In this episode, Sam Wares, VP of Settlements at Managed Care Advisory Group, describes how class action settlements work and ways healthcare organizations can maximize recoveries from these settlements.
Michael: Hi, this is Mike Passanante and welcome back to the Hospital Finance Podcast. We are very glad you could be with us.
Today, I am joined by Sam Wares. Sam is the Vice President of Settlements at Managed Care Advisory Group. And today, Sam is going to talk with us about revenue recovery opportunities from class action settlements.
Sam: Thanks a lot, Mike. I am happy to be here.
Michael: Sam, let’s jump right in. Can you give us some background on class action settlements?
Sam: Yeah, absolutely. There are many class action settlements that are available on an annual basis. In fact, there are often billions of dollars available annually from class action settlement funds where businesses and healthcare organizations are entities who are eligible to participate and collect money from these settlements.
What happens is there are lawsuits that will result in a class action settlement. They commonly center on price fixing of certain products or allegations of inadequate compensation for services. We will touch on some specific examples of settlement types later on in today’s cast.
Settlements are agreed to in order to avoid a court trial, as many listeners may know, so that each party makes a compromise or settles. And what will happen is the defendant or a group of defendants forfeit a large sum of cash, often times tens of millions, hundreds of millions or even billions of dollars for an individual settlement, in exchange for releases from class members, the entities who are eligible to participate in these settlements, will get releases from these class members and/or waive certain rights.
So for example, whatever the alleged action was such as under-reimbursements for a specific type of medical claim for a certain period of time, the defendants will set aside a pool of cash in return for being released of any litigation related to that issue in the future.
What many entities are not aware of is that even if they do not participate in a settlement by way of submitting a claim in hopes of receiving some cash compensation from that settlement fund, they are still surrendering these rights because they are actually part of the eligible class that could submit a claim.
In addition, automatic payment from a settlement is very rare for those where a business or a healthcare organization is a class member. So for these types of settlements, the claim must be submitted in order to receive any sort of compensation.
Michael: Sam, are hospitals and other healthcare providers often eligible to join these settlements?
Sam: Yes, hospitals and healthcare providers are oftentimes eligible class members, potentially even more frequently than any other type of business.
The reason for that is there are several types of settlements that apply only to healthcare providers. Those are ones where an insurance payer was alleged to have underpaid or inappropriately or inadequately reimbursed their providers for a specific period of time for certain types of claims. Again, those are only going to be specific to healthcare providers.
And then the other types of settlements will cover potential price fixing of products that really any type of business would have, including a hospital or healthcare provider, whether it be components of their patient beds or other office equipment such as a computer or office furniture that any business would have, and certainly, type of equipment that can be found in a healthcare setting.
Michael: Can you describe the typical options of class members?
Sam: Yeah, absolutely. That’s a good question. A class member basically has three options when they are notified of a class action settlement.
First, the class member can do nothing. They don’t submit a claim, meaning that no monetary compensation or cash will be received from the settlement.
The next option would be that they can submit a claim on their own. Some do this. However, of those that do submit claims on their own, few do it while maximizing their ROI or return on investment if you want to look at it this way where the amount of time that they spend on a claim submission may not be as fruitful as it could be if they use an expert in the field to assist with that submission.
And that’s the third option, which would be that a class member can have a third party submit a claim on their behalf because there are companies who offer settlement recovery services and/or claim filing assistance.
For most settlements, what people may not realize is that, typically, 80% or more of the entities who are eligible to submit a claim to a settlement do not pursue the settlement claim, and therefore do not receive any compensation.
This will happen because many class members simply are unaware of settlements that are applicable to them. And this may sound surprising, but if you think of it from an individual consumer perspective, you probably received these settlement notices in the mail that are for a coupon or rebate from an airline or maybe a cellphone company or maybe a stock deal that went bad or something like that.
And most of you, if you are like me, just throw those in the trash because they are very legal-looking documents. Many times, they are several pages, small fonts. They look confusing. It looks like it is going to take a lot of effort and you really aren’t sure what you are going to get from that.
