Insurance company CIGNA levies $650,000 overpayment charge on Schneider Hospital

The original article can be found in: Virgin Islands Daily News By Amanda Norris

ST. THOMAS ­- At its bi-monthly meeting Wednesday, the Schneider Hospital board of directors discussed options for handling what some called an “overreaching” charge of overpayment from the CIGNA insurance company in the amount of $650,000 for the period between Oct. 1, 2011, and March 31, 2013.

In a letter dated June 26, a CIGNA executive said that Schneider had 30 days from initial notice given on May 16 to respond in writing to the demand for the $650,000 and did not do so. The letter said that because the hospital did not respond, the $650,000 automatically became due.

The demands coincide with the negotiation of a new contract for all V.I. government employees and retirees under the age of 65 that would increase premiums paid to the insurance provider by a composite rate of 10.4 percent. That contract has to be ratified by the Senate and is expected to be taken up within the coming week, according to Taetia Phillips-Dorsett, a health care policy advisor to the governor.

The letter to Schneider’s Chief Executive Officer Bernard Wheatley also states that CIGNA will amend its agreement with the hospital to shift the discount in rates it is charged.

Currently, according to Schneider Hospital Chief Financial Officer Eugene Welsh, the hospital discounts CIGNA for services performed at 28 percent. The proposed amendments would keep discounts for outpatient services at 28 percent and increase the discount for inpatient services to 40 percent.

Board members expressed strong distaste for complying with the letter’s changes and overpayment charges without consultation from an attorney from the V.I. Attorney General’s Office.

Welsh explained to the board the back-story behind the letter, saying that in late 2010 the board had publicly discussed rate increases at a board meeting that were subsequently reported in the local media. The rates increases went into effect in 2011, and CIGNA had verbally told hospital officials they had no problem with the changes and were comfortable with the discount rate of 28 percent, which was increased from 10 percent after a similar rate increase in 2004, Welsh said.

Since that discussion, CIGNA appears to have had a change of its fiscal heart, according to Welsh.

Welsh said that a CIGNA vice president in charge of Puerto Rico and the Virgin Islands had since told him that the public disclosure of rate increases without prior consultation with CIGNA constituted a breach of contract with the provider. This is the basis for the overpayment charge in the letter, Welsh said.

Board member Maria Tankenson-Hodge, who is an attorney, called the letter “disturbing” and said it should be legally scrutinized using the doctrine of “the covenant of good faith and fair dealing,” given CIGNA’s prior representations to Welsh.

Board Chairman Cornel Williams said that senators and government officials should be notified of CIGNA’s letter prior to the ratification of the new contract for employee coverage.

In executive session, the board voted to approve the creation of a new position of chief medical officer at a salary of $175,000 and to appoint to the position Dr. Thelma Watson, who has been serving under the title of Medical Director at an annual salary of $124,200.

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