud and there was no connection between any
weapons that the President was using to speak to the Congress
to influence American public opinion, and that there was no
relationship between Al-Qaeda and Iraq with respect to the 9/11
tragedy.
So what we did in the Intelligence Committee--the natural
instinct is always to look forward to the future. This is
particularly advantageous for you too because it is where you
can be most comfortable. I do not, frankly, know how you sleep
at night based upon all these previous years. But nevertheless,
in order to not repeat what I think you folks have done,
although you are very smooth and your testimony is very glib,
you are contradicting yourselves in many places and that does
not go unnoticed by this committee or its investigators. We
harbor a little bit of attention on the past to make sure that
this never happens again.
Mr. Slavitt, this is rather crudely put, but my great
grandfather would have really taken you in as an immediate
partner in the Standard Oil Company. I mean, he would have
really liked the way you do business or the way that you do
business in hiring him to collect all of this information which
was used generally by the insurance community.
Now, Mr. Slavitt, in your testimony, you say that Ingenix's
role was to gather data about physicians' charges, validate the
information that you collected, and then publish it. Insurance
companies like UnitedHealth, Aetna, CIGNA, et cetera would then
use your products to set their out-of-network reimbursement
rates. That is correct?
Mr. Slavitt. That is correct, Mr. Chairman.
The Chairman. My understanding is that the way Ingenix
obtained physician charge data was through what you called a
voluntary data distribution program. Correct?
Mr. Slavitt. Yes, Mr. Chairman.
The Chairman. Insurers would gather up the charge data and
then send it to Ingenix to be used in your databases. Is that
correct?
Mr. Slavitt. Yes, Mr. Chairman.
The Chairman. And under Ingenix's protocols, insurers were
supposed to send all of their charge data. Correct?
Mr. Slavitt. Yes, Mr. Chairman.
The Chairman. They were even supposed to submit a form--
life is complicated, but they were supposed to submit a form
certifying they were sending all of their data.
Mr. Slavitt. That is correct.
The Chairman. But we know now that they were not sending
all of their data to you. We know that. They would scrub the
data--you have sort of pushed that aside during your testimony
so far this morning--before they sent it to Ingenix. For
example, Aetna would skim off 20 percent of the charges before
they sent the data to your company, your wholly owned company.
And other insurance companies had similar practices. The data
you were getting was biased in favor of the insurance
companies. I would stipulate that. If I were a lawyer, I would
probably say that better.
Mr. Slavitt, does the fact that you were receiving only
partial, prescreened sets of data from your contributors not
raise doubts about the accuracy of your data-based products? I
mean, it does in your statement here. You say that you really
cannot be responsible for it.
Mr. Slavitt. Senator, if we were, indeed, only getting
partial data and, indeed, selective data, that would absolutely
give this committee and it would have given me reason to be
concerned. As a matter of fact, when we receive our data, we
run a number of analyses, in addition to the certification
which requires a signature which states that the data is both
accurate and complete--we run a number of analyses to check and
make sure that that, indeed, has happened.
Routinely--I would estimate five or six times a year--we
find that for whatever reason the data that comes in is not
complete. When we find that to be the case, we do one of three
things. We either call the company and request a resubmission
and get one. If we do not get one satisfactorily, we conduct
our own audit, and if we are still not satisfied, we do not
include the data in the database.
The Chairman. Mr. Slavitt, does the fact--let me go on to
Massachusetts.
There was recently a public trial in Massachusetts. During
this trial, a senior Ingenix executive admitted under oath that
Ingenix did not audit the data they were getting from the
insurance companies. In other words, Ingenix did not go back to
the insurance companies, did not ask them to prove that they
were sending all of their charge data.
Now, auditing is widely accepted. When you own the whole
deal, I would think that you would be interested in doing that
to make sure that you were right. You did not have to worry
about competition, so perhaps you decided you did not need to.
Why did you not perform regular audits to make sure that
the data you were getting was complete and accurate?