It really is the same type of notice that a business or a healthcare organization will receive for these types of settlements that we are talking about today.
Another issue is that, often times, the notice or the claim forms just aren’t received by the class member at their primary or maybe all of their locations. If you think about a settlement, many times, they cover an issue that happened well in the past, so the information provided by the defendants by way of eligible class members in their addresses could contain old addresses and locations that are no longer in existence. So the notices and/or the claim forms simply are not received.
So, the way that that’s alleviated is that notices will be published in journals or sometimes you will see them in well known magazines or newspapers trying to spread the word to all the eligible class members. But it is literally impossible to ensure that every single class member is appropriately notified of any given settlement.
Michael: Okay. Sam, can you walk us through the types of settlements, and in particular, which ones might be available for healthcare organizations?
Sam: Yes. We focus on four types of settlements, all of which are available to healthcare organizations.
The first, I have talked about a bit thus far. We refer to it as product anti-competition or anti-trust. These settlements center around alleged price-fixing, and/or inflation of specific products made by certain manufacturers.
They typically come in the form of indirect purchase or settlements. Healthcare organizations will be included in these typically under the Consumer Protection Act. That’s where their arguments are made when the plaintiff’s counsel is actually submitting an action.
And I focus on indirect purchase or settlements. What that means is that if you were buying a computer, and say it is an Acer computer, for example—that’s the brand name that is in front of me—the settlement isn’t going to be something where you had to purchase that product directly from Acer. It’s assumed that you went to Best Buy or CDW or some other retail business or even wholesale to get your products. That’s what’s known as an indirect purchaser settlement.
Sam: Products that we have seen covered by these types of settlements include the materials within furniture—so the foam padding that was in the mattresses at any hospital or in any patient bed within the waiting room furniture and chairs.
Certainly, any type of computer monitor, both the old technology, which was cathode ray tube and the new technology which is typically LCD, those are the products that we have seen settlements on in the past and similar types of settlements look to be computer-component based at least in the near future.
Another type of settlement is what we simply refer to as healthcare where those are insurance claims, which were allegedly underpaid or they weren’t reimbursed appropriately. There have been several of these in the past.
Some of them are state-specific. They are all payer-specific. Some of them will be nationwide for all providers. Sometimes, they’re in network claims; sometimes, they’re out of network claims.
The one that has been in process for many years that will be quite large, I don’t know when it is going to hit it—it could still be several years from now—as an action pending against the Blues that’s been out there for quite some time.
And we may touch on a couple of specific examples of those types of healthcare settlements that we have worked on in the past.
Our third type of settlement is what we refer to as financial. This will cover manipulation of financial markets. There are a few that are out there to the tune of several billions of dollars. It is going to take some time before there is an actual claims process available.
Really, what those focus on is that large banks are alleged to have manipulated certain rates that would have been used as the basis for any type of loan or funding that every business in the country had, including healthcare organizations. So there may be some reimbursement there.
Another big one, which is currently pending is centered around excessive payment cards specifically Visa and MasterCard interchange fees. So again, healthcare organizations accept credit card payments by Visa and MasterCard from their patients, and they have allegedly been paying, overpaying too much to Visa and MasterCard to accept those types of payments, so there is a settlement that is in process for over $7 billion where there would be that large fund available to healthcare organizations to potentially get reimbursed for some of those overpayment of fees.
The last is pharmaceutical. These are specific to larger organizations because what these focus on are self-insured health plans where a health system is funding their health insurance plan for all of their employees and there is a settlement where it is alleged that there’s an overpayment for drugs purchased on behalf of its employees.
Typically, these come in the form of a pay for delay from a known brand manufacturer of a drug where they are allegedly focusing on the generic drug maker and asking them to hold off for a couple of years on releasing their generic, so that they can capitalize on that market that they have created.
Michael: So Sam, your firm helps organizations file into these class action settlements. Do you find that hospital internal legal departments are already involved in joining and settling class action suits? Or is this too specific for a general counsel to get involved in?
