Payment Issues (for Physicians)

Also under Emergency services and Managed care payments

Issue

The issue in this case was whether Florida's Emergency Services Statute (ESS) can be enforced by a non-government entity.

AMA interest

The AMA supports prompt and fair payment for physicians' services.

Case summary

The ESS provides that if emergency medical services are provided to an HMO subscriber, the HMO is to pay for those services at the market rate.  Adventist Health System, which owned a chain of hospitals in Florida, sued Blue Cross and Blue Shield of Florida (Florida Blue) under the ESS, claiming that it had been underpaid for emergency services.  The trial court ruled in favor of Florida Blue, without considering whether Florida Blue had violated the ESS payment requirements.  It held that the ESS cannot be a basis for a lawsuit by a non-government entity, and that, even if it could, Adventist had not exhausted the administrative review process.  Adventist appealed.

The District Court of Appeal reversed the trial court, finding that the ESS implied a private right of action.  It further held that Adventist was not required to exhaust its administrative remedies.

Litigation Center involvement

The Litigation Center filed an amicus curiae brief to support Adventist's interpretation of the ESS -- in favor of an implied private right of action.

Florida Court of Appeals brief.

Also under Managed care payments and Usual, customary, and reasonable payments

Issue

The issue in this class action lawsuit is whether Aetna systematically understated its calculation of “usual, customary and reasonable” (UCR) payments for out-of-network medical services.

AMA interest
The AMA supports fair policies and practices regarding payment for physician services.

Case summary

The American Medical Association, several state medical societies, and two individual physicians sued Aetna Health and its various subsidiaries.  The complaint alleged that Aetna systematically miscalculated the "usual, customary and reasonable" (UCR) amounts paid to out-of-network physicians.  The miscalculations arose out of Aetna's use of two databases maintained by Ingenix, a subsidiary of United HealthCare.  The complaint asserted violations of ERISA, RICO, and the Sherman Antitrust Act.  The Judicial Panel on Multidistrict Litigation consolidated the various cases against Aetna that claim damages on account of its use of the Ingenix databases. 

On December 7, 2012, the provider and subsriber plaintiff classes (not including the association plaintiffs, as they are not a part of either class), presented a settlement agreement to the court, which would settle the class claim.  Under the settlement agreement, Aetna could potentially have to pay $120 million in damages.  However, that sum is subject to various contingencies.  The provider plaintiffs can claim against a $20 million fund reserved for provider claims.  Alternatively, provider plaintiffs can clain against a $60 million general fund along with subscriber plaintiffs.  The court must now decide whether it will aprrove the settlement.

In the meantime, the medical associations are seeking to settle their injunctive claim against Aetna.

AMA involvement
The AMA is a named plaintiff in the case.

477 Fed.Appx. 543 (11th Cir. 2010)

Outcome:     Very unfavorable

Also under Managed care payments and Usual, customary, and reasonable payments

Issue
The issue in this class action lawsuit is whether CIGNA systematically understated its calculation of “usual, customary and reasonable” (UCR) payments for out-of-network medical services.

AMA interest
The AMA supports fair policies and practices regarding payment for physician services.

Case summary

The American Medical Association, several state medical societies, and two individual physicians sued CIGNA and its various subsidiaries.  The case was consolidated with a parallel class action brought by patients.  The consolidated complaint alleged that CIGNA systematically miscalculated the "usual, customary and reasonable" (UCR) amounts paid to out-of-network physicians or received by patients.  The miscalculations arose out of CIGNA's use of two databases maintained by Ingenix, a subsidiary of United HealthCare.  The complaint asserted violations of ERISA, RICO, and the Sherman Antitrust Act.

After the suit was filed, CIGNA obtained an order from the United States District Court for the Southern District of Florida requiring the AMA and the various state medical societies to show cause why they should not be held in contempt for proceeding with the New Jersey litigation.  CIGNA argued that the New Jersey claims were released pursuant to a settlement agreement entered into in 2003 as part of In re Managed Care Litigation; MDL No. 1334, which was litigated in the Southern District of Florida.  This was notwithstanding that the claims asserted in the New Jersey litigation arose subsequent to the signing of the earlier settlement agreement, the AMA was not a party to the settlement with CIGNA, and the AMA was not even a party in the In re Managed Care Litigation.  The enjoined parties appealed this order to the United States Court of Appeals for the Eleventh Circuit, but the Eleventh Circuit denied the appeal, holding that the proper way to challenge the injunction was through an appeal of an order of contempt. 

The New Jersey court dismissed, without prejudice, all claims that the Florida court had ordered dismissed. Also, on September 23, 2011, the New Jersey court found that the plaintiff physicians and medical societies had failed to allege a proper cause of action, and it dismissed their claims.  The court held that the physicians had failed to allege an assignment of all benefits under their patients’ insurance policies with CIGNA, rather than merely an assignment of CIGNA’s payments.

On January 12, 2012, the physician plaintiffs and the medical societies sued CIGNA in the United States District Court for the Northern District of Georgia.  The complaint asserted many of the claims that were dismissed by the New Jersey judge. 

On January 10, 2013, the Florida court ordered the medical societies to dismiss the majority of their outstanding claims, and on February 4, 2013 the case was dismissed.

AMA involvement
The AMA was a named plaintiff in the case.

588 F.Supp.2d 432 (2008) (S.D.N.Y.)

Also under Managed care payments and Usual, customary, and reasonable payments

Issue

The issue in this class action lawsuit was whether United HealthCare (UHC) had been systematically understating its calculation of "usual, customary, and reasonable" charges when paying physicians or reimbursing patients for out-of-network medical services.

AMA interest

The AMA supports fair policies and practices regarding payment for physician services.

Case summary

Most reimbursement health insurance policies provide that out of network insurance benefits are to be based on whichever of the following amounts is lowest: (i) the physician’s actual charge; (ii) the physician’s usual charge; or (iii) the "reasonable and customary charge" for the services. The "reasonable and customary charge" is defined as "the usual charge of other doctors or other providers of similar training or experience in the same or similar geographic area for the same or similar service or supply."  This payment scheme is commonly called "usual, customary and reasonable" or UCR.  The insurance company determines the reasonable and customary portion of the UCR charge, supposedly based on information available to it but not to the general public.

This suit, which was filed on March 15, 2000, alleged that UHC’s subsidiary, Ingenix Corp., had developed a database to determine UCR and frequently used unreliable or insufficient data to make that determination.  The plaintiffs asserted that the reasonable and customary charges for certain procedures were substantially higher than UHC had allowed.

The AMA, the Medical Society of the State of New York, the Missouri State Medical Association, individual physicians and subscribers/beneficiaries, and several unions of New York State employees were named plaintiffs. The suit alleged that the plaintiffs were representatives of a large class of physicians, subscribers, and beneficiaries.

Based primarily on the information given him by the plaintiffs in this lawsuit, in 2007 and 2008 the New York Attorney General undertook a broad investigation into the use by insurers of defective databases when determining "usual, customary and reasonable" payments made to out of network healthcare providers.  Following that investigation, the Attorney General publicly reported that UHC had been fraudulently underpaying New York consumers through its use of the flawed Ingenix database.  The United States Senate Committee on Commerce, Science and Transportation subsequently released its own report, which similarly concluded that major health insurers had been underpaying out-of-network benefits, based on the Ingenix database.