Mr. Slavitt. Senator, our procedures had us go through an
audit process with data submitters when the analysis of the
data indicated that there was a reason to do an audit.
The Chairman. What do you mean a reason to do an audit? I
mean, this is something you do automatically. You do not have a
reason to do an audit. I do not have a reason to take an exam
if I am going to college. I have to take it.
Mr. Slavitt. Well, I guess it depends on how we were to
define an audit, and I do not mean that fliply. But if a
submitter of data we knew had, say, 1 million members, we
understand using national averages and using past experience
and using all sorts of methods how many bills that would be
likely to create. So each time that the data was submitted, we
would run tests, and if it appeared to us that we were getting
data which would indicate that there is no possible way that
that represented 1 million members, we had tests, routines that
our statisticians deployed that would indicate that to us, in
which case we would stop the presses and we would pursue that
and we would pursue that vigorously.
The Chairman. Well, why was it that the court found that
the data was incomplete?
Mr. Slavitt. I need to refamiliarize myself with that
Massachusetts case, but I think what I heard you say was that
someone from my company said that we do not routinely perform
audits. Is that what you said?
The Chairman. That is what he said.
Mr. Slavitt. That is what he said?
So in the context of do we perform an annual audit----
The Chairman. The name was Carla Ghee.
Mr. Slavitt. Yes.
We do not perform, for example, an annual audit of our
clients and go through their processes, go through their
systems, and so on and so forth. That could be something that
this new entity, nonprofit, chooses to do, and that might be a
prudent step. I could not argue that the more safeguards and
the more processes and so forth that we go through will be of
benefit.
The Chairman. Good.
At our hearing on Thursday, Dr. Nielsen, the first woman
chairperson of the American Medical Association--naturally, she
is from West Virginia, so she has to be good--was critical of
the fact that Ingenix considered only the medical service
delivered to the patient and did not consider the expertise or
qualifications of the health care provider.
On Thursday, we discussed a hypothetical case, but today I
would like to talk about an actual case. It involves general
practice dentists and periodontists. Periodontists are dentists
with additional specialized training to treat advanced gum
disease. The problem was that both dentists and periodontists
often used the same billing code, in this case, D0150, to bill
an office visit. But it appears that on average periodontists
charge more for their office visits than general dentists and
with reason.
The case I want to talk about involves a consumer named
Jill Faddis who lived at that time near Seattle, Washington. In
2001, her husband was charged $140 for an appointment with a
local periodontist, but the insurance company, in this case
Aetna, told them that the usual and customary rate for that
service was $65. Ms. Faddis took out her Yellow Pages--this is
a woman of force, life force--and called every periodontist in
her area. She found that periodontists billed between $110 and
$160 for the service that her husband had received.
We have a chart. I have it. Do you have it? It is very
interesting. It is extremely interesting. Does the press have
it? OK.
[The information referred to follows:]
But here is what she also discovered. Ingenix automatically
invalidated the high periodontist charges because they were so
much higher than the fees dentists charged for their services.
These were valid charges. They represented the prevailing rate
periodontists charged for their services in this area, but
Ingenix threw them all out of the data set. They threw them
out. The result of this practice was that Ingenix and Aetna
were reimbursing customers half of what the prevailing charge
was in this area for periodontist services.
My staff spoke with Ms. Faddis yesterday. The end of the
story was that she and her husband were stuck paying $75 out of
their pockets they did not owe.
Now, that is not a lot of money, but if you are going
through today's economy or if you come from many places in this
country, that is a tremendous amount of money. And when it is
repeated thousands of times, obviously it gets worse.
So this practice saved the insurance company money, but it
was frustrating and costly for Ms. Faddis. She was left feeling
that either her insurance company or her periodontist had
ripped her off. That is what she told us.
So, Mr. Slavitt, can you explain why Ingenix scrubbed the
valid medical charges from your database, number one?
Mr. Hemsley, can you understand why these kinds of
practices make consumers and doctors so angry?
