Cuomo sets healthcare reimbursement reform

New York Attorney General Andrew Cuomo during a press conference in New York, June 5, 2008.

NEW YORK (Reuters) - New York Attorney General Andrew Cuomo announced on Tuesday the creation of a nationwide database to help set health care reimbursement rates, benefiting patients who use doctors outside their insurers' networks and capping an industrywide probe.

A new nonprofit, Fair Health Inc, will develop a database for consumer reimbursement, as well as a website where consumers will be able to compare prices before they choose doctors.

Calling prior reimbursement practices an "injustice" and "fraud," Cuomo said at a Syracuse, New York, press conference that Fair Health will "ensure transparency, accountability and fairness" for Americans who use out-of-network doctors.

The attorney general said the changes will stop insurers from "underreimbursing consumers for the very product they pay for," a practice he said has cost patients hundreds of millions of dollars.

About 70 percent of insured working families have out-of-network plans that let them choose their own doctors, a system that affects more than 110 million people, Cuomo said.

Cuomo obtained nearly $100 million from insurers such as Aetna Inc, UnitedHealth Group Inc and WellPoint Inc to fund Fair Health.

He said Fair Health will be fully implemented within one year, and developed by five upstate New York universities.

A probe by Cuomo's office had found that UnitedHealth's Ingenix unit operated a "defective" database that major insurers used to determine the "usual and customary rates" for reimbursing out-of-network medical expenses.

Insurers often promise to cover up to 80 percent of customary expenses when a patient goes out of network.

But should reimbursement rates be set at artificially low levels, patients would be forced to pay more money or doctors would be forced to accept less for their services. Insurers, on the other hand, would benefit from reduced costs.

Calling Ingenix a "black box," Cuomo said it created a conflict of interest because insurers were both providing and using the same data in calculating reimbursement rates.

The American Medical Association had criticized the old reimbursement system for shortchanging doctors and patients.

William Dolan, an AMA board member, in a statement said the changes should allow doctors and patients to "look forward to getting the straight deal."

Without admitting wrongdoing, UnitedHealth in January agreed to pay $350 million to settle class-action lawsuits brought on behalf of the AMA, doctors, patients and others over reimbursement rates.

Reed Tuckson, chief medical officer of Minnetonka, Minnesota-based UnitedHealth, said the company will work with Fair Health to launch the database "as soon as practicable."

Cuomo's announcement was monitored by webcast.

(Reporting by Jonathan Stempel; Additional reporting by Lewis Krauskopf, editing by Gerald E. McCormick)