La Donna Sell was talking to her son when she set down the phone to answer the door. Suddenly, she fell to the floor, as one spasm after another surged through her body.
Writhing in convulsions, she lost consciousness. She had been struck by a grand mal seizure. La Donna's four dogs began barking wildly. Hearing the commotion through the phone line, her son hung up and called his father, Phoenix accountant Jim Sell.
"I told him, 'Look, I'll get in my car, and I'll head home, and you call the paramedics,'" Jim Sell says.
"When I got to the house, the sheriff was there and so were the paramedics, and she was unconscious," Jim Sell says.
If it hadn't been for the barking dogs and the phone call from her son, La Donna believes she almost certainly would have died on that September day four years ago.
Luckily, an emergency team had time to rush her to Maryvale Samaritan Hospital. There, she suffered another seizure before being admitted for a two-day stay.
Eventually, the Sells were able to piece together what had happened to her.
An epileptic, La Donna had been controlling her seizures with the medication Dilantin. A month before she was stricken, La Donna had refilled her prescription at a CIGNA HealthCare pharmacy in northwest Phoenix. The pharmacy, however, had messed up the order. Rather than Dilantin, she had been given Dyazide, a diuretic normally used to control water weight.
There was no way for her to know she had been given the wrong medicine.
"They had changed the shape of Dilantin once before, so I didn't think anything of it," La Donna says.
Five weeks of taking an unneeded diuretic had left La Donna weak and dehydrated. CIGNA physicians had been treating her for what they thought was the flu, while a combination of fluid loss and lack of seizure medicine worked on La Donna. Then the near-fatal wave of seizures ripped through her body.
Even after hospital doctors realized the Dilantin level in La Donna's bloodstream had plummeted to zero, they neglected to examine the prescription medication she had been taking. They didn't examine the medicine, even though Jim Sell had provided it to them.
"No one ever checked it," says La Donna. "In fact, they sent me home with the same bad medication."
Only after one of Jim Sell's acquaintances recognized the medication as a diuretic did CIGNA send the pills to a lab for analysis, La Donna says.
La Donna Sell survived the seizures, apparently without permanent damage to her health. In their aftermath, however, she has learned enough about the state's largest health insurance company to make anyone sick.
Rather than take responsibility for the prescription foul-up and cover all related medical costs, CIGNA adopted a penny-pinching policy in the Sells' case. It is a policy that may ultimately cost one of the nation's largest insurance companies millions of dollars.
CIGNA refused to pay a $317 ambulance bill associated with La Donna Sell's near-fatal seizure. The company took the position that La Donna should have called for authorization before seeking emergency medical care. That is, according to CIGNA, La Donna should have phoned for permission to call an ambulance, while she was lying unconscious with a grand mal seizure.
That Alice-in-Wonderland assertion infuriated La Donna's husband, Jim, who happens to be a professional financial analyst. He began asking questions.
Adopting a pit-bull-like approach to gaining information from Samaritan and CIGNA, Jim Sell soon discovered the ambulance bill was just one item in a large bag of CIGNA financial tricks.
Eventually, Sell found that CIGNA secretly negotiated discounts for Samaritan's services that weren't shared with CIGNA customers.
The effect of such one-sided discounts was to shift most of La Donna Sell's hospital costs from CIGNA to the Sells. In the Sells' case, the shift amounted to about $600. But the discount scam apparently has been played out hundreds of thousands of times across the country, by CIGNA and other large health insurers.
The amount of money at stake is, by all appearances, astronomical.
"This is how they screw the little guy," says Jim Sell. But he's not just another little guy.
CIGNA picked the wrong person to try to squeeze a few hundred dollars out of.
Jim Sell is an expert at sniffing out financial shenanigans. The government frequently hires his company, Sell Consulting Service Corporation, as a trustee to handle the affairs of companies that have filed bankruptcy or been seized by state regulators for violating laws.