To resolve the consumer fraud claim of the Attorney General, on January 13, 2009 UHC announced that it would discontinue its defective database.  As part of its settlement with the Attorney General, UHC also paid $50 million to a not-for-profit corporation, which was then to develop a replacement database, using more transparent methodologies.  Several other large health insurance companies, which had also been using the defective Ingenix database to determine UCR payments, made their own settlements with the Attorney General and made their own contributions to the development of the replacement database.  As a result, close to $100 million in insurance company funds was paid for that purpose. 

Pursuant to its settlements with the insurance companies, the New York Attorney General appointed the trustees of a new not-for-profit corporation, known as FAIR Health, to develop and manage the replacement database.  He also designated a coalition of universities in New York State to assist in that effort.  The data and methodology in the new database are to be accessible to the general public.  Hence, the new database is to be more transparent than the old one, and it should be free from conflicts of interest.

On January 14, 2009, one day after it settled with the New York Attorney General, United signed a settlement agreement with several of the plaintiffs in the American Medical Association lawsuit, including the three medical societies.  Under the settlement, United agreed to pay $350 million to the plaintiff class.  A number of plaintiffs, through their attorneys, strenuously opposed the settlement.  Following lengthy hearings and extensive briefing, the trial court approved the settlement on a preliminary basis, conditionally certified the plaintiff classes, and established an agenda for the remaining trial court proceedings. 

At the conclusion of the case, the attorneys who had been opposing the settlement advised the court that they now supported it.  Thus, these attorneys switched their position by 180 degrees.  At the same time and by a consolidated motion, all of the plaintiffs’ attorneys asked the court to award them, jointly, 25% of the $350 million recovery from UHC, or $87.5 million in fees.  As an element of justification for their share of the award, the attorneys who had originally opposed and then switched their position sought compensation for the legal services they had expended to oppose the settlement.

The medical societies, representing themselves and the Litigation Center, objected to compensation being paid to these law firms for work incurred in objecting to the settlement.  The medical societies argued that, to the extent the attorneys opposed the settlement, they did not provide a benefit to the plaintiff class and instead created delay and caused an unnecessary expenditure of resources to defend it.  It was argued that the attorneys should not be rewarded for such wasteful actions, at the expense of patients and physicians.  A final fairness hearing was held on September 13, 2010 following which the court entered an order unconditionally approving the settlement and payment of attorneys’ fees of $87.5 million, the full amount requested.  

The aggregate payment to physicians was approximately $200 million.

AMA involvement

The AMA was a named plaintiff in the case.

Also under Managed care payments and Usual, customary and reasonable payments

Issue

The issue in this class action lawsuit is whether WellPoint systematically understated its calculation of “usual, customary, and reasonable” (UCR) payments for out-of-network services.

AMA interest

The AMA supports fair policies and practices regarding payment for physician services.

Case summary

The American Medical Association, several state medical societies, and a number of individual physicians sued WellPoint, Inc.  The complaint alleged that WellPoint systematically miscalculated UCR payments to out-of-network physicians.  The miscalculations arose out of WellPoint's use of the databases maintained by Ingenix, a subsidiary of United HealthCare.  The complaint asserted violations of ERISA, RICO, and the Sherman Antitrust Act.

The Judicial Panel on Multidistrict Litigation consolidated the AMA case with various other cases against WellPoint that claim damages on account of its use of the Ingenix databases to calculate UCR payments.  WellPoint moved to dismiss the consolidated complaint.  The court granted that motion in part and denied it in part.

In the meantime, the United States District Court for the Southern District of Florida enjoined the AMA, various state medical societies, and the named physician plaintiffs from proceeding with the California litigation with WellPoint.  The Florida court found that the claims were released pursuant to a settlement agreement entered into in 2006 as part of In re Managed Care Litigation; MDL No. 1334, which had been litigated in the Southern District of Florida.  This is notwithstanding that the claims asserted in the California litigation arose subsequent to the signing of the earlier settlement agreement, the AMA was not a party to the settlement with WellPoint, and the AMA was not even a party in the In re Managed Care Litigation.  The enjoined parties appealed the order to the United States Court of Appeals for the Eleventh Circuit, but the Eleventh Circuit denied the appeal, holding that the proper way to challenge the injunction was through an appeal of an order of contempt.

On September 6, 2012, the Central District of California dismissed most of the counts on various technical bases.

AMA involvement

The AMA is a named plaintiff in the case.

Also under Managed care payments

Issue
The issue in this case was whether an insurance company had improperly "bundled" and "downcoded" medical services provided by anesthesiologists, which resulted in underpayment to those anesthesiologists for the services provided.

AMA interest
The AMA supports fair payment to physicians for their medical services.

Case summary
A number of Wisconsin anesthesiologists complained of improper "bundling" (i.e., packaging of medical services for payment purposes) and "downcoding" by Wisconsin Blue Cross/Blue Shield, contrary to standard Current Procedural Technology ("CPT") coding guidelines for classification of physicians’ services. The Litigation Center supported the Wisconsin anesthesiologists in their efforts to secure just payments from Wisconsin Blue.

When the anesthesiologists informed Wisconsin Blue that the AMA was supporting them, Wisconsin Blue initiated settlement discussions. The case settled in the anesthesiologists’ favor.

Litigation Center involvement
The AMA provided general consultation and referral to expert witnesses, as well as publicly declaring support for the physicians.

Also under Medicare

Issue
The issue in this administrative proceeding was whether a Medicare fiscal intermediary could recover alleged overpayments it had made to physicians for prescription medications, when the physicians were without fault and the fiscal intermediary had implemented ambiguous and inconsistent payment policies.

AMA interest
The AMA opposes unfair and untimely efforts by payers to recover money paid to physicians for their services, particularly if the physicians continued to render services or incur expenses under the good faith belief that the money they were being paid was the amount they were entitled to receive.

Case summary
Approximately 120 urologists, oncologists, and other physicians (located primarily in Oklahoma and New Mexico), resisted an attempt by Blue Cross & Blue Shield of Arkansas (Arkansas Blue), a Medicare fiscal intermediary, to secure a refund of alleged overpayments made for Lupron. Fiscal intermediaries operate under directives from the federal Centers for Medicare & Medicaid Services (CMS), which funds Medicare. Lupron, most commonly prescribed by urologists and oncologists, is a drug used to treat prostate cancer, among other medical conditions. Because prostrate cancer is an age-related illness, many of the patients using it are covered by the Medicare program.

Beginning in July, 2001, Arkansas Blue announced that it would no longer reimburse physicians who administered Lupron at the Lupron average wholesale price. Instead, Arkansas Blue would pay at the scheduled rate for a less expensive drug, Zoladex, which Arkansas Blue claimed was equally effective. These announcements, however, were ambiguous and inconsistent, and Arkansas Blue continued to pay physicians at the Lupron price through approximately March, 2003.

