Lawsuit against Medicaid insurers moves to federal court

Vinton hospital alleges $91,000 unpaid claims

Enrollment information for managed-care organizations, including Amerigroup, in Iowa's Medicaid privatization plan, phot
Enrollment information for managed-care organizations, including Amerigroup, in Iowa’s Medicaid privatization plan, photographed in Cedar Rapids on Friday, Dec. 18, 2015. (Liz Martin/The Gazette)

Virginia Gay Hospital, a 25-bed facility in Vinton, is suing the three managed-care organizations that provided health care coverage for nearly 618,000 poor and disabled Iowans in the privatized Medicaid program.

The hospital’s lawsuit says the insurers had violated federal law and “illegally recouped patient revenue” from the hospital’s emergency department, according to the suit.

Mike Riege, chief executive officer of Virginia Gay Hospital, said the unpaid claims by three managed-care organizations between 2016 and 2017 has resulted in a roughly $91,000 loss for the health care facility.

“In our minds, in the minds of our board of directors and our legal advisers, we felt it was so clearly wrong that somebody had to do something,” Riege said.

The suit — initially filed in Benton County and moved to the U.S. District of Northern Iowa Thursday — is against Amerigroup Iowa, UnitedHealthcare of the Midlands and AmeriHealth Caritas Iowa.

AmeriHealth left the state’s Medicaid program at the end of November 2017.

Spokespersons from AmeriHealth and Amerigroup declined to comment, citing pending litigations.

UnitedHealthcare did not respond to requests for comment by press deadline.

The state of Iowa transitioned the majority of Iowans on Medicaid over to managed care on April 1, 2016.


But before that, the International Statistical Classification of Diseases and Related Health Problems, or ICD, updated its medical classification list, which health care providers use to classify and code diagnoses, symptoms and procedures to insurance companies.

The 10th revision of ICD was implemented for Medicaid and Medicare by federal officials on Oct. 1, 2015.

However, according to the lawsuit, Iowa’s managed-care organizations were “not using a complete and accurate list” of the ICD codes from Oct. 1, 2015 to about June 15, 2017.

The lawsuit further says that beginning in March 2017, the managed-care organizations started recouping a portion of reimbursements for patient services, claiming there had been overpayments.

“They were recouping or taking back money from us that should have been legally ours because they should have been abiding by ICD-10,” Riege said.

Some of these unpaid reimbursements include claims for migraine headache, bleeding and “all manner of things that any reasonable person would consider a true emergency,” Riege said.

According to the filings, officials from the Iowa Department of Human Services and Iowa Medicaid Enterprises, the state organizations that oversee the insurers, acknowledged the ICD list the managed-care organizations had used to determine the recoupment amounts was “incomplete and inaccurate.”

The Iowa Department of Human Services spokesman Matt Highland said he was unable to comment due to pending litigation.


Riege said the hospital opted to file a lawsuit in part due to the managed-care organizations “extremely long” and “arduous” appeals process health care providers can undergo to reclaim unpaid reimbursements.

“You just run into so many roadblocks,” Riege said. “We felt the best route to go would be to file a lawsuit for breach of contract.”

Riege also raised concerns for a recent move DHS officials made to reclassify more than 700 symptoms as non-emergency diagnosis codes effective Aug. 1. According to a letter sent to providers, a claim for an emergent service “must contain an approved emergent diagnosis code,” meaning some emergency room visits will not be fully reimbursed.

Among some of the symptoms, Riege said gastric pain is included — a pain he said could be the forerunner of a heart attack.

The Department of Human Services’ Highland said these changes were made based on recommendations of providers.

“The Iowa Medicaid Enterprise uses emergency diagnosis codes to ensure the health care needs of Medicaid members are provided in the appropriate health care setting,” he said in an emailed statement to The Gazette. “Hospitals have the option to submit justification based on layperson understanding of ‘emergency’ to get emergent reimbursement.”

But Virginia Gay officials are still concerned. Riege said this has some worried it will prevent some patients from seeking emergency care.

“That really sets a poor precedent,” he said.

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