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UMass Memorial fined for 'deceptive' donor registry

WORCESTER  —  Attorneys general in two states slapped UMass Memorial Health Care Inc. with more than $800,000 in fines and penalties yesterday for “unfair and deceptive acts” by the hospital’s bone marrow registry, which for years raked in millions of dollars in lab testing fees for the hospital by using high-priced models in lab coats and bright blue wigs to urge people to sign up for the registry.

UMass Memorial employees failed to disclose to potential donors that their insurance companies would be charged as much as $4,000 for a simple blood test that typically costs about $100 or less.

In addition to fines, restitution and attorneys fees to be paid to prosecutors in Massachusetts and New Hampshire, UMass Memorial also has struck separate confidential agreements to repay the insurance companies who paid the inflated testing bills submitted by the registry.

New Hampshire Attorney General Michael A. Delaney said UMass Memorial and its Caitlin Raymond International Registry profited by taking advantage of well-intentioned state laws requiring health insurers to pay for bone marrow testing.

“Charging $4,300 for a test that costs $50 is an outrageous exploitation and distortion of that statute,” Mr. Delaney said in a written statement.

The New Hampshire legal action against the hospital, settled out of court yesterday, alleges that in some cases Caitlin Raymond staff discarded potentially life-saving donor samples, rather than test them, when the registry didn’t have enough information to bill the donor’s insurance company.

“It seems the profit goal was the end game here,” Massachusetts Attorney General Martha Coakley said in an interview.

“What’s disturbing is the extent to which we believe this institution targeted people with insurance, seeking reimbursement up to $4,000 for a test that costs $100 on average,” Ms.

Does Obamacare Limit Profits for Health Insurance Companies in ...

One of the provisions in the Patient Protection and Affordable Care Act (a.k.a ACA, a.k.a. Health Reform, a.k.a. Obamacare) is that it limits the profits of health insurance companies. The ACA imposes a minimum medical loss ratio (MLR) on all insurers. The MLR is the amount of money spent on covered person medical care divided by the total revenue received through premiums. There is some debate of what constitutes ‘medical care’ (e.g., do investments in electronic health records count as medical care?), but insurer profits certainly are non-medical.

The ACA requires health insurers in the individual and small group market to spend 80 percent of their premiums (after subtracting taxes and regulatory fees) on medical costs. The corresponding figure for large groups is 85 percent. According to a recent Kaiser tracking poll, 60 percent of the public views the MLR concept favorably, although only 38 percent was aware that the provision is in the ACA. Insurance brokers may be getting squeezed for insurers to meet this amount. Why? Because many States are petitioning for a waiver. HHS is currently reviewing applications from six states: Florida, Kansas, Michigan, Texas, Oklahoma and North Carolina. According to The National Association of State Budget Officers, HHS has granted waivers to seven states: Maine, New Hampshire, Kentucky, Nevada, Iowa, Georgia and Wisconsin. The department has denied them to Delaware and North Dakota.

Why did these States receive waivers? For a variety of reasons, but one of the reasons is due to the fact that some states have a less competitive medical market. Maine, for instance, requested a MLR of 65%. The reason was that State only has two large commercial insurers, Anthem Blue Cross Blue Shield (with 49% of the market) and MEGA Life and Health Insurance Company (with 33% of the market). A public-private partnership, DirigoChoice, makes up most of the rest of the market. Three HMO’s have less than 1% of the market combined between them. To avoid the case where a large insurer would leave the market due to minimum MLR requirements and create a near monopoly, HHS decided to approve Maine’s request.

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