Mr. Slavitt. So, thank you for sharing that. I think I
followed it. I may need to--at some point want to get more
familiar with that situation. But let me speak to a couple of
the points that I think you are getting at here, which are
important questions.
One of those questions is why does the database use the
same code for two different specialists who might use the same
service or, in fact, that can be applied to a physician
assistant and a physician doing the same service. That is,
indeed, how it works. This is the same system that CMS uses.
The system was designed by the AMA. The AMA designed a
system that is based on the service rendered, not where it is
performed or who performed it. It is called CPT, as you well
know. It is a very detailed system. So it incorporates--the
reason there are so many codes is because it allows the
physician to code it based upon the level and intensity of the
resources that they apply.
What it allows physicians to do, because I think this ends
up working both ways, is as physicians have gotten busier and
busier and busier and have less and less time to see patients,
they can send a physician assistant, who is very qualified for
a lot of tasks, to see a patient for 15 minutes, code the
visit, and not degrade what they receive.
The Chairman. Now, you are not talking about the example
that I used. You are making up your own example. Right?
Mr. Slavitt. Yes. Two points I am trying to make. One is
that we use the same system that everybody uses to reimburse.
Otherwise, it would be apples to oranges. So we use a system
that was designed by the AMA itself. So, therefore, a
periodontist and a dentist who performed the same service, if
they coded it the same way, would, indeed, come the same way.
We did not make that decision. We are following that accepted
guideline that----
The Chairman. So, in other words, if the AMA did it--and I
have not been a great fan of the AMA in the past, nor have they
been of me. I am becoming warmer now that I see a brighter
future for them. And she testified very strongly against both
of you and what you are doing. Very strongly.
Because the AMA was doing it, why does it make it the right
thing for you to do? Do you not know it is wrong?
Mr. Slavitt. Well, what I am trying to explain is why we
made the decision that we made. I believe----
The Chairman. No. I understand you are saying that.
Mr. Slavitt. I believe it was the right decision. I believe
other people----
The Chairman. You believe AMA was right.
Mr. Slavitt. I believe that adding yet--with 8,000 codes
and 500 geographies, adding a third dimension of complexity to
the data would get the sample sizes so small as to be a lot
less meaningful. That is what I believe. But a reasonable
person could conclude something different, and I respect that.
I understand that.
But I do not want that to be tied with an intent to
perpetrate some sort of fraud because I think it can happen as
often on the lower side as on the higher side. It is an attempt
to use the data in the way that it is commonly used in the
industry so that it can serve a function for the industry.
The Chairman. Well, you are sort of emphasizing, in your
previous testimony today, that you do four times as much on the
cutting off of the low side than the high side. Boy, you are
going to have to really prove that to me. And I would like to
get a whole bunch of paperwork from you showing that.
Mr. Slavitt. OK.
The Chairman. All right. Mr. Hemsley. It is hard to say. We
are all so accustomed to Hemsley.
In our hearing on Thursday, we had a witness from the New
York Attorney General's Office. Her name was Linda Lacewell.
You must be familiar with her. One of the things we discussed
with her was the results of her investigation into
reimbursements for rates out-of-network for out-of-network
doctor visits in Erie County, New York.
I would like to show you another table that Ms. Lacewell
and I discussed at the hearing on Thursday. Take a moment to
look at it. You will understand it right away.
[The information referred to follows:]
Payments for Doctor Visits
Erie County, NY (2007)
------------------------------------------------------------------------
Ingenix ``usual
Doctor and customary'' NYAG Estimate of
Office Visit Reimbursement Prevailing Cost Difference (%)
Codes Rate
------------------------------------------------------------------------
99211 $36-$37 $45 18-20%
99212 $53-$61 $68 10-22%
99213 $70-$78 $84 7-17%
99214 $105-$122 $130 6-19%
99215 $145-$182 $200 9-28%
99245 $276-$340 $373 9-26%
------------------------------------------------------------------------
Source: State of New York, Office of the Attorney General, Health Care
Report: The Consumer Reimbursement System is Code Blue (Jan. 13 2009),
20.
