Penn is embroiled in a civil lawsuit against Aetna, the second largest health insurance company in the Philadelphia area.

In a complaint filed in May, Penn accused the insurance company of systematically under-reimbursing health care services provided by University of Pennsylvania Health System hospitals to patients insured by Aetna.

Penn alleges that Aetna has underpaid UPHS by over $3 million since late 2010. Overall, UPHS received $3.2 billion in net patient revenue in 2011.

Aetna and Penn signed a five-year agreement in 2010, making the Hospital of the University of Pennsylvania, the Pennsylvania Hospital and the Presbyterian Medical Center official health care providers for Aetna members.

Aetna is the provider for the student health insurance plan at Penn and for part of employees’ insurance plans. Specifically, the University paid Aetna $5.6 million for the period between July 1, 2009 and June 30, 2010 in life insurance premiums for its employees.

The three UPHS hospitals compute cost claims for the services based on available clinical data, and send them to Aetna. Aetna is obligated to reimburse UPHS, but may audit and dispute claims.

Penn is alleging that Aetna is not following the terms of the contract and has violated a Pennsylvania Code regulation requiring “prompt” payment of the claims within 45 days.

Penn specifically claims that Aetna changed its auditing policy two years ago to systematically dispute the hospitals’ claims in order to underpay them and delay reimbursements.

In computing the claims, hospitals often use software designed to classify patients in a category that would cost the insurance company more, according to health care management professor Mark Pauly.

“Hospitals want to make sure that they put the patient in the highest legitimate [category] in terms of payment,” Pauly said.

On the other hand, insurance companies may also try to place patients in the least costly category possible.

“It’s a kind of ballet that goes on between the hospital and the payer,” Pauly added.

Aetna was also sued in 2009 by the Association of New Jersey Chiropractors in a class action lawsuit brought on similar charges. The group alleged that Aetna’s audit process violated several laws and demanded the company change its audit policy. The lawsuit was unsuccessful.

“We disagree with Penn’s characterization of their obligations and our duties under the contract,” Aetna said in an emailed statement.

UPHS spokesperson Susan Phillips declined to comment.

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