In April, 2004, Arkansas Blue sent letters to physicians within its coverage area advising them of overpayments for Lupron and requesting records pertaining to Lupron usage as a basis for refund of the supposed overpayments. Arkansas Blue claimed the overpayments ranged from around $10,000 to $200,000 per physician. The total refund claim came to several million dollars.

Under the Medicare laws, if an amount paid to a provider of services is beyond the amount allowable under those laws, the excess may be recovered from the provider, subject to certain exceptions. One of those exceptions is that an overpayment may not be recovered if "such provider of services … was without fault with regard to the payment of such excess over the correct amount." The physicians argued that they were "without fault" and therefore had no obligation to repay the alleged overpayments. They further argued that, due to the ambiguities and inconsistencies of the Arkansas Blue payment policies, coupled with its continued reimbursement at Lupron rates, the physicians could not have been expected to know that they would only be paid at Zoladex rates.

Ultimately, CMS accepted the physicians’ "without fault" argument. As a result, CMS sent letters to the physicians who protested the repayment letters, stating that it would not allow Arkansas Blue to recoup the supposed overpayments.

Litigation Center involvement
The Litigation Center contributed toward the physicians' legal expenses.

(American Arbitration Association)

Issue

The issue in this case is whether in-network clinical pathologists can charge patients’ insurance companies for professional component services.

AMA interest

The AMA advocates that third party payers provide appropriate coverage for plan oversight codes, such as codes used for billing professional component services. The AMA also believes that a professional fee should be paid directly to the appropriate physician for clinical laboratory work, regardless of payer source.

Case summary

The “professional component” of pathologists’ services involves the supervision of a pathology laboratory, to make sure that the diagnostic testing equipment functions properly and that the laboratory personnel are qualified for their jobs and follow appropriate protocols. These services are rendered for the benefit of all patients tested by the laboratory, so a specific professional component service is difficult to correlate directly with a benefit for a specific patient, distinct from the benefits to other patients. Professional component services are billed and paid separately from services in which a pathologist performs or analyzes a laboratory test for a specific patient.

Prior to July 19, 2004, United Health Care of Illinois routinely reimbursed in-network pathologists’ professional component services. Beginning on that date, however, UHC of Illinois has been denying reimbursement for pathologists’ professional component services.

The claimant in this action, Associated Pathology Consultants, filed a class arbitration with the American Arbitration Association to contest the UHC of Illinois change of policy. They contend that UHC of Illinois was and is obliged to pay for pathologists’ professional component services as a “covered Health Service” under its standard participation contracts. They seek compensatory damages for breach of contract, plus a declaration that, going forward, UHC of Illinois is obliged to pay for pathologists’ professional component services.

The claimants secured an order from the arbitration panel allowing the case to proceed on a class basis. UHC of Illinois appealed that order to a court, but the court affirmed the class arbitration order on appeal. The case was then remanded to the American Arbitration Association.

The case was subsequently settled.

AMA/Litigation Center involvement

The AMA CPT Department offered expert testimony to support the plaintiff pathologists. The Litigation Center supports the pathologists’ arbitration.

2002 Cal. LEXIS 2290 (Cal. Mar. 27, 2002) (unpublished decision)

Also under Managed care payments

Issue
The issue in this case was whether under a California statute, HMOs were required to pay physicians who had rendered services to the HMO’s patients, after the bankruptcy of the Independent Practice Associations with which those physicians had been under contract.

AMA interest
The AMA supports fair and prompt compensation of physicians for the services they render.

Case summary
In California, HMOs are licensed and regulated under the Knox-Keene Health Care Service Plan Act of 1975. California HMOs commonly contract with unlicensed and unregulated organizations known as Independent Practice Associations ("IPAs"), which, in turn, contract with individual physicians. The HMOs reimburse the IPAs through capitated payments (i.e., set payments per patient); however, the IPAs usually pay the physicians on a fee for service basis. The contracts between the physicians and the IPAs typically state that the physicians must "look solely" to the intermediaries for payment. There is no direct contractual relationship (legally, "privity") between the HMOs and the individual physicians.

Several of the large IPAs with offices in California (and in other states, particularly Texas) went bankrupt. When this occurred, many physicians, who had already rendered services to the HMOs’ patients, had only an unsecured claim in bankruptcy court for the money that the IPAs owed them. Unsecured creditors are nearly the lowest priority of potential claimants in a bankruptcy case. Therefore, the physicians received little or nothing for their services from the bankrupt IPAs. They thus asked the HMOs to pay them for their services to the HMOs’ patients.

In response to these requests, the HMOs contended that they had no privity with the physicians. Under the common law of contracts, any money the HMOs owed was to the bankruptcy estate. Thus, the HMOs argued, the physicians, who contracted with the defunct IPAs, bore the risk of their insolvency.

Section 1371 of the Knox-Keene Act, a prompt payment law, states that a managed care plan must pay uncontested claims within 30 or 45 working days (depending on the circumstances) of the plan’s receipt of the claim. The last sentence of this section states as follows:

"The obligation of the plan to comply with this section shall not be deemed to be waived when the plan requires its medical groups, independent practice associations, or other contracting entities to pay claims for covered services."

The California Medical Association (CMA) solicited California physicians with claims against bankrupt IPAs to assign those claims to it. As a result, CMA accumulated tens of millions of dollars of such claims. CMA sued several of the large California managed care organizations for recovery of this money. CMA contended that the HMOs, exercising their market power, insisted that physicians contract with the IPAs, rather than the HMOs. At the same time, the HMOs knew that their capitation payments to the IPAs were so small that the IPAs stood a substantial risk of insolvency. The principal CMA legal theory was that Knox-Keene Act §1371 repeals the common law requirement of contractual privity and mandates that the managed care organizations pay CMA as the physicians’ assignee.

The trial judge dismissed the CMA lawsuit based on the pleadings, and the Court of Appeal affirmed the dismissal. CMA asked the California Supreme Court to hear the case on a discretionary basis. However, on March 27, 2002, the California Supreme Court, with one justice dissenting, declined to hear the case.

Litigation Center involvement
The Litigation Center filed a letter brief with the California Supreme Court, supporting the CMA request. The letter brief emphasized the importance of the case, both within California and the entire United States.

California Supreme Court letter brief.

Concentra, Inc. and two of its subsidiaries provide cost management services to insurance companies and other entities that pay medical bills arising from workers’ compensation injuries and automobile accidents. The services are of two types: maintenance of a PPO network and repricing of medical bills.

First State Orthopaedics brought a class action lawsuit in the United States District Court in Philadelphia, alleging breach of a form written contract and the supplying of incorrect repricing information. Almost immediately after the suit was filed, the parties agreed to settle it. The settlement, in essence, was that the defendants would make certain changes in their business practices, and the plaintiff class, which appears to include several hundred thousand physicians, would release any claims it may have against the defendants. The settlement did not provide for any monetary payments to the plaintiff class.

The AMA, along with a single physician from Texas, objected to the settlement. At the preliminary approval hearing, the judge urged the parties to modify their settlement, bringing it more in line with the AMA (and the Texas physician’s) objections, and the parties did so. While the revised settlement still falls short of what the objectors sought, it is an improvement over the original proposal. Even as revised, it does not provide for monetary compensation to the plaintiff class.