The first column contains the various billing codes that
cover doctor office visits, and the second column presents the
range of usual and customary reimbursements, as calculated by
Ingenix.
Now, let me explain the third and fourth columns. Ms.
Lacewell and her staff went back and independently collected
doctor visit claims data for Erie County. They just went to
work. They have a large staff. It was New York. They could do
it. Most states cannot. Our state could not. My state could
not. They hired a health care economist to analyze the data and
develop rates that could be directly compared to the Ingenix
data.
The results of this analysis are presented in the third and
the fourth columns. What they show is that the insurance
industry reimbursement rates, as calculated by Ingenix, were
anywhere from 10 to 25 percent lower than what doctors were
actually charging their patients in this area. This is solid
information. You all quickly settled for $350 million. There
must have been something there.
Mr. Slavitt. We were not shown this report prior to
settlement.
The Chairman. Well, it does make any difference to me
whether you were shown it. They had done their homework, and if
you did not see them, then I am so sorry. But you sure settled.
So here is what this table means for real doctors and
consumers in Erie County. If a doctor in Buffalo is charging
$84 for an office visit but the insurance company is only
paying $74 for the visit, consumers get stuck with a $10
balance. Now, they should not be paying that. You should or he
should. Now, it is not a lot of money, but it is not the amount
of money that counts here because it is just added up and added
up and added up because people have to keep going to doctors.
It sort of takes me back to this earlier statement that you
made that you do not stand--it is for informational purposes, a
database ``for informational purposes only, and Ingenix
disclaims any endorsement, approval, or recommendation.'' That
is an extraordinary thing to say for a group that has the whole
business. It is an extraordinary thing to say, but you say it.
You do not stand by what you produce.
So, Mr. Slavitt and Mr. Hemsley, do you dispute the New
York Attorney General's findings that insurance companies were
under-reimbursing consumers for doctor visits in Erie County,
New York? Do you dispute that?
Mr. Hemsley. We do not agree with the findings----
The Chairman. You do dispute it.
Mr. Hemsley. We do. If you take a look at what they
reviewed, they reviewed five counties. They reviewed six codes.
They reviewed a million claims over 4 years. That compares to--
our comparable database is updated four times a year. It has 18
million claims, 8,000 codes. On average, that database would
suggest reimbursements that would be two to four times Medicare
and one and a half times normal network charges. So we do not
agree with the conclusions of the Code Blue Report.
The Chairman. OK. I think I need to explain to you why
practices like this make people so angry. Mr. Hemsley,
according to Forbes magazine, you are one of the 400 top paid
executives in the United States. Your company, UnitedHealth
Group, reported $3 billion in profits last year. This is not a
good time to be talking about this. I admit that. $10 per
doctor visit probably does not cause you to lose a lot of
sleep, but it is causing a lot of people, 100 million people
around the country, to lose a lot of sleep and a lot of money
and a lot of opportunities for their families.
I have no doubt that your company would have remained
profitable if you had been doing the proper reimbursement, as
we on this committee understand it, as the New York Attorney
General understands it, as you evidently, to some degree,
understood it when you took the $350 million settlement because
I suspect there was an alternative that was standing in the
shadows that you did not want.
Why did you allow this to happen?
Mr. Hemsley. Mr. Chairman, we operate the database in a
consistent fashion to high standards of performance. The
database is used for reference purposes only, and we do not
believe that there are--we stand behind the database. We do not
believe----
The Chairman. You do not stand behind the database.
Mr. Hemsley. We do stand behind it.
The Chairman. He does not. Mr. Slavitt does not.
Mr. Hemsley. The database, in terms of the integrity of the
collection of data and the presentation of that data, as it is
intended to be presented--we believe that database is valid.
The Chairman. Evidently.
All right. I am going to make some closing statements. I
think this is profoundly troubling testimony from both of you.
So let me say this.
I would like to review what we know and what we do not know
about the insurance industry's--how they reimburse consumers
for out-of-network services.
