Faulty health care database costs consumers billions

Congressional investigators say a Minnesota company sold health insurers faulty data, causing patients around the nation to pay more than they owed for certain health care costs.

The data was maintained and sold by Ingenix, a subsidiary of Minnetonka-based UnitedHealth Group. The congressional report says the company's practices led consumers to spend billions of dollars in overpayments.

The Ingenix-owned databases are built on information gathered from claims submitted to health insurers around the country. Ingenix crunched the data to determine the reasonable and customary fees in an area, and insurers then used the numbers to set their payments for out-of-network care.

An investigation by the New York Attorney General's office found that the data was scrubbed, resulting in low-ball estimates, and insurers paid about 30 percent less than they should have in that state.

The Senate Commerce committee expanded the scope of that investigation, and found that a majority of health insurance companies used the faulty databases to set reimbursement rates.

According to the Commerce committee report, Ingenix eliminated the highest tier of charges to artificially depress rates. The committee also found that other insurers provided faulty data to Ingenix, some that had been scrubbed the same way.

At a hearing Wednesday, committee chair Sen. John Rockefeller, D-W.Va. called the practice "deceptive."

Ingenix spokesman Matthew Klein disputed the report, saying the company stands by its data.

"There have been many questions about that methodology," he said. "We think it's a sound methodology, and it's absolutely critical to have that kind of a methodology in place when you are dealing with large data sets."

Klein says the company eliminates both low and high outliers to ensure accuracy. He says there is little in the report that wasn't already widely known.

Ingenix has about 1,200 employees in Minnesota. But as part of a $350 million settlement with New York officials, the company agreed to close the database and help fund a new one to be operated by an independent nonprofit.

UnitedHealth has admitted no wrongdoing. At a hearing in March, Ingenix CEO Andy Slavitt said the company uses a number of measures to ensure the accuracy of its data.

"We, when we receive our data, 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's indeed happened," he said.

However, the Commerce committee report says Slavitt's statement is inconsistent with earlier court testimony, when an Ingenix executive admitted under oath that the company did not actually audit its data. Wednesday's report says Ingenix could easily have caught the bad data it received, if it had simply checked what came in.

But University of Minnesota professor Steve Parente says the real problem is that the way health care is priced doesn't work very well.

"The whole system needs much greater transparency," he said.

Parente is a health economist who's worked in the health care industry for decades, including for one of the insurance companies named in the report. He says there are no hard and fast rules for setting prices.

"Physicians and insurers are free to negotiate what are set fees between them as contracts. It doesn't have a very hard regulation that says this is the fee, like Medicare does," he says."There aren't any negotiations after that."

Parente says that leaves plenty of room for manipulation by insurers and providers. He says an alternative would be to set fees at the federal level.

The question of who pays, and how much, will likely be addressed as Congress and the administration begin to tackle health care reform this year.