Fla. doctor beats insurer -- in small claims court

A column analyzing the impact of recent court decisions on physicians

By — Posted March 1, 2010.

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Physicians are not known for taking health insurer payment abuses lying down, having marched big carriers into state and federal courtrooms in a series of successful class-action lawsuits over the years.

But one Florida physician caught an insurance giant from an angle it was not expecting when he launched an attack in small claims court. The dermatologist's strategy: to win back the roughly $130,000 he contends Humana Inc. owed his practice in unpaid bills since at least 2007, even if it took filing a few small claims at a time.

The strategy worked. The doctor has recouped nearly all of the money."If doctors have a legitimate right to be paid based on services they provided, insurance companies should pay. And if they think they can get away with nonpayment, [doctors] should be aggressive in whatever manner it takes," said Steven Rosenberg, MD, president of Palm Beach Dermatology Inc. in West Palm Beach.

Letters to Humana seeking to resolve the claims on behalf of himself and other doctors in his practice brought no recourse. After his lawyer wrote to the insurer, Dr. Rosenberg said he got a promise from Humana that it would expedite the claims.

"But here we were a year and a half later, and we were still doing this process," he said. "We basically kept getting the runaround, and we got frustrated that Humana was not responding to all our efforts."

He explored hiring an attorney to take his case to civil court. But the 40% contingency fee that would have come from whatever judgment the practice collected was not appealing.

At that point, Dr. Rosenberg put his medical research skills to work. He discovered that for the same $350 he paid the attorney to write to Humana he could file a petition against the company in Palm Beach County small claims court, where parties can represent themselves.

Because damages could not exceed $5,000 per claim, Dr. Rosenberg bundled a few bills together worth that amount, filled out a simple claim form, attached a check and, in the fall of 2009, sued the insurer in small claims court for violating Florida's prompt-payment law.

"Palm Beach Dermatology Inc. has worked for the last 29 months to remedy the issue via Humana's claims appeal/special projects process and through their appointed attorney with no resolution," the one-page complaint stated.

Legal maneuvering

Dr. Rosenberg was met in court by an attorney Humana sent to defend the case. But he was familiar with his legal rights, having been a past president of the Florida Society of Dermatology & Dermatologic Surgery and a former state medical board member, so he successfully rebuffed some of the lawyer's legal maneuvers.

When the attorney tried to argue that the dermatology practice did not obtain the requisite prior authorization before treating patients, the doctor countered that state law gave patients direct access to dermatologists without a referral. And to the insurer's contention that Palm Beach Dermatology failed to first collect payment from patients before seeking reimbursement from the insurer, Dr. Rosenberg fired back that state law prohibited such practices.

Then came a settlement offer. Humana agreed to pay the first set of claims and the doctor's filing fees, totaling $5,340, according to a court judgment dated Oct. 6, 2009. Dr. Rosenberg said the case was heard within a month of filing the lawsuit and resolved the same day.

But he warned Humana's lawyer that the case was only the beginning. "I told him this was the first of 25 claims we were going to be filing."

He took the insurer to court a second time and won again in January. Shortly after he filed the second case, Dr. Rosenberg said the practice began receiving checks in the mail from Humana totaling $90,000.

The insurer sent two representatives to the office to go through the remaining outstanding claims. Since then, Humana has restituted nearly all of the $130,000 Palm Beach Dermatology was owed, Dr. Rosenberg said. "We didn't really know if it was going to work but figured it was worth a try. Obviously, Humana got the message this was going to cost them."

Humana spokesman Mitchell Lubitz said the issues regarding Palm Beach Dermatology were unique.

"Humana has been working diligently to correct any payment issues with this provider, and we believe that the steps we've taken have corrected, or will soon correct, these payment issues," he said in a statement. "We don't expect this lawsuit to lead to any additional lawsuits."

Lubitz said the insurer works to ensure claims are processed promptly and accurately, and that physicians are paid correctly and on time. He pointed to a 2009 report by athenahealth, a company that helps medical practices manage claims processing, which ranked Humana first among managed care firms in performing claims processing procedures, including paying doctors speedily.

Taking action

Given the minimal time and expense involved, small claims court may be worthwhile, some legal experts said. But they warn against potential pitfalls.

For example, insurers could argue to have groups of smaller, similar claims consolidated and moved to civil court. Once there, cases can take anywhere from six months to a year to get to trial, and attorney's fees can mount up.

In California, parties have an automatic right to appeal a judgment from small claims court to the next level in civil court, said John A. Meyers, co-chair of the health care law department at Ervin Cohen & Jessup LLP in Los Angeles. "Although, from the carrier's point of view, it may be an expensive proposition to appeal all of these issues."

Any arbitration clauses included in insurance contracts that prohibit doctors from contesting claims in court are likely to apply to small claims proceedings, Meyers added.

States vary in maximum damages allowed in small claims. Depending on those limits, doctors may not be able to recoup much without having to file multiple claims, Meyers said.

Physicians also must be careful how they combine patient claims so they don't lose the ability to bring future small claims actions. For example, he suggested consolidating claims by patient or type of treatment.

That also means physicians must do their homework to be familiar with the individual claims they are contesting and why they were denied, experts said. But if doctors can successfully bring a few small claims and win, it may open the door to other legal recourse.

"If you can use this as a way not so much to get the money, but to set a predicate pattern, then you might be able to go after [insurers] at a different level and bring it to the attention of regulators to say, 'This is an unfair practice,' " Meyers said.

Dr. Rosenberg said Palm Beach Dermatology had enough at stake to make the legal effort worthwhile. "If these laws exist, we should be able to enforce them, and most doctors are either unaware of the legal avenues they have or they are afraid to invest the time and effort."

Since the court victories, he has received some "fan mail" of sorts from other doctors who heard or read about his case, even patients praising his efforts and soliciting advice.

"If every doctor that had money due to them filed these sorts of cases, insurance companies would get the message," he said.

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