Texas Files Suit Against PacifiCare for ‘Tens of Millions’ in Late Provider Payments
The state of Texas filed suit against PacifiCare of Texas yesterday, alleging that the insurer owes "tens of millions" in unpaid claims to providers, the Austin-American Statesman reports. Texas Attorney General John Cornyn said that PacifiCare's failure to pay claims on time and inadequate monitoring of its provider networks led three of the groups to declare bankruptcy recently (Schatz, Austin American-Statesman, 2/12). "When doctors and hospitals don't get paid as they should -- or when they should -- and as a result terminate their relationship with a health plan, patients suffer the consequences," he said (White, Los Angeles Times, 2/12). The lawsuit marks the latest step Texas has taken to crack down on late payments by nine state managed care organizations. Cornyn said that eight have cooperated with his investigation of MCOs' payment practices, but PacifiCare, based in Santa Ana, Calif., has refused to do so. "PacifiCare has repeatedly promised to clean up its act, but it has not done so. We're now asking the court to order PacifiCare to do business the way it should under Texas law and to make it pay for its violations," Cornyn said (Villafranca/Kreimer, Houston Chronicle, 2/11). The Los Angeles Times reports that the lawsuit illustrates how states have "beefed up their once toothless" prompt pay laws (Los Angeles Times, 2/12).
PacifiCare disputed Cornyn's allegations, saying in a statement that it "has acted responsibly and promptly in this matter." The statement added, "At this time, [PacifiCare] is paying claims on an average of five days and is in compliance with [Texas] regulations regarding complaint resolution" (Houston Chronicle, 2/12). In October --- six months after it was released from oversight by the state Department of Insurance -- PacifiCare filed its own suit against Texas, contesting the state's right to investigate the company (Los Angeles Times, 2/12). Also yesterday, the California-based Tenet Health System announced that it has sued PacifiCare, seeking more than $18 million for alleged unpaid claims (Houston Chronicle, 2/12). The Times reports that the lawsuits represent a "setback" for PacifiCare's turnaround efforts. The company, which has seen its stock drop 46% in the past 12 months, announced 3,000 layoffs last month. According to Greg Crawford, an analyst with Fox Pitt Kelton, the Texas suit illustrates the difficult that health plans have had in shifting from capitation-based relationships with their provider networks to one of shared risk, particularly when provider groups fail. "When those providers go bankrupt, there are lots of responsibilities that get transferred back to the health plan, like claims adjudication, and the health plan may not be prepared for that," he said (Los Angeles Times, 2/12).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.