October 11, 2002 - Universal under fire again: Doctor group suing for $3M
Seven months after Tennessee threatened to cancel its TennCare contract, Nashville-based managed care organization Universal Care of Tennessee Inc. is facing another potential legal headache. Team Health Inc., a Knoxville emergency physician staffing firm, is suing Universal, claiming nearly $3 million in unpaid bills that date back more than a year.
"Timely payment has been a problem since they began doing business in Tennessee," says David Steed, an attorney at Cornelius & Collins in Nashville representing Team Health in the lawsuit. In a lawsuit filed Sept. 13 in Davidson County Circuit Court, Team Health says it's owed more than $1.5 million in unpaid claims before April 12 and another $1.4 million for claims since then. Team Health also wants a 25 percent bad-faith penalty assessed against Universal.
"They're paid money as a third-party vendor in this state," says Russ Miller, senior vice president of the Tennessee Medical Association, an organization representing physicians and other health care providers. "When the money comes due, they don't pay the providers. Doctors and providers are in essence loaning them the money and not getting paid." Besides Team Health, Universal is facing lawsuits from other providers, including one by the Pharmacy Cooperative. These lawsuits aren't Universal's first brush with financial problems. In March, the state threatened to pull its contract with the company due to inadequate net worth. At the end of 2001, Universal had reported a total net worth of $5.36 million, below the state minimum of $6.52 million, state documents show. The state's Department of Commerce and Insurance then began an investigation into the MCO in January and found Universal's net worth to actually be negative $42 million.
Since the issue arose in March, Universal has come into compliance with the state's requirements, according to media reports. In April, the state stepped in to assume the insurance risk for Universal's nearly 135,000 TennCare enrollees in Middle Tennessee. "The state is standing good for all claims" subsequent to April 12, says TennCare spokesperson Lola Potter. Regarding claims prior to April 12, Universal has said it was undercapitated, meaning that it received a disproportionate share of disabled, insurable and uninsured people and then didn't have enough money to pay its providers.
During its six months of operations last year, Universal posted a loss of $620,000 on revenues of $182.5 million. "We weren't provided with enough premiums for the claims," Davis says. The state disagrees with Universal's assessment, saying bad management led to the financial problems. Specifically, officials say Universal offered higher hospital per-diem payments to providers than other Tenn-Care MCOs. "We know some of their provider contracts were inflated," Potter says. 'Someone has to make good'
Universal now wants the federal government to chip in on the pre-April 12 claims. According to the TMA, Tennessee has contacted the Centers for Medicare and Medicaid Services about helping providers get paid. In an Aug. 1 letter to the CMS, TennCare Deputy Commissioner Manny Martins said that, if Universal's claims