He knows how financial games are played, and he's not afraid to exercise his rights as a consumer when it comes to health care. After enduring CIGNA's shabby treatment of his wife, Sell was more than a little suspicious. Then he learned that La Donna's two-day hospital bill was $4,533.75, even though the only treatment she received was Dilantin injections.
So when Samaritan began demanding he pay $906.75--the 20 percent share of the bill called for under his CIGNA insurance policy--Sell balked. Before paying the bill, he asked Samaritan to provide an itemized list of expenses for all services rendered at the hospital.
"I was told that CIGNA doesn't like us to provide a detailed bill," Sell says.
Sell's reply was straightforward: If you don't send an itemized bill, then you'll have to sue to collect. Samaritan backed down and sent an itemized bill showing room charges of $650 per day plus thousands of dollars of other charges, ranging from $5 for a "tongue blade" to $1,010 for laboratory fees.
But the most interesting item was a one-line note attached to the bill stating: "CIGNA contract adjustment and payment have been made, balance due--$906.75."
The term "contract adjustment" set off alarms, and Jim Sell wanted to know more. So he went back to Samaritan's accounting department with a simple question.
"I wanted to know how much of a contract adjustment had CIGNA received," Sell says.
Once again, a Samaritan official told Sell that CIGNA doesn't like contract-adjustment information disclosed.
"I told her, 'Look, the only way you're going to collect from me is to disclose the information,'" Sell says.
"`Otherwise, just sue me for it, because I'm not going to pay.' And so she looks up on the computer, and that's when she told me the amount [of the contract adjustment]. I just about lost it right there."
Sell was stunned to learn that Samaritan had slashed $3,119.75 off the hospital bill sent to CIGNA. While Sell was being told by Samaritan he had to pay 20 percent of a $4,533.75 hospital bill, the actual bill to CIGNA was only $1,414.
It gets worse. CIGNA then deducted Sell's $906.75 share of the itemized bill from the $1,414 discounted bill to determine how much it would actually pay. The bottom line: CIGNA would pay only $507.25.
The magnitude of the discount is clearer when broken down by the percentage each party was to pay. Rather than paying 20 percent of the hospital bill called for under their insurance plan with CIGNA, the Sells were being asked to pay 64 percent of the actual bill sent to CIGNA.
Meanwhile, CIGNA, which promised to pay 80 percent of the hospital charges, was paying only 36 percent of the actual bill, based on the discounted charges the company had secretly negotiated with Samaritan.
Sell was outraged. A day later, he walked into the Phoenix law offices of Jaburg & Wilk and met with attorney Leon B. Silver to begin work on a federal class-action lawsuit against CIGNA. After three years of research, the suit was filed earlier this summer.
"I certainly didn't contract with the insurance company to conspire with the hospital to rip me off," Sell says.
The Sells filed their class-action suit in U.S. District Court in Phoenix last June, naming CIGNA HealthCare of Arizona Inc. and two affiliated CIGNA companies as defendants.
The suit alleges that CIGNA violated state and federal racketeering laws because the insurance firm contracted with hospitals to pay a lower rate for services than the hospitals charged to CIGNA's own clients.
The suit also claims CIGNA violated federal insurance laws and engaged in false advertising, fraud, negligent misrepresentation and breach of contract.
CIGNA corporate officials refuse to discuss the case. "We don't feel it is appropriate to comment," CIGNA spokeswoman Annie Mooney says.
CIGNA's attorneys, the powerful Phoenix law firm of Snell & Wilmer, are not denying that CIGNA has negotiated hospital discounts different from the rates charged to CIGNA's clients.
Instead, the lawyers argue in court documents that the Sells were aware of this arrangement, because it is stated in their insurance contract. Therefore, by CIGNA's reasoning, the Sells shouldn't have been surprised that CIGNA received a discount from Samaritan.
Samaritan officials have also declined to comment specifically on the Sells' situation. But Samaritan spokeswoman Sue Chasin says that the hospital bills patients based on whatever agreements are reached between the hospital and the insurance companies.