Sam: Yes, some are. We work with over 500 hospitals of all sizes and different systems with different complexities. So the largest systems will work on these in some way, shape or form. But it is tough thing for them to really value because it is not what their team of attorneys are tasked to do on a day-to-day basis, especially since the return is often unknown from these settlements.
So, it is hard to determine whether or not they should dedicate one person to try and look out for all these settlements or put a team of people on it to make sure that they don’t miss any settlement opportunities, and then take the time to submit a claim in a fashion where they are going to receive the optimal return or the maximum return from these settlements.
Some settlements require specific data, historical data to receive the most that they possibly are eligible for from that given settlement. Again, what that most is, what that amount actually turns out to be is going to be unknown.
While some work on it, what we found is that when we engage with hospitals’ internal legal departments, they almost always end up turning over the business to us because we can focus on searching for applicable settlement opportunities and sifting through all the notices that they may receive, which really aren’t opportunities that are worth their time.
And then when we do find an opportunity that it is worthwhile, we can assist them in a way where they are spending the least amount of time and we are getting them the most that they can receive from that given settlement.
So, the short answer to that is they do work on these settlements on their own in some cases. But what we found is that working with us has been mutually the best type of situation.
Michael: Got it! Sam, I’d be interested if you could share some examples of recent settlements for our audience.
Sam: Yeah. The first settlement that’s a good example is one that is healthcare based. It paid out back in 2012. It’s known as the United Healthcare/Ingenix settlement. This is something I have touched on by way of example where this was an issue where underpayments were allegedly made due to use of Ingenix’ database to pay for out of network claims.
It was a large settlement pool. It was $350 million. The class was nationwide, so any provider who had United Healthcare out of network claims was eligible to submit claims.
And that was one where there was a default submission method, meaning that you could, as an eligible provider, simply send in your claim form by signing your name on the dotted line and accept what the estimate was based on data provided by the defendants. That is often the case. However, what we find is that when you can submit your own data to support your claim, you will often receive much more money from that settlement.
So there would have been thousands of providers that we represented who would have received next to nothing, and they actually ended up receiving thousands to tens of thousands and sometimes more from the settlement. So it is a good representation in the value of our service and a good example of a healthcare settlement there.
Another one is Oxford, New York. That’s similar to United Healthcare in that the alleged issue was dealing with underpayments. This one was due to claim coding and bundling edits.
The reason why I want to bring this up in addition to United Healthcare was this was a state-specific settlement. It was a pool of $22 million available to medical providers in the State of New York. Again, data was needed in order to receive and appropriate refund from that settlement.
And the last one I want to touch on is one that falls into the product, anti-competition category that we touched on earlier. It was known as the CRT indirect purchase resettlement. CRT means cathode ray tubes. So that was the technology found in old computer monitors, older box tube TVs that would have been found in every single patient room within the hospital and also in the older medical device equipment—so EKGs, ECGs, those types of monitors and vital monitors.
The settlement was for $576 million. And it was available to businesses in just over 20 states. Good return from that settlement on average was tens of thousands of dollars for each of our clients.
And that’s also a good example because that settlement covered about two dozen states. There are also individual states that are raising those actions just for each specific state that we may see pop up in the future.
The reason why a whole group of states will be included in what is called multi-district litigation, whereas others won’t, is based on the authority that the individual state’s attorney general has set in place by way of the protection offered under the Consumer Protection Act that we touched on earlier.
So, those are three good examples. What we see on the horizon as far as the most immediate opportunities coming up are those similar to that CRT settlement where they are product-based settlements.
Michael: Got it! Sam, it was great chatting with you today. Where can people go to learn more about your firm and upcoming settlement opportunities?
Sam: Sure! We have a website specific to our settlement service and upcoming and current settlement opportunities. It is Settlements.MCAGINC.com. And you should be able to find all the information you ever want on settlements there.
Michael: That’s great. Thanks again, Sam. It’s good talking to you.
Sam: Absolutely. Thank you, Mike. I appreciate it.