First of all, we know that for a long time alert doctors
and consumers knew that something was wrong about the way the
industry was calculating usual and customary. But they did not
have the resources to find out what was really going on. Ms.
Lacewell from the New York Attorney General's Office described
it last week and said that the insurance industry's practices
were hidden in a black box. It took the combined efforts of the
AMA--this is evidently a new AMA than the one that you said
this is what we should be doing before--and it took the
Attorney General's Office to open this box. What they found was
what they had suspected all along, that consumers were being
reimbursed at rates that were significantly below the
prevailing rates. You declined to acknowledge that, but
frankly, that does not bother me because I am satisfied that it
is true.
Armed with this information, the New York Attorney General
was able to force insurance companies operating in New York to
change their practices. You had not done so before. You had
been in business for a long time before. You had complete
control in your case of what was available for setting the
payment.
Because many of the country's largest insurance companies,
including UnitedHealthcare, CIGNA, Aetna, and WellPoint, do
business in New York, Attorney General Cuomo's work had a
national scope. That has been discussed.
But there are still a number of questions that have not
been answered. For example, there are hundreds of thousands of
Federal workers who have health insurance coverage with an out-
of-network option. I will be sending a letter today to the
Inspector General of the Office of Personnel Management asking
him to investigate how many Federal workers' out-of-network
reimbursements may have been reduced by the use of Ingenix's
databases.
Another thing we do not know is how widely the Ingenix
databases were used by insurance companies that do not operate
in New York. According to our review, Attorney General Cuomo's
settlements have forced 7 out of the top 25 health insurance
companies to change their practices. It is a good beginning,
but it is not an ending.
Over the next few days, this committee will be sending
letters to the rest of the top 25 companies asking them if they
use the Ingenix data to determine reimbursement rates. These
letters will also ask these companies if they intend to change
their practices in light of the Attorney General's
investigation.
We are continuing this investigation because the American
consumers deserve to know what they are getting when they pay
their health insurance premiums.
This committee has to be and will be henceforth all about
accountability. Whether it is NASA, whether it is NOAA, whether
it is aviation, whether it is transportation, we are going to
be all about accountability.
And just like I made that vote, as soon as I found out as a
member of the Intelligence Committee that everything the
President said was false, every single thing he said in his
March 23, or whatever it was, speech back in 2003 which sent us
to war and got the Nation behind him--when I found out, because
intelligence is not owned by the intelligence committees--it is
owned by the Government and made available as the Government
decides to make it available, a situation not unlike us here.
But as soon as I found out that I had been wrong, I happened to
be going on Meet the Press, and I said I was wrong.
Now, a lot of people refused to say they were wrong. Either
they did not want to. They felt that somehow that would show
that they were flip-floppers. I would just say they were
ignoring reality.
Now, I am going to close this hearing, and I need to tell
you that I am very unhappy and we are going to continue this.
But I also need to tell you that I am very proud of both of you
for coming down here and taking what I think is well-deserved
abuse because you have done it smoothly. Your testimony was
remarkably smooth, talking always about the future. It was
interesting to me that some of our members talked about the
future because they had missed the first meeting. So it is
always easier to talk about a better future. But I am one who
believes that unless you do the accountability business firmly,
you do not really know what the future might be because the
future describes itself. So I thank you both and I really do.
This hearing is adjourned.
[Whereupon, at 12:13 p.m., the hearing was adjourned.]
A P P E N D I X
Response to Written Question Submitted by Hon. Mark Pryor to
Stephen J. Hemsley
Question. I understand that United Healthcare and/or companies
owned by UnitedHealth Group provide health plans through both the
Medicare Advantage Program and the Federal Employees Health Benefits
Program (FEHBP). Can you please provide the committee with information
concerning each health plan offered by United Healthcare or a company
owned by UnitedHealth Group in 2008 through Medicare Advantage or
FEHBP, which used data from Ingenix to determine reimbursements for
medical care provided by out-of-network providers? For each plan
specify how out-of-network reimbursements were calculated. Please also
include the same relevant information for any plans offered under the
Federal Employee Dental and Vision Benefits Enhancement Act.
