Humana 2011 Annual Report Download - page 127

Humana Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
outpatient services provided to beneficiaries of the DoD’s TRICARE health benefits program (“TRICARE”).
The Complaint alleged that Humana Military breached its network agreements when it failed to reimburse the
hospitals based on negotiated discounts for non-surgical outpatient services performed on or after October 1,
1999, and instead reimbursed them based on published CHAMPUS Maximum Allowable Charges (so-called
“CMAC rates”). Humana Military denied that it breached the network agreements with the hospitals and asserted
a number of defenses to these claims. The Complaint sought, among other things, the following relief for the
purported class members: (i) damages as a result of the alleged breach of contract by Humana Military,
(ii) taxable costs of the litigation, (iii) attorneys fees, and (iv) any other relief the court deems just and proper.
Separate and apart from the class relief, named plaintiff Sacred Heart Health System Inc. requested damages and
other relief for its individual claim against Humana Military for fraud in the inducement to contract. On
September 25, 2008, the district court certified a class consisting of all institutional healthcare service providers
in TRICARE former Regions 3 and 4 which had network agreements with Humana Military to provide outpatient
non-surgical services to CHAMPUS/TRICARE beneficiaries as of November 18, 1999, excluding those network
providers who contractually agreed with Humana Military to submit any such disputes with Humana Military to
arbitration. On March 3, 2010, the Court of Appeals reversed the district court’s class certification order and
remanded the case to the district court for further proceeding. On June 28, 2010, the plaintiffs sought leave of the
district court to amend their complaint to join additional hospital plaintiffs. Humana Military filed its response to
the motion on July 28, 2010. The district court granted the plaintiffs’ motion to join 33 additional hospitals on
September 24, 2010. On October 27, 2010, the plaintiffs filed their Fourth Amended Complaint claiming the U.S.
District Court for the Northern District of Florida has subject matter jurisdiction over the case because the
allegations in the complaint raise a substantial question under federal law. The amended complaint asserts no
other material changes to the allegations or relief sought by the plaintiffs. Humana Military’s Answer to the
Fourth Amended Complaint was filed on November 30, 2010. We are currently involved in discovery on this
matter, with trial currently scheduled for October 2012.
On March 2, 2009, in a case styled Southeast Georgia Regional Medical Center, et al. v. Humana Military
Healthcare Services, Inc., the named plaintiffs filed an arbitration demand, seeking relief on the same grounds as
the plaintiffs in the Sacred Heart litigation. The arbitration plaintiffs originally sought certification of a class
consisting of all institutional healthcare service providers that had contracts with Humana Military to provide
outpatient non-surgical services and whose agreements provided for dispute resolution through arbitration.
Humana Military submitted its response to the demand for arbitration on May 1, 2009. The plaintiffs have
subsequently withdrawn their motion for class certification. On June 18, 2010, plaintiffs submitted their amended
arbitration complaint. Humana Military’s answer to the complaint was submitted on July 9, 2010. An arbitration
trial was held from September 26, 2011 to October 7, 2011. On January 20, 2012, the Arbitration Panel issued an
Interim Award granting relief in favor of the plaintiffs on their claims for breach of contract and in favor of
Humana Military on its counterclaim for recoupment based upon improper coding and billing for services on the
part of the plaintiffs. The Arbitration Panel reserved decision on the award of damages pending submission of
additional evidence and argument by the parties.
Florida Matters
As previously disclosed, with the assistance of outside counsel, we are conducting an ongoing internal
investigation related to certain aspects of our Florida subsidiary operations. We have voluntarily self-reported the
existence of this investigation to CMS, the U.S. Department of Justice, and the Florida Agency for Health Care
Administration. Matters under review include, without limitation, the relationships between certain of our
Florida-based employees and providers in our Medicaid and/or Medicare networks, practices related to the
financial support of non-profit or provider access centers for Medicaid enrollment and related enrollment
processes, and loans to or other financial support of physician practices. We have reported to these regulatory
authorities on the progress of our investigation to date, and intend to continue to discuss with these authorities
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