Anthem Blue Cross to pay hospitals $1.62 million to settle payment dispute

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California’s largest for-profit health insurer has agreed to pay a total of $1.62 million to seven hospitals to settle allegations that it failed to properly reimburse the providers for patient care.

Anthem Blue Cross of California underpaid hospitals for charges that exceeded contracted daily rates, the California Department of Managed Health Care said in its agreement with the insurer.

Anthem, a unit of health insurance giant WellPoint Inc. of Indianapolis, admitted no wrongdoing and said in a statement that it settled the matter to avoid litigation.

Regulators said the problem stemmed from Anthem’s process for handling claims. The Woodland Hills-based insurer required hospitals to submit paperwork for daily rates to one mailing address, but claims for additional charges — known as stop-loss payments — went to another address, a violation of state law.

Claims sent to the wrong address were processed improperly, officials said. As a result, hospitals received less than they were owed.

The payment problems were compounded by Anthem imposing separate deadlines for hospitals to submit the two types of claims; it denied stop-loss payments that missed their deadlines, state officials said.

The issues identified by regulators occurred from at least 2004 to 2007, when the managed-care department began to investigate hospital complaints about Anthem, regulators said.

“There were rules in place regarding payment of claims. They were not following those rules, and were in instances inappropriately withholding stop-loss payments to hospitals,” said Cindy Ehnes, director of the managed healthcare department.

Anthem insisted that it handled stop-loss payments under hospital contracts that specified filing deadlines.

In a statement Tuesday, the company said it was pleased to resolve “our disagreement with the Department of Managed Health Care” rather than fight in court over complaints that were “4 to 6 years old.” A spokeswoman said the insurer changed its claims intake process in December 2005 and made additional improvements in 2008.

“We greatly value our relationship with the hospitals in our network and work hard to provide them with prompt and accurate payment in accordance with the terms of the applicable provider agreement,” the company said.

The hospitals — six in Los Angeles and Orange counties and one in Northern California — will divvy up nearly $1.08 million, plus more than $543,000 in interest and penalties. The agreement did not name the providers because their complaints to regulators contained confidential patient information.

-- Duke Helfand