Alleging that a large national health insurer has been wrongfully denying claims and avoiding payment on hundreds of others, Potomac Hospital filed a lawsuit in Prince William County Circuit Court last week seeking more than $1 million for services.

The eight-page complaint, filed Aug. 18, alleges that NYLCare Health Plans of the mid-Atlantic has for months been denying and delaying payment on claims of about $1 million that nonprofit Potomac Hospital has filed for reimbursement. According to hospital officials, Potomac has consistently been performing regular services for hundreds of patients covered by NYLCare but has not been receiving payment from the insurer.

A spokesman for Aetna Life & Casualty Co., which acquired NYLCare in 1998, said he could not comment on the lawsuit because company officials had not been served with it as of yesterday.

"Beginning in the spring of 1998, Potomac Hospital recognized a pattern of improper denials of payment and erroneous payment adjustments by NYLCare," hospital spokeswoman Charlene Wilkins said Friday. "NYLCare would fail to pay claims in a timely manner, would utilize unjustified technical denial adjustments that reduce or eliminate the total allowable amount per claim, would deny payments for services provided . . . and would engage is other unfair and deceptive claims practices."

NYLCare, which has been working with Potomac Hospital since 1992 under a contract that allows its members to receive services there, is one of several large national health maintenance organizations that send patients to Potomac.

Wilkins said that the hospital relies on such private contracts for its funding and that these contracts allow allow Potomac to provide more than $4 million in indigent care each year. She said that not being reimbursed by NYLCare has had "a significant impact on the hospital's budget."

In July 1998, shortly after Potomac allegedly began having problems with NYLCare, the health-care provider was bought out by Aetna, a nationwide insurance company. Walt Cerniak, an Aetna regional spokesman, said the transition after the buyout is not related to any problems that may have risen with Potomac.

"We have been in discussions with Potomac Hospital for several months to address some of the concerns they have," Cerniak said. "We are committed to paying clean claims in a timely manner, and we are always looking to improve the services that we provide."

Cerniak said Aetna purchased NYLCare, one of the largest providers in the mid-Atlantic region, as part of a larger strategy to expand its health insurance business. He said the NYLCare acquisition was one of three major buyouts in the past three years. He said the takeover of NYLCare has been a "gradual process" that won't be completed in Virginia's markets until well into 2000.

Aetna has not reported any kind of performance for NYLCare separately, said Lori Prince, managing director, senior health services at New York-based CIBC World Markets investment bankers. "So it's difficult to say how they are performing except that NYLCare has met their expectations."

She said that despite hearing several "anecdotes" such as the situation with Potomac Hospital, Aetna has reported nothing about NYLCare.

Wilkins said Potomac's alleged problems with NYLCare claims run the gamut of services the hospital provides, from regular check-ups to major surgery. The lawsuit alleges that NYLCare officials gave "explicit and/or implicit assurances . . . that it intended to work in good faith with Potomac to resolve the claims issues" and that Potomac continued to work with NYLCare subscribers under the assumption that the hospital would eventually be paid.

"We waited as long as we thought appropriate," Wilkins said.

Potomac is seeking $1 million in services rendered and $350,000 in punitive damages, according to the lawsuit.

Potomac's attorney, Dana J. Finberg, said that the sum is modest in the larger picture but that the amount means quite a bit to the nonprofit hospital.

Finberg is also working on a case filed in federal court in Richmond against NYLCare on behalf of Mary Washington Hospital in Fredericksburg. Finberg said that complaint seeks $3 million in similar compensation.

"They essentially boil down to billing disputes between the hospitals and NYLCare," Finberg said last week.

Potomac Hospital said it plans to continue offering services to NYLCare members despite the alleged problems. Wilkins said the hospital does not want its patients to suffer because of the dispute.

Staff writer Amy Joyce contributed to this report.