On May 1, 2006, the court conditionally approved the settlement and certified the plaintiff class. The plaintiff class was notified of the settlement in June. 2006, and opt outs from the plaintiff class or objections to the settlement were to have been filed by Sept. 12, 2006. With the assistance of several state medical societies, the AMA has urged physicians to opt out of the proposed settlement. Only a handful of opt outs and objections were filed by the deadline.

On Oct. 16, 2007, the court entered an order and decision approving the settlement.

Also under Managed care payments and Prompt payment laws

Issue
The issue in this case was whether the Florida HMO prompt payment law, Fla. Stat. § 641.3155, can be enforced through a private (i.e., non-governmental) right of action.

AMA interest
The AMA supports fair policies and practices regarding payment for physician services.

Case summary
The plaintiff group of physicians, Westside EKG Associates, was outside the network of the defendant HMOs. Although the health insurance contracts between the HMOs and Westside’s patients did not refer to the HMO prompt payment law, Westside maintained that, by implication, the prompt payment law was incorporated into those contracts. Westside further contended that it was a third party beneficiary of those contracts.

The trial court entered judgment on the pleadings in favor of the HMOs. On appeal, the Florida District Court of Appeal reversed, ruling in favor of Westside. The District Court of Appeal certified the case to the Florida Supreme Court as an issue "of great public importance."

The Florida Supreme Court affirmed the District Court of Appeal, holding that the physicians could sue the HMOs for violation of the prompt payment law as third-party beneficiaries of the contract between the HMOs and their subscribers.

Litigation Center involvement
The Litigation Center, joined by the Florida Medical Association, the Florida Hospital Association, and the Florida College of Emergency Physicians, filed an amicus curiae brief in support of the physicians.

Florida Supreme Court brief.

Also under Managed care payments

Issue
The main issue in these consolidated cases was fair and prompt payment by insurance companies to provider physicians.

AMA interest
The AMA supports fair policies and practices regarding payment for physician services.

Case summary
Harrison v. Aetna, as originally filed, sought to enforce the Georgia prompt payment law. However, it was subsumed into the Multidistrict Litigation known as In Re Managed Care Litigation—Provider Track Cases, pending in the United States District Court for the Southern District of Florida and, in such re-configuration, embraced a host of additional issues.

The original class action lawsuit was filed in Georgia state court and included the AMA, the Medical Association of Georgia, and three physicians as plaintiffs. The suit sought monetary damages under Georgia law on account of late payments of physician claims. The Georgia prompt payment statute provides that insurance companies must pay interest on "clean claims" from physicians, which are unpaid after 15 working days of their receipt. The suit contended that Aetna routinely failed to pay claims within that time frame. Shortly after the suit was filed, the Georgia Insurance Commissioner fined Aetna $61,305 for violations of the prompt payment law.

Aetna removed the suit to federal court in Georgia, contending that the suit involved an interpretation of the federal ERISA statute and thus invoked federal question jurisdiction. The plaintiffs subsequently filed an amended complaint, adding a count under ERISA.

The Federal Judicial Panel on Multidistrict Litigation ("MDL") ordered this case and its companion cases transferred to Judge Federico Moreno in the United States District Court for the Southern District of Florida. Once transferred, it was consolidated with other lawsuits against managed care entities. The consolidated litigation was designated In Re Managed Care Litigation—Provider Track Cases and encompassed a broad range of allegations. The most notable allegation was a charge that the principal managed care organizations in the United States conspired to defraud physicians and other health care providers, in violation of the Racketeer Influenced and Corrupt Organizations Act (RICO). Although the AMA was a plaintiff in the Managed Care MDL proceedings, it was not named as a plaintiff in the consolidated MDL/RICO complaint.

Following an interlocutory appeal by the defendants on the issue of arbitrability, the Eleventh Circuit Court of Appeals ruled that, while some of the claims had to be referred to an arbitrator, others could be adjudicated in court. The case was then remanded to the trial court, and discovery began.

The United States Supreme Court heard one of the arbitrability issues, under the caption PacifiCare Health Systems v. Book. The Supreme Court found that at least some of the claims that the Eleventh Circuit and the trial court had deemed non-arbitrable should have been submitted to arbitration, and it reversed the lower courts on this point. Subsequently, in light of the Supreme Court decision, the plaintiffs voluntarily dismissed certain of their claims and the defendants moved to dismiss others.

On September 26, 2002, Judge Moreno certified the Managed Care Provider Track MDL as a national class action, including approximately 600,000 physicians, finding that the plaintiffs had demonstrated the existence of a common scheme among large managed care organizations to defraud physicians. The Eleventh Circuit affirmed the class certification as to the RICO-based claims but ordered that the class be decertified as to actions based on state law.

On October 24, 2003, the court approved a settlement among the plaintiff class and Aetna, Inc. The settlement, among other things, required Aetna to disclose its coding edits, adopt certain Current Procedural Terminology (CPT) conventions, clarify the criteria under which medical procedures would be deemed "medically necessary," fund a charitable foundation, and reimburse up to $100 million to the class of plaintiff physicians. The court also approved payment by Aetna to the plaintiff class attorneys of $50 million in fees and expenses. The settlement approval was appealed, but the Eleventh Circuit affirmed the trial court.

The court also approved a settlement agreement between CIGNA and the plaintiffs. That settlement agreement, like the Aetna settlement, required disclosure of coding edits, adoption of certain CPT conventions, clarification of medical necessity criteria, funding of a charitable foundation, and reimbursement of money to the plaintiff class. It also provided for an overall payment of $55 million to the plaintiffs' attorneys. The CIGNA settlement was not appealed.

On Sept. 20, 2004, the Eleventh Circuit stayed all trial court proceedings, pending disposition of the insurance companies' numerous appeals of the trial court's rulings as to the effect of the arbitration clauses in the physician panel contracts. On November 5, 2004, the Eleventh Circuit (in an appeal involving both signatories and nonsignatories of broad arbitration agreements) held in Klay v. All Defendants, 389 F.3d 1191 (11th Cr. 2004) that the "law of the case" doctrine precluded revisiting previous rulings regarding indirect RICO claims and the federal policy favoring arbitration was not applicable to disputes that the parties had not agreed to arbitrate.

On Sept. 26, 2005, Judge Moreno of the United States District Court for the Southern District of Florida entered an order approving settlement among Prudential and physicians. 2005 U.S. Dist. LEXIS 21472 On June 19, 2006, Judge Moreno granted summary judgment for United Health Care and Coventry on plaintiffs’ claims of conspiracy to underpay physicians or aid and abet RICO violations. 430 F. Supp.2d 1336. The Eleventh Circuit affirmed that ruling on June 13, 2007. 2007 U.S. App.LEXIS 13813.

AMA involvement
In addition to its participation as a named plaintiff in the original Harrison v. Aetna case, the AMA assisted the plaintiffs with substantial technical advice on coding and other payment issues. The AMA also assisted in educating physicians about the Aetna and CIGNA settlements.

Issue

The issue in this class is whether in-network clinical pathologists can charge insurance companies for professional component services.