Chasin declined to discuss the details of the contract between CIGNA and Samaritan. But she did say it was possible that the hospital billed CIGNA's clients at a rate higher than what the hospital charged the insurance company.
"It would all depend on what's in the contract between CIGNA and the patient. We just follow the terms of the contract," Chasin says.
The CIGNA contract with the Sells is written in the type of legalese that no one but a lawyer could love. It states that the insured "shall be liable for a designated percentage of the Usual and Customary Fee charged for In-Patient Hospital Services." The contract goes on to state that "`Usual and Customary Fee means the current charge of the provider of care on a nondiscounted fee-for-service basis."
In other words, CIGNA's customers under this plan are required to pay a set percentage--in the Sells' case, 20 percent--of the hospital's itemized bill.
The CIGNA contract then adds another provision that simply states: "The balance of the charges for In-Patient Hospital Services . . . shall be paid by" CIGNA.
Nowhere does the contract explicitly state that the balance of the charges to be paid by CIGNA are based on a secret discounted pricing schedule not available to the insured.
This duplicity is what has the Sells so angry.
"I would be agreeable to pay on the same basis as they do," Sell says. "The difference is I paid in cash, and they paid in Monopoly money."
The Sells allege in their lawsuit that CIGNA entered into secret discount agreements with hospitals and other health-care providers in order to expand the company's market share.
CIGNA, Jim Sell says, could attract more members by offering lower monthly premiums to potential customers than many of its competitors. CIGNA then makes up for any losses it may suffer from lower premiums by negotiating discounts with health-care providers. But it is the company, not its customers, that benefits from those discounts.
In 1985, Sell says he was considering switching from CIGNA to other plans, but after researching the market and comparing premiums, he concluded that CIGNA offered the best rates for the services provided.
That was before he learned of CIGNA's discount pricing practices.
"If I would have known they had this type of discounting deal, I would have taken another look at how the actual billing practice was structured, because it completely changes the basis for evaluating the plan," he says.
The Sells and their attorney, Leon Silver, believe that CIGNA's customers are entitled to the same pricing discounts from health-care providers that CIGNA receives.
"If CIGNA did what we believe they are obligated by law to do, which is when they negotiate, to negotiate on behalf of their insured and not themselves, then Jim is entitled to the benefit of that discount," Silver says.
It is impossible to know how many other CIGNA policyholders are in the same situation as the Sells. The only members of the class-action suit so far are the Sells. But Silver is confident more policyholders--perhaps tens of thousands more--have been hurt by CIGNA's secret side agreements. They just don't know it yet, because they haven't been as aggressive as Jim Sell when it comes to dealing with hospital bills.
"People don't know that they are being ripped off," Silver says.
Tens of thousands of people already have been victimized by discount agreements between hospitals and another major national insurance company.
The Florida Attorney General's Office reached a settlement agreement on June 10 with Humana Inc. calling for the health insurance company to pay $6.25 million to settle allegations that the company overcharged 37,000 Florida health-care consumers.
In a case that is nearly identical to the Sells' suit against CIGNA, Florida state officials alleged that customers of Humana Health Insurance Company of Florida were required to pay greater shares of their hospital bills than called for by their health insurance policies.
Florida officials say patient co-insurance charges were based on the full amounts of hospital bills--even though Humana's health insurance company was granted discounts as high as 89 percent by Humana-run hospitals.
"Patients who should have paid only a fraction of the hospital costs sometimes wound up paying most, or, in the worst cases, all of the amount actually collected by the hospital," says Florida Insurance Commissioner Tom Gallagher.
The settlement, in which Humana admitted no wrongdoing, came after a two-year investigation by the Florida insurance department and attorney general. While the settlement was restricted to Florida residents, state investigators believe that Humana was doing the same thing in other states.
"From our review, it would appear it was a nationwide policy on the part of the company," says Florida assistant attorney general Steve Parton.
