Class Action Settlement

Class action settlement with coventry health care affects physical therapists who treat injured workers.

By Diana E. Godwin, Esq.

June 2014

On June 2 an official notice from the U.S. District Court in Oregon will be sent out to approximately 38,000 medical providers around the country, including physical therapists, who had a First Health PPO Provider Agreement during the period of March 25, 1999 to the present. The notice will inform the providers that a settlement has been reached in a class action case against Coventry Health Care, Inc., (Coventry) involving payment to providers for certain workers’ compensation medical bills.

The full title of the class action lawsuit is Chehalem Physical Therapy, Inc. v. Coventry Health Care, Inc.

The notice you may receive is ten pages of dense print and explains that the class action lawsuit relates to how Coventry has calculated the discount on payments to providers for workers’ compensation medical services. Specifically, the lawsuit claims that when a provider bills below the maximum fee specified under a state workers’ compensation fee schedule, Coventry applies the discount rate in the provider’s participating provider contract to the lower billed amount, rather than calculating the payment as the lesser of the provider’s lower billed rate or the stated percentage discount off the maximum fee under the state fee schedule, as the language of the contract requires. (For example: The maximum payable for a certain CPT code under the state workers’ compensation fee schedule is $100. The provider bills $90 for that CPT code. Under a First Health PPO contract that specifies a discount rate of 80 percent, the provider should be paid $80, which is the lesser of the $90 billed or 80 percent of the maximum fee schedule amount. Instead, Coventry has applied the 80 percent discount to the lower billed amount of $90 and tells the workers’ compensation insurer to pay the provider only $72 (80 percent of $90.)

Among the benefits achieved for providers under this settlement are money damages and injunctive relief. The injunctive relief in the settlement gives providers who currently have a First Health PPO contract the right to terminate or “opt-out” of just that portion of their contract that applies discounts to workers’ compensation medical care.

The information telling providers about the opportunity to opt-out of having discounts taken against their workers’ compensation medical billings is found in Paragraph 13 on page 6 of the notice. It says that if you no longer wish to have your worker’s compensation billings discounted in this incorrect manner (or have them discounted at all) you may terminate just the workers’ compensation portion of your contract, while still remaining a member of the First Health preferred provider network for private health patients. Please note that your right to terminate the workers’ compensation portion of your contract must be exercised by no later than July 2—30 days from the date of the notice. Do not miss this very short window of time to take advantage of this opportunity!

As one of the lawyers who brought the class action case against Coventry, you will see my name listed in the notice. I am also a member of the Administrators’ Council. As part of my legal practice, I serve as the executive director for two statewide private practice organizations, Oregon Physical Therapists in Independent Practice (OPTIP), with 165 members, and the Private Practice Special Interest Group (PPSIG) of the Physical Therapy Association of Washington, with 170 members. One of the class action plaintiffs, Chehalem Physical Therapy, located in Newberg, Oregon, is a member of OPTIP. In addition to Chehalem Physical Therapy, the second class action plaintiff is South Whidby Physical Therapy, located on Whidby Island in Washington and owned by Andy Goetz, a member of PPSIG and a PPS/APTA member. We all owe them our thanks for stepping up to serve as the representative plaintiffs on behalf of all of the medical providers around the country who are in the class.

I have had many opportunities at PPS annual conference to discuss the problems of participating provider contract discounting in workers’ compensation with a number of PPS members from around the country. Unlike the situation with private health patients who are “steered” to members of a PPO network through the mechanism of a lower copayment, a lower percentage of coinsurance, or a lower deductible, workers’ compensation patients do not pay for their medical care, so there are no financial incentives or mechanisms by which to steer these patients to providers who are members of a PPO network. Since there is no “steerage” of patients, there is no quid pro quo, or benefit to the provider for accepting discounts on their workers’ compensation billings.

The PPS members I have spoken to have expressed frustration with the fact that if they want to see private health insurance patients who have First Health as their PPO network, they have had to sign a First Health contract that requires them to accept discounts not only for their private health patients, but also for their workers’ compensation and motor vehicle accident patients. The First Health contract has been an “all or nothing,” “take it or leave it,” proposition.

For the first time, as a direct result of this national class action settlement, private practice physical therapists will have the opportunity to rectify the situation.