AMA interest

The AMA advocates that third party payers provide appropriate coverage for plan oversight codes, such as codes used for billing professional component services.  The AMA also believes that a professional fee should be paid directly to the appropriate physician for clinical laboratory work, regardless of payer source.

Case summary

Richard J. Hausner, M.D. and Associates and Pathology Associates of San Antonio, L.L.P., are groups of physicians that include pathologists and participate in the United HealthCare of Texas provider panel.  After United refused to pay their professional component pathology services, Hausner and Pathology Associates filed a class arbitration with the American Arbitration Association. 

The claimants contend that United was and is obliged to pay for pathologists' professional component services as a "covered Health Service" under its standard participation contracts.  The claimants seek compensatory damages for breach of contract, plus penalties, interest, and attorneys' fees under the Texas Prompt Pay Statute.  They also seek a declaration that, going forward, United is obligated to pay for these services.

The pathologists asked the arbitration panel to certify the class status of the arbitration proceeding.  However, the panel denied the pathologists' motion.  Therefore, the physicians who brought this action will be representing themselves only.  Several other pathology groups have expressed an interest in bringing similar claims.

AMA involvement

The AMA CPT Department will provide expertise and/or testimony to assist the pathologists.

Also under Managed care payments

Issue
The issue here was whether a payor had obtained an unwarranted discount on hospital fees.

AMA interest
The AMA supports the full and appropriate provision of healthcare services, and in connection with that, the AMA supports third party payors’ approval of payment for those services.

Case summary
HCA had promised a third party that it would charge a discounted (by 25%) fee upon rendering specified medical services. The third party then "leased" the right to a fourth party, which (unbeknownst to the patient and HCA) "leased" the right to the 25% discounted fee to Employers Health Insurance (EHI).

The trial court found that EHI had secured an unwarranted discount on the fees charged by HCA, pursuant to a "silent PPO" scheme. EHI unsuccessfully argued that it was entitled to reduce initially by 25% HCA’s bill for its treatment of a patient and then pay HCA 80% (the rate for out-of-network providers) of the bill that already been discounted by 25%. (The patient had assigned to HCA his right to recover 80% of his out-of-network surgery costs). EHI appealed.

The Court of Appeals affirmed, finding that EHI’s claimed discounts were unauthorized and therefore invalid.

Litigation Center involvement
The Litigation Center filed an amicus brief to support HCA and the lower court’s ruling.

Also under Managed care payments

Issue
The issue in this case was whether various health insurance/managed care companies had conspired to defraud physicians through their payment practices.

AMA interest
The AMA supports fair and prompt payment to physicians for their services.

Case summary
These consolidated class actions, initiated by several individual physicians and medical societies, alleged that the principal managed care organizations in the United States conspired to defraud physicians and other health care providers, in violation of the Racketeer Influenced and Corrupt Organizations (RICO) Act. Most of the defendants settled.

The settlements, among other things, required the defendants to disclose their coding edits (i.e., changes made to the Current Procedural Terminology (CPT) codes), adopt certain CPT conventions, clarify the criteria under which medical procedures will be deemed "medically necessary," fund a charitable foundation, and reimburse up to several hundred million dollars to the class of plaintiff physicians.

Three of the defendants, however, were granted summary judgments. In essence, the court ruled that parallel actions by separate business enterprises, even if those actions may have been illegal, are not, by themselves, sufficient evidence of a RICO conspiracy.

AMA involvement
In addition to its participation as a named plaintiff in one of the original cases brought prior to the multidistrict consolidation, the AMA assisted the plaintiffs with substantial technical advice on coding and other payment issues. The AMA also helped to educate physicians about the settlements and to work with individual physicians and groups recovering past claims as part of these settlements.

Also under Managed care payments

Issue
The issue here was whether insurer CIGNA improperly reduced its payments to provider physicians.

Case summary
This class action lawsuit, originally filed in a Madison County, Illinois state court, alleged that, through the use of ClaimCheck Software, CIGNA improperly "bundled" and "downcoded" Current Procedural Terminology (CPT) procedures in order to reduce its payments to provider physicians. To justify such actions, CIGNA contended that the AMA sanctions the use of its edits.

The standard managed care agreement between CIGNA and the physicians on its PPO program panel provides that the physicians will be reimbursed for "Covered Services" at "the lesser of Physician’s usual and customary charge for the service provided or CIGNA’s … maximum fee schedule in effect at the time of the service, less applicable Copayments." The contract does not explicitly define what is meant by a physician’s "services." CIGNA, of course, drafted this form contract.

The case was certified as a nationwide class action. CIGNA moved to dismiss or stay the majority of the claims, contending that they were subject to arbitration agreements. CIGNA also filed a class action lawsuit in the United States District Court for the Northern District of Illinois to compel arbitration under the Federal Arbitration Act. In light of the parallel proceedings in state court, however, the federal district court declined to exercise jurisdiction. CIGNA appealed that decision, but the Seventh Circuit affirmed the ruling, with a slight, technical modification.

The plaintiffs filed their third amended complaint in the Madison County court. They expanded their claims to include violations of the federal ERISA and RICO statutes. CIGNA, on the basis of the federal statutory claims, removed the suit to the United States District Court for the Southern District of Illinois. On the same day, CIGNA and the plaintiffs signed a voluminous settlement agreement, which, subject to the court’s approval, would resolve all claims alleged in the federal district court, conditionally certified the plaintiff class and conditionally approved the proposed settlement. The order allowed class members an opportunity to opt out of the lawsuit. The settlement agreement could be finalized only if no more than 7.5% of the class members opted out of the lawsuit and if the agreement passed a fairness hearing to be held by the court.

The settlement provided for numerous forms of injunctive relief in favor of the plaintiff class. Much of the monetary relief would be contingent upon the class members’ submitting documentary proof of underpayments extending back to 1996. It also provided that CIGNA would pay the fees of the plaintiffs’ attorneys, who were to petition the court for their fees, costs, and expenses, in an amount not to exceed $36 million, and CIGNA, per its agreement, would not oppose such objection.

On Dec. 12, 2002, Judge Moreno, presiding judge in the Florida Managed Care Provider Track MDL (see case description of Harrison v. Aetna U.S. Healthcare), enjoined implementation of the settlement agreement. His order was directed toward "CIGNA, its attorneys … and any party acting in concert with CIGNA." In deference to this injunction, neither CIGNA nor the Kaiser plaintiffs attempted to implement the settlement. CIGNA and the plaintiffs both appealed the injunction to the Eleventh Circuit.

Pursuant to the rules on Multidistrict Litigation, this case was designated a potential "tag-along action." On Feb. 24, 2003, the Judicial Panel on Multidistrict Litigation transferred this case to Judge Moreno, for consolidation with the rest of the Managed Care Provider Track MDL.

Litigation Center involvement
To assist the plaintiffs at the class certification hearing, the AMA’s CPT Department submitted an affidavit, explaining to the court that the AMA interpreted CIGNA’s software edits differently from the way that CIGNA represented that those edits should be interpreted. The AMA, through the course of this case, also provided substantial technical support on coding issues. The Illinois State Medical Society also provided technical advice.

