Recovery centers sue insurance company

Metro Creative

PRESCOTT – Three local recovery centers and another from Scottsdale are suing the Health Net insurance company for actions that allegedly have had “a severe and adverse effect” on the treatment centers, as well as the clients.

The legal complaint by Chapter 5 Counseling Center LLC, Prescott House Inc., Desert Cove Recovery Center LLC, and Compass Recovery Center LLC was filed in Maricopa County Superior Court July 22.

The complaint deals with many of the accusations that an insurance-company investigator made this week to the Prescott Mayor’s Ad Hoc Committee on Structured Sober Living Homes. At that Aug. 10 meeting, Centene Corp. lead investigator Dan Kreitman maintained that many local group homes have been engaging in fraudulent practices, which, in turn, led the insurance company to change its payment structure.

The lawsuit notes that Health Net (the insurance provider recently acquired by Centene Corp.) sold health insurance policies to Arizona customers and accepted premiums in exchange. But when customers then sought medically necessary treatment, the lawsuit contends, “Health Net subsequently refused to reimburse or significantly underpaid plaintiffs for the services that were rendered to patients as required by the policies of insurance.”

An Aug. 12 news release from Phoenix law firm Gallagher & Kennedy, which is representing the treatment centers, pointed out that “a large number of behavioral health centers in Arizona and California have filed separate lawsuits” against Health Net for “unlawfully refusing to pay millions of dollars in claims to treatment centers ...”

The law firm maintains that Health Net deliberately stopped paying “as part of a plan to save money at the expense of the people who bought Health Net policies, all while seeking to consummate its sale to a larger insurance holding company (Centene).”

The news release adds that the lawsuit was filed “only after the centers, Northern Arizona Recovery Association and Addiction Treatment Advisory Coalition, and counsel, aggressively pursued regulatory, political, and non-litigation options in an attempt to resolve the disputes with Health Net.”

The treatment centers are asking for award damages, “in an amount to be proven at trial,” as well as punitive damages, attorneys’ fees, and pre-judgment interest.

Among other things, the 41-page complaint claims that Health Net started an investigation in early January 2016, which included virtually every drug and alcohol treatment center in Southern California and Arizona that had submitted claims to Health Net.

As a part of its audit, Health Net reportedly stopped paying its claims to “all drug and alcohol treatment centers for any treatment rendered subsequent to approximately Jan. 15, 2016.”

Indeed, in April 2016, several Prescott group home operators told the Daily Courier that all payments from Health Net had been suspended industry-wide, causing problems for many of the area’s reputable treatment centers.

The lawsuit includes copies of the Health Net form letters that went out to local group homes. The letter lists several potential concerns, including: That eligibility under the applicable insurance policies “is limited to individuals who continually reside in our defined service area.”

The letter adds that Health Net’s policy required the insured to pay their own deductibles, copayments or coinsurance, and that a waiver of those payments by the center on behalf of the patient “could raise questions as regards determination of benefits under the policy or as regards false and/or fraudulent claims.”

The letter also states that Health Net needed to verify that all services and tests provided were “medically necessary.”

The lawsuit claims that although Health Net appears to have divided the treatment centers into two categories – those that were “boldly assumed (to be involved in) wrongdoing,” and those that were being asked to verify that they had not been involved in wrongdoing – all of the centers were treated the same.

“That is – no claims were paid for drug and alcohol treatment for Arizona policyholders for approximately the last two months of 2015 and the first five months of 2016,” the complaint states.

Kreitman said Wednesday night that Centene had since resumed payment, under a new “Medicare-based payment structure.”

The lawsuit states: “On or about May 6, 2016, Health Net began slowly releasing the long-overdue payments …” but “Unfortunately, virtually every payment made to drug and alcohol treatment centers” after the audit were incorrect.

It also contends that Health Net is “unilaterally and unlawfully recoding treatment by drug and alcohol treatment centers where the submitted claims/codes do not have a corresponding Medicare fee schedule listing.”

Other claims of the lawsuit involve: Alleged violation of HIPAA (Health Insurance Portability and Accountability Act) privacy and security; inaccurate regulatory filings; and issues with the Mental Health Parity and Equity Addiction Act.

The lawsuit includes a number of counts, including: Breach of contract; breach of implied covenant of good faith; interference with contract or business expectancy; consumer fraud; promissory and equitable estoppel; bad faith; and civil conspiracy.

A representative from Centene’s media division did not immediately respond to a Daily Courier request for comment Friday afternoon, and the company has yet to file an official response to the lawsuit.

Kreitman declined to comment further Friday afternoon, although he earlier said Centene planned to defend itself against the litigation.