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In a case that could send a warning to health insurers, Nashville, Tenn.-based Hospital Corporation of America has won an $8.8 million arbitration decision against Humana Medical Plan Inc. of Florida for late payment or nonpayment on 3,300 patient accounts at 16 hospitals in Florida. If approved in Florida’s Broward Circuit Court, the award would be one of the largest ever obtained by a hospital operator against a managed health care insurer for payment lapses, according to health care experts. It represents 20 percent of Humana’s net earnings in the third quarter. Humana, a Fortune 500 company based in Louisville, Ky., is one of the nation’s largest publicly traded health insurers, with 6.4 million subscribers in 18 states. “This ruling is significant in principle more than in dollars,” said Ken Abramowitz, a health care analyst with the Carlyle Group in New York City. “Nine million dollars is not a lot to a large corporation, but the message this sends to managed care companies is that they have a responsibility to pay providers within a reasonable period of time and make sure claims systems are capable of adjudicating a claim fairly.” HCA, the giant, publicly traded hospital company formerly known as Columbia HCA, filed the arbitration ruling in Broward Circuit Court on Nov. 19, seeking a final judgment. The HCA hospitals involved included Cedars Medical Center in Miami, Plantation General Hospital, Aventura Hospital and Medical Center and Columbia Hospital in West Palm Beach, Fla. HCA owns more than 40 hospitals in Florida and 200 nationwide. Since managed care insurers became dominant in health insurance in the 1990s, hospitals and other medical providers repeatedly have accused the insurers of improperly delaying payments for patient services, underpaying, or not paying at all. Critics have charged that insurers secretly have adopted a policy of paying late in order to improve their own finances. But hospitals — fearful of losing big managed care contracts — have been reluctant to take legal action. Ed Pozzuoli, a partner at Tripp Scott in Fort Lauderdale, Fla., who represented HCA, said this was one of the first lawsuits filed by a hospital company against an insurer on the issue of nonpayment and delayed payment. “HCA was willing to go the distance in order to collect what it thought it was owed in the contract,” he said. “Previously, the balance of power was with the [health insurers]. It wasn’t in the culture of hospitals to sue.” Gabriel Imperato, a health care attorney and managing partner at Broad and Cassel’s Fort Lauderdale office who was not involved in the case, agreed. “What’s significant is they got the HMO to pay,” he said. “You didn’t see litigation like this five or 10 years ago.” The ruling caps a three-year dispute between the parties. In 1999, HCA initiated the arbitration, the stipulated process for disputes under the terms of its contract with Humana. The hospital company alleged that Humana paid hospital bills for patients in Humana’s HMO, preferred provider, Medicaid, and Medicare health plans as much as one year late. HCA hospitals sometimes had to bill Humana three or four times in order to receive reimbursement, Pozzuoli said. The contracts in question were between 1996 and 1999. HCA originally submitted an arbitration claim for $14 million, accusing Humana of “breach of contract, failure to pay, improper takebacks, insufficient payments and application of incorrect rates.” Humana filed a counterclaim, alleging it actually overpaid the hospitals, said Pozzuoli. The counterclaim was dismissed by the three-member American Arbitration Association panel as part of a settlement between the two parties. During the lengthy pretrial discovery process, 20,000 pages of exhibits were produced. On Oct. 29, the arbitration panel ruled in favor of HCA, requiring Humana to pay the hospital company $8.84 million, plus $95,213 in costs. Humana was required to pay the award within 30 days. But HCA, anticipating that the insurer would not pay, filed a petition last week in Broward Circuit Court for confirmation of the arbitration award and entry of final judgment. Humana has an opportunity to respond to the judgment before a circuit court judge enters a final order, though Pozzuoli said that arbitration awards usually are upheld. “There’s a very narrow scope” in which a judge can overturn such a ruling, he said. Humana spokeswoman Pam Gadinsky said the questionable contracts were actually entered into by PCA, Physician Corporation of America, which was acquired by Humana in 1997. “Humana inherited these contracts when it acquired PCA,” she said. Analyst Abramowitz said it’s easily conceivable that Humana inherited the headaches from PCA. “Companies that sell out are usually having financial trouble,” he said. “You can do your due diligence on a company and some things don’t become obvious until you’ve acquired it.” Both Humana and HCA expressed confidence that they will have better relations in the future.

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