United Healthcare and American Renal Associates are in court over out-of-network fees

National health insurer United Healthcare has filed a lawsuit against dialysis provider American Renal Associates, claiming that the company offered joint venture agreements to lure nephrologists out of United Healthcare’s network so that American Renal Associates could then bill United higher rates for dialysis care.

It is the second lawsuit filed by United Healthcare (UHC) against American Renal Associates (ARA) over payment for dialysis services, the first being issued in July 2016 in Florida. Attorneys for ARA told Nephrology News & Issues that the company has not yet responded to the new suit, filed on March 30 in the U.S. District Court for the District Court of Massachusetts, but said in prepared statements that the insurer has no grounds to suggest fraud.

“This new lawsuit by UHC follows a number of defeats that UHC has suffered in another lawsuit that UHC previously filed against ARA in Florida,” ARA said in a prepared statement. “UHC has previously sought to obtain discovery and information in the Florida litigation about employer group health plan patients, but repeatedly has been denied access to that information. Most recently, UHC had its claims of fraud against ARA dismissed by the federal court in Florida hearing the case. This new lawsuit should be seen for what it is – an exercise in forum shopping, designed to obtain a new judge to hear UHC’s arguments, rather than put all of its claims before the existing court for resolution.”

American Renal Associates told Nephrology News & Issues that the provider had a previous contract with UHC to provide care to patients in the UHC network, working with UHC nephrologists. However, UHC cancelled that contract despite efforts by the provider to renegotiate.

“The majority of ARA’s clinics were contracted on an in-network basis through OptumHealth’s network until UHC unilaterally instructed OptumHealth that ARA would be out-of-network effective May 2014,” ARA said in a statement. “Now, UHC is claiming that it has been damaged because it is obligated to pay higher out-of-network rates when UHC insureds exercise their contractual right to obtain out-of-network dialysis services. ARA has made repeated attempts to re-establish an in-network contract on fair and reasonable terms.”

In a statement released to Nephrology News & Issues, law firm Robins Kaplan LLP of Minneapolis, which is representing UHC, said, “As noted in the judge’s order, United Healthcare was granted leave to amend its complaint. The company has received a wealth of discovery since the time the complaint was originally filed and United is confident it will prevail on its fraud claims.”

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A stronger IPO

In the lawsuit, UHC said part of the reason why ARA wanted to bolster its percentage of commercial employer health plan-enrolled dialysis patients and improve cash flow was because the company was preparing to launch its initial public offering.

“Increasing its profits and commercial mix was paramount to ARA as it prepared for the initial public offering (‘IPO’) it completed in April 2016 — an IPO ARA had been contemplating since at least March 2013,” according to the lawsuit.

In February, ARA announced it reached a $4 million settlement with shareholders about what they labelled “false and/or misleading statements” released by ARA about the provider’s financial health, as well as failing to disclose facts about company business practices. On March 26, 4 days before UHC filed suit, ARA announced it was going to make a public offering of 5,000,000 shares of its common stock and then withdrew the offering 2 days later saying, “current market conditions are not conducive for an offering on terms that would be in the best interest of its shareholders.”

On May 7, the stock price for ARA was $15.62, down from a high of $24.07 earlier this year.

Nephrologists given share sell-back option

United Healthcare is also charging in the lawsuit that ARA offered IPO put rights to nephrologists to entice them to move outside of the UHC network. IPO put rights allow partners to sell their stake in a joint venture once a company goes public.

“The incentives ARA offered its nephrologists, whether through IPO put rights or otherwise, will be a focal point during discovery,” Robins Kaplan LLC said in its statement to Nephrology News & Issues. However, ARA said only “a limited number of our 400 nephrologist partners had IPO put rights, which are common in health care joint ventures. These were event-based contracts that were triggered by the IPO and not a result of ARA offering to buy out these nephrologists.” – by Mark E. Neumann

Reference:

Case 1:18-cv-10622-ADB, United States District Court, District Court of Massachusetts.