I came across an interesting new class action suit against Nationwide, filed in the Northern District of Ohio on May 5, 2011. The complaint in Roche v. Nationwide Mutual Insurance Company was filed by a chiropractor who claims to be an assignee of insureds. (I don’t have a link to the complaint, but e-mail me if you would like a copy.) The complaint alleges that Nationwide uses software called “Decision Point” to evaluate medical bills, and the software reduces the amount paid for certain services under a code “41” or “X41.” Plaintiff’s counsel includes the Freed & Weiss law firm in Chicago, which I have litigated against. The complaint claims that the software allows an insurer to select a particular percentile, and then caps the amount paid based on that percentile. For example, if the 85th percentile is selected, the software allegedly caps the payment at the 85th percentile of what is charged in a particular area for a particular service, according to a database.
According to the complaint, the insurance policy provides that Nationwide will pay all “reasonable expense incurred for necessary . . . medical services.” A determination of what is “reasonable” or “necessary” typically requires a case-by-case analysis and courts have found such issues inappropriate for class treatment. Here, the plaintiff contends that reasonableness is not an issue because there is simply a purportedly “arbitrary” selection of a percentile and then the software determines what will be paid. The complaint does not indicate whether Nationwide also employs other review by claims personnel of the reasonableness and/or necessity of the charges in addition to any function performed by the software.
This case seems similar in nature to the extensive litigation some years ago regarding insurers’ use of the Colossus software, and may portend a new trend in class action filings against auto insurers. Insurers using the “Decision Point” software or other similar software should take a careful look at how they are using it and whether the same theory might be alleged against them.