Also under Antitrust, Arbitration, and Managed care payments

Also under Managed care payments

Issue
The issue here was whether orthopedic surgeons were entitled to insurer reimbursement for performing multiple procedures when those procedures were performed through a single incision.

AMA interest
The AMA supports fair policies and practices regarding payment for physician services.

Case summary
This class action filed by orthopedic surgeons against a health insurance group alleged that the defendants utilized a reimbursement policy that wrongly denied physicians full compensation for medically necessary multiple procedures performed through a single incision, and instead reimbursed only for one procedure with the highest allowance. Plaintiffs alleged violations of state business and insurance law statutes, breach of contract and the implied covenant of good faith and fair dealing, unjust enrichment and fraud.

The parties ultimately settled the case, with the insurer agreeing to revise its policy so that reimbursement would be provided for all procedures performed through a single incision.

Litigation Center involvement
The Litigation Center provided the physician-plaintiffs with technical assistance through the submission of an affidavit by the AMA attesting to generally accepted medical payment practices and Current Procedural Terminology guidelines, under which the defining criteria for physician reimbursement should be the number of appropriate procedures performed and not the number of incisions made to perform such procedures.

Also under Workers' Compensation

Issue
The issue in this case was whether the Maryland Workers’ Compensation Commission ("WCC") should award payment for medical services according to the fee schedule established in the Maryland Medical Fee Guide, or whether and under what circumstances it had discretion to pay according to a lower rate if the health care provider has agreed to accept the lower rate under a managed care contract.

AMA interest
The AMA supports fair policies and practices regarding payment for physician services.

Case summary
Two claims, adjudicated by the WCC with apparently conflicting results, were appealed to the circuit court. The Maryland physicians believed that the WCC should have required that the health care providers be awarded the amount specified in the Maryland Medical Fee Guide fee schedule. However, the court entered summary judgment against the physicians on both claims.

Litigation Center involvement
The case was supported by MedChi, the Maryland State Medical Society, and by several groups of Maryland physicians. The Litigation Center also contributed to the defraying of these expenses.

Also under Medicaid and Medicare

In the late 1980’s, a number of state Medicaid programs adopted policies that limited or denied Medicaid reimbursement of Medicare Part B copayments for patients who qualify under both Medicare and Medicaid.  The issue is whether, in the event of such dual qualification, the states must pay at the higher Medicare rates, or whether they can pay at the lower Medicaid rates.  All four federal circuits that considered the issue prior to 1997 found that the state programs violated federal law and they were required to pay copayments based on the higher Medicare rates.

In January 1997, the Litigation Center, in states affected by these policies, began helping its members resolve their physician members’ Medicaid reimbursement shortfalls through negotiation with Medicaid programs and through litigation in both federal court (seeking declaratory relief prospectively) and state court (seeking payment of claims retrospectively).

In August 1997, Congress passed the Balanced Budget Act of 1997 (“BBA”), which authorized Medicaid’s underpayment of Medicare copayments for future medical services and which also attempted to moot any pending lawsuits filed to collect past-due reimbursement.  The Litigation Center challenged Congress’ retroactive application of the BBA provisions in court cases then pending in Montana and the District of Columbia. The Litigation Center also served as amicus curiae in related cases in Tennessee and Wisconsin.

The Seventh Circuit, the Ninth Circuit, and the U.S. District Court for the District of Columbia all held against the physician plaintiffs. The Litigation Center supported a petition for certiorari by the California Medical Association and filed its own amicus curiae brief.  The Supreme Court denied the CMA petition as well as similar petitions by other parties in these lawsuits.  In a final effort to preserve physician rights, the Litigation Center supported an appeal by the Medical Society of the District of Columbia to the D.C. Court of Appeals.  The case was named McCreary v. Offner.  The appellate court held that HHS’s permitting states to limit reimbursement to health care providers was reasonable. 

Interest in this Case: Physicians have provided medical services to poor and elderly patients and patients with disabilities, for which they have not been properly compensated by the Medicaid programs.  The Litigation Center wants to help these physicians recover the money they were promised at the time they rendered their services, according to the law in effect when those services were rendered. 

Result:  Following the above-mentioned rulings in other jurisdictions, the D.C. Court of Appeals also ruled against the physician plaintiffs.

Also under Managed care payments and Usual, customary, and reasonable payments

Issues
The issues in this case were whether Georgia Blue was required to provide its panel physicians with its fee schedule and the method by which that fee schedule was calculated.

AMA interest
The AMA supports fair policies and practices regarding payment for physician services.

Case summary
The Medical Association of Georgia ("MAG") and four of its members sued for a declaration that Georgia Blue had breached its provider contracts in a number of respects. The trial court ruled against the claims of the plaintiffs. The Georgia Court of Appeals, however, held that unless the provider contract with the physicians specifies otherwise, a health insurance company must provide its doctors with its fee schedule and "the precise methodology that is used for determining payments." The appellate court remanded the case to the trial court, with instructions to order Georgia Blue to follow its ruling. The Georgia Supreme Court denied requests from both sides to review the appellate court’s decision.

Following remand, the trial court ordered Georgia Blue to provide the information ordered by the Court of Appeals. Georgia Blue subsequently certified to the court that it had complied with the trial court’s and Court of Appeals’ orders.

MAG later asked the trial court to hold Georgia Blue in contempt of court, because although Georgia Blue had disclosed its fee schedule, it had not disclosed the various edits in its payment software which could significantly alter the payments made to physicians. On this basis, MAG argued that Georgia Blue had not disclosed "the precise methodology … used for determining payments," as the Georgia Court of Appeals had required.

The court denied MAG’s contempt motion. It indicated that Georgia Blue’s practice of bundling fees was a matter separate from its failure to disclose its fee schedule. MAG appealed from that order, but withdrew that appeal after determining that Georgia Blue was disclosing its payment edits.

Litigation Center involvement
The AMA asked the trial court for leave to join the case as an additional plaintiff, but that request was denied.

Also under Manged care payments and Usual, customary, and reasonable payments

Issue
The issue in this case was whether an out-of-network physician could sue HMOs to recover the full value of his fees for emergency services provided under statutory mandate to the HMOs’ beneficiaries.

AMA interest
The AMA supports fair payments to physicians for their medical services.

Case summary
Dr. Merkle, an orthopedic surgeon, sued four HMOs in the Circuit Court for Palm Beach County, Florida, alleging that he was outside the HMOs’ networks but regularly provided emergency medical services for their beneficiaries. For these services, the HMOs paid him at Medicare reimbursement rates, "plus a small premium." The HMOs’ payments systematically fell below his usual charges, and they also fell substantially below the usual and customary charges for such services in Palm Beach County.

The Florida Emergency Services Statute specifically required Dr. Merkle to provide his emergency services to HMO patients, even though he was out-of-network, yet the law prohibited him from balance billing the patients. However, Florida law also required the HMOs to reimburse him for his services at the lesser of (a) his charges, (b) the usual and customary charges for similar services in Palm Beach County, or (c) whatever charge the HMOs and he agreed upon within 60 days of the submittal of his claim. Since he had not come to an agreement with the HMOs, their payments fell below the legally designated standards.