The Florida investigation also clearly revealed that hospital bills based on so-called "usual and customary charges" are literally pulled out of thin air and have nothing to do with economic reality, Parton says.
"Humana charges huge rates to patients, but then discounts it back up to 89 percent for the insurance company," he says. "Is there, then, any reality to this 'usual and customary' charge?"
The answer to that question is obviously no, says Nevada state senator Joseph Neil.
Neil single-handedly conducted a legislative investigation into Humana's insurance and pricing policies in Nevada and found the same problems discovered in Florida.
"They rigged the pricing system where they could rip off a huge amount of money," Neil says. "They had gotten about $17 million before anybody realized what in the hell was going on."
But so far, Humana has avoided any significant legal action from Nevada state officials, other than being subjected to a series of public hearings held by Neil.
The company is the target of a federal class-action lawsuit filed by Humana customers claiming they didn't benefit in the hospital discounts offered to their insurance company. The suit is nearing a settlement.
Humana's ability to avoid state prosecution in Nevada is not happenstance, Neil says.
"Humana Hospital surreptitiously moved in and captured a lot of regulators and a lot of politicians through big campaign contributions," Neil claims.
A Nevada criminal investigation into Humana's activities was terminated prior to completion, even though the probe was finding evidence later used by Humana customers in their federal civil suit, Neil says.
Gregory Barlow, the chief criminal investigator in the case, says he was ordered to terminate the investigation case by Nevada's former insurance director, an assertion the former director, David Gates, denies.
Neil's public hearings also showed that several key state employees, including former attorney general Brian McKay, left state government soon after the close of the criminal probe and took jobs at a law firm that represented Humana.
"What we found was a lot of sweetheart arrangements," Neil says.
It's too early to say what Arizona Insurance Department investigators will find, but there is no doubt they are closely examining whether health insurance companies are sharing discounts they receive from health-care providers.
The department began an investigation into discount pricing last June in the wake of Florida's settlement with Humana, state Insurance Department Director Chris Herstam says.
Unlike most department investigations, which are triggered by consumer complaints, this probe was launched at Herstam's request. Herstam, a former state legislator and former chief of staff for Governor Fife Symington, had one word for the discounting practice.
Arizona may find it tougher to rid the state of secret discounts than Florida did. In 1992, the Florida legislature passed a law specifically requiring insurance companies to share discounts with their customers. Arizona does not have a similar law.
But that doesn't mean Herstam will easily drop the matter, especially if cases like the Sells' claim against CIGNA can be prosecuted on a criminal level.
"It is my opinion when insurance companies negotiate discounts with hospitals, it is only fair that those discounts be passed on to insurance consumers," Herstam says.
The department will rely on a variety of other state insurance laws to force Arizona health insurance companies to pass along discounts, he says.
"Our investigation may still discover some form of material misrepresentation that could be utilized if we find wrongdoing by an insurance company," he says.
Legislative action to require insurance companies to pass discounts along to their customers already is in the works. State Senator John Huppenthal, Republican-Chandler, has held informal meetings with the insurance department and the state Attorney General's Office to discuss the matter.
"They both appeared supportive of the idea of passing new legislation," Huppenthal says.
Huppenthal, who played a crucial role last spring in helping thousands of investors get their money back after the collapse of Phoenix-based Charter Title Agency, scheduled the meetings after New Times questioned him about problems experienced by the Sells with CIGNA.
Last week, Huppenthal met with representatives of the state's top health insurance companies, including Blue Cross/Blue Shield, Humana, Intergroup, FHP Healthplan and State Farm, to discuss the issue. Notably missing from the meeting was CIGNA, which was asked to attend, but did not send a representative.
The companies were not enthusiastic about legislation requiring insurance companies to share hospital discounts with consumers. At the same time, Huppenthal says, the companies attending the meeting assured him that any discounts they receive are shared equally with their customers.
There is reason, however, to question those assurances.
