A class action lawsuit has been filed against a company acting as a claims administrator that allegedly resold preferred provider organization benefits to insurance companies without authorization.

Lead class plaintiff Walsh Chiropractic claims defendant StrataCare would repeatedly apply discounts to bills submitted under workers' compensation plans sponsored by those insurance companies to whom it resold benefits.

Walsh and the putative class will be represented by Robert W. Schmieder II, Jonathan B. Piper and Andrew W. Kuhlmann of LakinChapman in Wood River will be representing them.

According to the complaint filed Nov. 6 in Madison County Circuit Court, StrataCare gained access to discounted reimbursement amounts associated with an agreement between Walsh and First Health Group Corp., which is an organization that oversees the preferred provider organization.

Under a PPO, a network of health care providers offer discounted rates for their services. In exchange, insurance companies agree to encourage their insureds to utilize those providers by offering financial incentives.

Usually, providers enter a PPO network through a provider agreement with an administrator, such as First Health. That administrator then enters into contracts with insurance companies, known as payors.

StrataCare became a payor when it entered into a workers' compensation agreement with First Health, the suit states.

However, it did not financially encourage patients to utilize Walsh's services, the complaint says. In addition, it illegally began acting as a claims administrator for various third parties, Walsh claims.

"StrataCare nonetheless unlawfully entered into agreements with these third party payors pursuant to which StrataCare applied First Health discounts to bills submitted under workers' compensation plans sponsored by these third-parties," the suit states. "StrataCare knew or should have known that these discounts were unlawful and improper because StrataCare was not a proper Payor and had no lawful right to impose or resell the discounts under the First Health provider agreements."

Walsh accuses StrataCare of operating a silent PPO, which means the insurance company reaps the benefits of discounts without steering patients to participating doctors.

"By operating a silent PPO, Defendant has illegally reaped huge savings for itself and its clients, and pocketed substantial revenues in customer fees, while giving no consideration to preferred providers in exchange for the PPO discounts," the suit states.

Under the silent PPO scheme, Walsh and the class have been economically damaged, according to the complaint.

For example, Walsh says it has lost more than $4,000 on one workers' compensation claim because of StrataCare's scheme.

The money was lost after Walsh began treating a patient in October 2005 who was claiming workers' compensation benefits under a workers' compensation policy issued by Mid-West Truckers Risk Management Association, the complaint says.

Walsh claims it continued to treat the patient until February 2006 and charged $11,495 for its services.

However, it was only paid $7,086.06, according to the complaint.

"Upon information and belief, Plaintiff's bills were adjusted by Defendant, under an agreement between StrataCare and Mid-West Truckers," the suit states. "Under the StrataCare-Mid-West Truckers agreement, StrataCare acts as third party administrator, servicing and paying Mid-West Truckers' workers' compensation claims."

In the five-count suit, Walsh and the putative class are asking the court to certify the case as a class action complaint, to certify Walsh as representative of the class and to enter an unspecified judgment against StrataCare, plus other relief the court deems just.

Madison County Circuit Court case number: 09-L-1200.

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