The HMOs argued that the Emergency Services Statute was not intended to allow physicians or other providers of emergency medical services to bring a lawsuit against them to recover fees. Rather, they argued, the providers are constrained to follow a complex administrative procedure of the HMOs and the Florida Agency for Health Care Administration, as their exclusive remedy. The trial court accepted this argument and entered judgment for the HMOs. Dr. Merkle was not permitted to file an amended complaint, and he appealed.

The Florida District Court of Appeal reversed the trial court and found for Dr. Merkle, holding that the Florida Emergency Services Statute implied a private right of action and he was thus entitled to bring a lawsuit for its violation.

Litigation Center involvement
The amicus brief, submitted by the Litigation Center, the Florida Medical Association, two specialty medical societies, and the Florida Hospital Association, argued that the Florida legislature intended to allow providers of emergency medical services to sue the HMOs for the fair value of their fees.

Fourth District Court of Appeals brief.

2006 Mich. App. Lexis 3776 (Mich. App. 2006) (unpublished opinion)

Also under Managed care payments

Issue
The issue in this case was whether an insurance company serving as a third party administrator could obligate physicians included in its preferred provider listing to charge reduced fees even though the self-funded employer-insurer had no obligation to reimburse the participating physicians, and the administrator made no direct payment to physicians.

AMA interest
The AMA supports fair policies and practices regarding payment for physician services.

Case summary
Michigan physicians participating in Blue Cross Blue Shield of Michigan’s (BCBSM's) PPO network were bound by a Blue Preferred Plan Program Professional Provider Agreement (the "Trust Network Agreement"), which obligated physicians to charge reduced fees for certain "Covered Services" provided to patients enrolled in one of BCBSM's PPO products. These "Covered Services," however, included only those health care services "cited in Certificate," which Section 1.03 of the Trust Network Agreement defined as services listed in "Certificates/Riders/Benefit Plan Descriptions issued by BCBSM or under its sponsorship."

In 2003, the United Auto Workers Union ("UAW") and the three domestic automakers, General Motors, Ford, and DaimlerChrysler (collectively, the "Automakers"), decided, in their collective bargaining agreements, to establish new employee health care plans (the "New Health Plans") to replace their existing health plans. To form these new plans, the Automakers entered into agreements with BCBSM (the "Administrative Service Agreements") for it to provide administrative services, such as claims processing, record keeping, and enrollment tracking, while the Automakers would be responsible for the funding and underwriting.

As for the insureds, the New Health Plans operated in some ways like traditional PPOs. Patients were free to select their physician and were given incentives to choose a physician from BCBSM's established network. But unlike traditional PPOs, the insureds were required to pay the entire fee for office visits rather than a co-payment, and the UAW and the Automakers had no obligation to reimburse the participating physicians. Nonetheless, the insureds were promised the same reduced rate given to patients enrolled in BCBSM's PPO products. In addition, according to the New Health Plans, physicians bound by the Trust Network Agreement were obligated to charge the reduced rate, even though they did not benefit from having portions of their fees directly paid by BCBSM, as they did with patients enrolled in BCBSM-insured PPO products.

On July 21, 2004, BCBSM met with the Michigan State Medical Society (MSMS) representatives to discuss the ramifications of this new program. BCBSM stated that that the Trust Network Agreements entitled it to fix office visit fees at the reduced rate, since the Benefit Plan Descriptions issued by the Automakers were sponsored by BCBSM and included a discounted office visit fees as a "Covered Benefit." MSMS, on the other hand, asserted that the office visits were not covered by the Trust Network Agreements, and BCBSM's role in the New Health plan was not that of a sponsor, but rather one of a contractor hired to provide administrative duties alone. Therefore, the physicians had no contractual relationship with the insured.

On July 27, 2004, BCBSM released a letter declaring that any physician who refused to reduce their fee to enrollees of the New Health Plans, in accordance with the terms of those plans, would have their Trust Network Agreement terminated. According to the letter, any such physician would become an out-of-network provider for any patient enrolled in any of BCBSM's PPO products.

MSMS and the Michigan Osteopathic Association (MOA) sued for declaratory and injunctive relief on September 9, 2004, in order to prevent BCBSM from terminating any physicians for refusing to apply the terms of the Trust Network Agreement to New Health Plan members. MSMS and MOA also sought the court's declaration that physicians in BCBSM's PPO network were not obligated to limit their fees in accordance with the terms of the Network Trust Agreement and that BCBSM was not a "sponsor" of the New Health Plans. An amended complaint was filed on November 22, 2004.

On Jan. 24, 2006, without the litigants’ request, the judge entered summary judgment for BCBSM. She ruled, among other things, that BCBSM was entitled to amend the Trust Network Agreement unilaterally on 60 days notice to its panel members. MSMS and MOA appealed that decision.

On Dec. 21, 2006, the Michigan Court of Appeals affirmed, holding that BCBSM had acted within its discretion under the Trust Network Agreement.

Litigation Center involvement
The Litigation Center supported the attempt of MSMS to prevent BCBSM from exploiting its PPO network to unilaterally fix the fees physicians charge for office visits by beneficiaries of non-BCBSM insured (but BCBSM administered) health insurance plans.

On July 6, 2006, the Litigation Center filed an amicus curiae brief, subsequently joined by the American Osteopathic Association, to support the MSMS and MOA position on the appeal.

Michigan Court of Appeals brief.

Also under Ethics, Managed care tort liability, and Patient rights

Issue
The issue in this case was whether a physician is liable for breach of fiduciary duty to patients for not disclosing any financial incentives to limit care.

AMA interest
The AMA believes that the primary burden of disclosure of financial incentives relating to a patient’s treatment lies with the HMO, not with physicians.

Case summary
The Illinois Appellate Court, relying in part on the AMA’s Council on Ethical and Judicial Affairs (CEJA) Opinion 8.132, held that a physician and a managed care organization have a fiduciary duty to disclose to their patients any financial incentives to limit medical care.

The Illinois Supreme Court reversed, holding that no cause of action exists for breach of fiduciary duty against a physician. The Court ruled that the alleged breach of a fiduciary duty for failure to disclose an interest in a Medical Incentive Fund was merely a "re-presentment" of plaintiff’s medical malpractice claim. Concerning CEJA Opinion 8.132, the Court stated that Illinois law places the burden of disclosure of "financial inducements" on HMOs, not on physicians.

The AMA considers this a favorable outcome.

Litigation Center involvement
The Illinois State Medical Society and the Litigation Center filed an amicus brief which supported the CEJA opinion, while emphasizing the practical burdens a physician faces in making the disclosures mandated in the appellate court decision. The brief also argued that, under the circumstances of this case, the court should not equate the physician’s legal and ethical obligations, as the primary duty to disclose financial incentives should rest with the health plan.

Issue
The issue in this case is whether pathologists’ bills to patients for "professional component charges" related to oversight of pathology laboratories are deceptive or otherwise improper.

AMA interest
The AMA believes that third party payers should provide appropriate coverage for oversight billing codes, such as codes used for billing professional component services.

Case summary
Neighborhood Clinics owns and operates medical clinics. It contracts with managed care organizations (MCOs), which pay it on a capitation basis in exchange for provision of health care services to the MCOs’ beneficiaries. In turn, Neighborhood Clinics pays the bills of direct health care providers, such as hospitals and pathologists.