CIGNA is probably not the only health insurance plan in Arizona that refuses to share the benefits of secret discount pricing agreements with its customers.
A March 8, 1993, confidential memorandum prepared by Phoenix Children's Hospital's legal department shows the hospital has more than 30 different contractual arrangements with Arizona health-care plans. Nearly all the arrangements involve discounts.
Most of the discounts to the insurance companies range from 20 percent to 33 percent off amounts billed to patients. Some discounts even include a 25 percent deduction charge on transplant services, according to the memo, which was prepared by PCH paralegal Laurie Johnson.
In a recent interview, Johnson said the discounts are passed directly to insurance companies, in those cases when patients pay a flat rate for services provided by the hospital.
She was unsure, however, whether patients who pay for hospital service on a percentage basis--patients like the Sells--benefit from the discount.
The percentage those patients pay is "probably based on the full bill charges," Johnson says.
Among the insurance companies receiving discounts from Phoenix Children's Hospital are FHP Healthplan, AETNA, CIGNA, Baptist, Humana, Intergroup, Maricopa Foundation of Health Services, Preferred Plan of Arizona, Metropolitan Life, Samaritan Health Plan, Smith's Food and Drug, US Health Net and a company simply, and perhaps appropriately, known as OUCH.
The confidential memorandum also clearly shows that there is no set price for services provided by the hospital.
For example, Phoenix Children's Hospital charged patients insured by Metropolitan Life $3,265 per day for staying in its pediatric intensive care unit. The charge to CIGNA-insured patients for the same service was $1,804 per day. Charges varied widely for other services, including psychiatric treatment, neonatal intensive care and routine pediatric care.
Charges vary, hospital officials say, depending on the number of people enrolled with the various insurance companies. The more people enrolled, the more likely some will end up in the hospital.
Signing contracts with insurance companies provides hospitals with a steady supply of patients, allowing lower operating costs. In exchange for the stream of patients, hospitals agree to discounts from the typical bill that would be sent to an uninsured patient.
While discounts are widespread, they are not widely advertised. Ken Diamond, vice president of managed care for Mercy Health Care, which operates St. Joseph's Medical Center in Phoenix, says it is up to the insurance companies to notify their customers about any discounts the insurers receive from St. Joseph's--even though the hospital bills patients at a nondiscounted rate.
Diamond says the hospital is not obligated to inform patients that their insurance company may be receiving a significant discount compared to the patient, because the hospital has no contractual obligation with the patient.
The contract, Diamond says, is between the hospital and the insurance company. Any discounts are determined by the insurance company based on its contract with the hospital.
"They calculate it at their end, and we book it at the discounted rate on our books," Diamond says.
But at least one state insurance plan considers any policy under which insurance companies fail to share the benefits of hospital discounts with customers to be unethical. Blue Cross/Blue Shield spokesman Dave McIntyre condemns the practice.
"Quite frankly, we find it deplorable that some have seen fit to do one thing with a customer, and cut a deal on the side to enrich their pockets," he says. "It's just plain wrong in our view."
McIntyre says Blue Cross/Blue Shield uses the same charge as its customers when it calculates payments to health-care providers.
"To do anything different is a total financial sleight of hand, and it is wrong," he says.
While battling with CIGNA in the courts, La Donna Sell faces another challenge, one that requires her to deal on an almost daily basis with the insurance company and its physicians.
For the last five months, La Donna has undergone extensive chemical and radiation therapy to battle cancer. She also had surgery that resulted in numerous complications. She has been left weak, thin, frail.
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"It's been a rough summer," she says in a soft, barely audible voice.
Is CIGNA any better now than it was four years ago when a prescription mistake nearly ended her life?
"I can't say that," she says. "I haven't been happy with them for a long time."
La Donna says the company still maintains the attitude it had in 1990, when it refused to pay her ambulance bill because she didn't seek permission to call for emergency help while lying unconscious on the floor of her house.
"They do what they have to do," she says. "And no more.