I would also appreciate your providing the committee with
information concerning how these plans may have changed the calculation
for out-of-network reimbursements following the settlement that was
reached with the New York Attorney General.
Answer. UnitedHealth Group companies use the lngenix data bases to
make reimbursement decisions for only a very small percentage of claims
administered across our business. The vast majority of claims we
receive are from care providers and facilities which are in our
networks. For out of network claims, we use several methodologies in
addition to a ``reasonable and customary'' standard to determine
reimbursement amounts. Less than 4 percent of claims we receive are
processed using the Ingenix data bases.
Our 2008 experience in the Medicare Advantage Program, the Federal
Employee Dental and Vision Benefits Enhancement Act, and the Federal
Employees Health Benefits Program (FEHBP) are consistent with the
overall experience described above.
Medicare Advantage Programs
UnitedHealth Group companies served approximately 1.7 million
members in Medicare Advantage programs in 2008. None of these members
had a benefit structure which used data from the Ingenix PHCS or MDR
data bases in connection with out-of-network reimbursements. These
programs use methodologies and rates published by the Centers for
Medicare and Medicaid Services (CMS) for reimbursement of out-of-
network services.
Federal Employee Dental and Vision Benefits Enhancement Act
UnitedHealth Group companies also provided vision benefits to
around 200,000 members in 2008 through plans offered under the Federal
Employee Dental and Vision Benefits Enhancement Act. None of these
members had a benefit structure which used data from the lngenix PHCS
or MDR data bases in connection with out-of-network reimbursements. The
vision plans reimburse out-of-network services at a fixed fee that is
not based on PHCS or MDR.
FEHBP Plans
In 2008, UnitedHealth Group companies provided medical benefit
coverage to approximately 300,000 members through the Federal Employees
Health Benefits Program. None of these members had a benefit structure
which used data from the lngenix PHCS or MDR data bases in connection
with out-of-network reimbursements.
The majority of these members were enrolled in health maintenance
organization (HMO) offerings which provide no coverage for non-
emergency out-of-network services.
Approximately 2 percent of United FEHBP members were enrolled in
preferred provider organization (PPO) offerings in 2008. These
offerings did provide coverage for out-of-network services; out-of-
network allowed amounts for professional medical services were
calculated based on a percentage above the Medicare fee schedule, not
the Ingenix data bases.
UnitedHealth Group companies also provided vision benefit coverage
to approximately 150,000 members through FEHBP plans. None of these
members had a benefit structure which used data from the lngenix PHCS
or MDR data bases in connection with out-of-network reimbursements. The
vision plans reimburse out-of-network services at a flat fee that is
not based on PHCS or MDR.
United Health Group companies provided dental benefit coverage to
approximately 200,000 members through FEHBP plans. Some of these
members had a benefit structure which used data from the Ingenix PHCS
database in connection with out-of-network reimbursements. These dental
plans reference the 85th percentile of the PHCS database in determining
allowed amounts.
Since our agreement with the New York Attorney General,
UnitedHealth Group companies have been determining ``reasonable and
customary'' reimbursements in the out-of-network setting in accordance
with that agreement. Once the not-for-profit entity is named by the New
York Attorney General and issues a new database for use in ``reasonable
and customary'' determinations, UnitedHealth Group companies will apply
that database in all settings to which it is applicable and which
require a ``reasonable and customary'' determination.
Members of United medical plans--including FEHBP enrollees--whose
dental claims were administered under a reasonable and customary
standard using the lngenix data bases are covered by the class action
settlement discussed at the hearing. The settlement is supported by the
American Medical Association and state medical societies, among others.
Under the settlement, which is subject to court approval, eligible
members will receive notice from a court-approved settlement
administrator which will contain instructions about how to submit a
claim for a portion of the settlement funds.
Thank you for the opportunity to provide this information.