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Texas Supreme Court Rules Against Medicare HMOs in Hospital Reimbursement Fight

Aetna can't avoid Texas Courts in dispute over nearly $14 million in unpaid


AUSTIN, Texas, Aug. 31 /PRNewswire/ -- The Supreme Court of Texas has ruled that hospitals providing Medicare-related services can seek reimbursement in state court without first being forced to pursue costly and time-consuming reviews through "the federal administrative machinery."

"This is a huge victory for health care providers," says attorney Scott Clearman of Houston-based McClanahan & Clearman, who represents five area hospital systems in their case against Hartford, Conn.-based Aetna Inc. (NYSE: AET). "It's not often that the Texas Supreme Court rules against insurance companies. More important, this decision puts a little more certainty in the health care system and that's good for everyone."

Mr. Clearman represents Christus Health Gulf Coast; Christus Health Southeast Texas, Gulf Coast Division Inc.; Memorial Hermann Hospital System; and Baptist Hospitals of Southeast Texas.

In the late 1990's, the hospitals contracted with North American Medical Management of Texas (NAMM). NAMM received payments from NYLCare, a subsidiary owned by Aetna to provide health care services under the Medicare+Choice program. Medicare+Choice was established in 1997 to provide Medicare beneficiaries with a wider range of health plan choices.

In a state court lawsuit, the hospitals alleged that NAMM grossly mismanaged its accounting and, ultimately, ceased paying the hospitals for their services. The hospitals claimed that Texas law made Aetna responsible for $13,967,759.19 in unpaid service fees once NAMM was placed into supervised conservatorship by the Texas Department of Insurance.

Initially, the trial court dismissed the lawsuit, finding that the dispute was governed exclusively by the federal Medicare Act. That ruling meant that the hospitals had no other remedy but to pursue their 6,000 individual claims through a lengthy federal administrative process. A Texas court of appeals affirmed the trial court decision.

However, the Texas Supreme Court found that "requiring Hospitals to exhaust administrative remedies before coverage decisions have been made would turn the administrative scheme on its head ... "

The Court reversed the court of appeals decision and remanded the case to the trial court to determine Aetna's contractual obligations to the hospitals.

The hospital systems are represented by Scott Clearman and Brian Walsh of McClanahan & Clearman, L.L.P., and David Warden and Eric Chenoweth of Yetter & Warden, L.L.P., in Houston.

For more information about this case, contact Scott Clearman of McClanahan & Clearman at 713-223-2005 or 713-304-9669 or Mike Androvett at 214-507-5456 or

SOURCE McClanahan & Clearman
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