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Regulators' Inquiries Into Aetna Claims Review Practices Not Likely to Derail CVS Merger: Lawyers

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Although two states recently announced that they are taking a close look at Aetna Inc.’s practices for denying claims for health care coverage, the scrutiny is unlikely to prevent the insurance giant’s proposed merger with CVS Health from going through, corporate lawyers said.

California Insurance Commissioner Dave Jones announced Monday the opening of an investigation into Aetna’s claims denial process, its requests for prior authorization for care, and its utilization review process. Later that afternoon, Colorado Interim Insurance Commissioner Michael Conway said that his office would be making inquiries about whether Aetna’s procedure for appealing the denial of coverage for a medical procedure complies with Colorado law governing the issue.

(Related: Big Hospitals Bully Private Insurers: Medicare Watchdog)

California’s investigation, which prompted Colorado’s heightened interest in the matter, came after CNN showed Jones a transcript of a 2016 deposition of one of Aetna’s former medical directors. During that proceeding, Dr. Jay Iinuma, Aetna’s medical director for Southern California from 2012 to 2015, appeared to say that he did not review patient records when making a decision about whether to approve or deny coverage but rather relied on nurses’ information and recommendations to him, according to the report. Iinuma’s testimony was part of a lawsuit against Aetna filed by a then-19-year-old man who was denied coverage for a procedure to treat his autoimmune disease.

Jones said in statement, “If a health insurer is making decisions to deny coverage without a physician ever reviewing medical records, that is a significant concern and could be a violation of the law.”

But in a statement released Wednesday morning, Hartford, Connecticut-based Aetna said that medical records were, in fact, an integral part of the clinical review process during Iinuma’s tenure at the company, and that the statement used in the CNN report was taken out of context.

“Aetna medical directors review all necessary available medical information for cases that they are asked to evaluate,” according to the statement. “That is how they are trained, as physicians and as Aetna employees. In fact, adherence to those guidelines, which are based on health outcomes and not financial considerations, is an integral part of their yearly review process. As Dr. Iinuma stated in his deposition, his evaluation ‘was to ensure care was being provided in a safe and effective manner.’”

Aetna also said the physician made a sworn statement on Feb. 13, after the story appeared that, “in addition to reviewing the relevant portions of submitted medical records, it was also generally my practice to review Aetna nurses’ summaries, notes, and the applicable Aetna clinical policy bulletins. After reviewing the relevant, submitted portions of the medical record, the nurse’s notes, and the clinical policy bulletin(s), I would apply my medical training, experience, and judgment to reach an appropriate coverage determination.” The insurer released the physician’s redacted statement along with its own.

Dave Jones (Photo: Rich Pedroncelli/AP)

Dave Jones (Photo: Rich Pedroncelli/AP)

An attempt to reach the physician by phone Wednesday was unsuccessful.

The increased scrutiny comes amid Woonsocket, Rhode Island-based CVS’s plan to purchase Aetna for about $69 million. That proposed merger currently is under review by the U.S. Department of Justice.

Andre Barlow, an antitrust lawyer at Washington’s Doyle, Barlow & Mazard, said despite the state regulators’ inquiries, the merger likely is in no jeopardy. “It is always concerning when some past conduct by a target [acquired company] is uncovered during the merger review process, but typically these issues do not derail a deal,” he said. “In some cases, the buyer may already know about the issue, and it has been disclosed.”

State regulators are important in any review of a merger, Barlow said. And unlike federal regulators, who are concerned with harm to competition, state regulators use a broader standard—whether a merger is in the public interest, he added. Thus, they could consider a number of factors, including local competition and the companies’ financial condition, and use these investigations to obtain broader concessions than the DOJ Antitrust Division could.

“There may be things that will come out of this investigation that relate to certain conduct-type remedies that are unrelated to what the Antitrust Division would sign off on,” he said.

While mere announcements of increased scrutiny into Aetna’s claims approval and appeals processes may not in and of themselves threaten the planned merger, sufficiently adverse results from them could give CVS an out, if the company were interested in one, said Shannon Zollo, corporate partner at Boston-based law firm Morse, Barnes-Brown & Pendleton.

“Let’s just say that if the states concluded that bad things had been occurring and imposed some type of fine or restrictions, the buyer can take the position that they can walk away,” he said. “But if the buyer doesn’t want to walk away, it may use [those adverse developments] to re-leverage conditions or terms.”

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