Neighborhood Clinics sued the defendant pathologists in a putative class action, after paying the pathologists’ bills and then allegedly discovering that the "professional component" charges included in the bills related to oversight of the pathology laboratory rather than services attributable and rendered to specific patients to whom the bills were sent.  Neighborhood Clinics seeks recovery of its payments for professional component services based on claims of unjust enrichment and violation of the Illinois Consumer Fraud and Deceptive Business Practices Act.   It also sought punitive damages and attorneys fees. In response, the defendants argue that professional component billing is a generally accepted practice.

The court entered summary judgment for the physicians, and Neighborhood Clinics did not appeal.

Litigation Center involvement
The Litigation Center joined the College of American Pathologists in an amicus brief supporting the right of pathologists to require patients to pay for the professional component services of clinical pathology.

Circuit Court of Cook County brief.

Also under Medicare

Issue, Case summary and Litigation Center involvement
The Litigation Center, the North Carolina Medical Society, and the American Urological Association successfully challenged an effort by the Health Care Financing Administration, through its intermediary, CIGNA Insurance Company, to recover Medicare overpayments from approximately 100 North Carolina physicians. The overpayments stemmed from CIGNA’s failure to implement a change in payment methodology for certain drugs. The Medicare hearing officer found the physicians "without fault" and thus not subject to approximately one million dollars in recoupment.AMA Interest: The Litigation Center wants to help physicians keep money to which they are lawfully entitled.

Issue
The issue in this case is whether Florida statutory and regulatory law requires HMOs to pay pathologists for hospital based services, even if the pathologists are not themselves within the HMO networks, so long as the hospitals are within the HMO networks.

AMA interest
The AMA believes that physicians should be fairly compensated for their professional services.

Case summary
Eleven different pathology groups sued three HMOs in 14 lawsuits filed in Florida courts, under similar legal theories.

The pathologists were outside the HMOs’ networks but were based at hospitals within those networks. The HMOs’ contracts with their patient subscribers required the HMOs to cover "professional clinical pathology laboratory services" (i.e., the services provided by the pathologists in performing and evaluating laboratory tests for the patient subscribers). Pursuant to Florida statute, the pathologists were not allowed to charge the HMO subscribers directly for these services. Fla. Stat. § 641.3154(1). Instead, the pathologists submitted their bills to the HMOs.

The HMOs refused to pay those bills, as they were out of their network. The pathologists nonetheless argued that the HMOs were liable for payment under Section 69O-191.049(2) of the Florida Administrative Code, which provides:

"In the event the HMO has not contracted directly with a hospital based physician provider delivering services in the hospital, including, but not limited to, pathologists, radiologists, anesthesiologists, and emergency room physicians, the HMO shall pay for medically necessary and approved physician care rendered to a non-Medicare subscriber at a contracted hospital which services are covered by the HMO subscriber contract."

In the first of these cases to go to trial, the court ordered the HMOs to pay the pathologists $1,546,479 as the reasonable value of their services.

The HMOs appealed. On April 16, 2008, the Florida Court of Appeal affirmed the trial court's decision.

Litigation Center involvement
The Litigation Center assisted with the interpretation of various Current Procedural Technology (CPT) codes at issue in the lawsuit. Additionally, the Litigation Center joined the College of American Pathologists in an amicus curiae brief supporting the right of pathologists to collect the "clinical component" of their services from HMOs under Florida law.

Florida District Court of Appeal brief.

Outcome:     Very unfavorable

Also under Medicare, Regulatory Burdens

Issue

The issue in this case was whether regulations of the United States Department of Health and Human Services (HHS) that govern reopening decisions under the Medicare Recovery Audit Contractor (RAC) Program were valid.

AMA interest

The AMA opposes RAC Program physician audits.

Case summary

A patient had his hip removed and replaced with a prosthetic device at Palomar Medical Center.  Pursuant to his physician’s direction, the patient was admitted to Palomar’s inpatient rehabilitation unit.  Palomar then submitted a Medicare claim for the rehabilitation services rendered to the patient, which was paid. 

More than a year after the claim had been paid, HHS, pursuant to the Medicare Recovery Audit Contractor (RAC) Program, reopened the claim and determined that Palomar had not been entitled to payment for the patient’s rehabilitation services, as these services could have been rendered at a skilled nursing facility (SNF), instead of the hospital rehabilitation unit.

Palomar appealed the RAC contractor’s actions through several administrative levels.  It contended that, under the Medicare regulations, after one year following payment a claim cannot be reopened except for good cause and good cause did not exist here.  One of the administrative bodies, an administrative law judge (ALJ), agreed with Palomar that the failure to show good cause voided the reopening.  However, a higher administrative review body (the Medicare Appeals Council) found that the ALJ had been unauthorized to question the failure to show good cause.  Therefore, HHS ultimately concluded that the overpayment determination had been correct.  Since Palomar remained a participant in the Medicare program, HHS recouped the money required to restore the alleged overpayment.

Palomar then sued HHS in the United States District Court for the Southern District of California, contending that the reopening had been procedurally defective because good cause had not been shown for reopening the claim.  Palomar also contended that HHS had deprived it of due process by failing to provide a forum in which it could contest the legality of the reopening.  The parties made cross-motions for summary judgment, which were referred to a federal magistrate judge, who recommended an order in favor of HHS.  The trial judge upheld the magistrate’s recommendation in its entirety, and summary judgment was entered in favor of HHS. 

Palomar appealed to the United States Court of Appeals for the Ninth Circuit.  Oral argument was heard on March 7, 2012.

On March 14, 2012, the Ninth Circuit called for additional amicus briefs, which are to address, primarily, the question of whether the federal courts have jurisdiction to enforce the agency’s compliance with the good cause standard for reopening.

On August 22, 2012, the Ninth Circuit found that HHS had interpreted its regulations correctly and affirmed the district court decision in favor of HHS.  Palomar petitioned for rehering en banc, but that motion was denied on January 29, 2013.

Litigation Center involvement

The Litigation Center, along with the California Medical Association, filed an amicus curiae brief in support of Palomar.

The Litigation Center, along with the nine state medical societies in the Ninth Circuit, filed a second amicus brief, responding to the court’s request. 

The Litigation Center, along with the nine state medical societies in the Ninth Circuit, filed a third amicus brief, to support the petition for rehearing.

United States Court of Appeals for the Ninth Circuit first amicus brief

United States Court of Appeals for the Ninth Circuit second amicus brief

United States Court of Appeals for the Ninth Circuit third amicus brief

Also under Managed care payments

Issue
The issue in this case was whether the parties’ proposed settlement was a reasonable compromise of all issues released under the settlement agreement, or whether it was a "sweetheart deal," which allowed the plaintiff orthopedic surgeons (and, more importantly, their attorneys) and Independence Blue Cross (IBC) to profit at the expense of the larger class.

AMA interest
The AMA supports fair policies and practices regarding payment for physician services.

Case summary
The Pennsylvania Orthopaedic Society and several orthopedic surgeons sued IBC, alleging systematic underpayment of claims for medical services. After about three years of litigation, the parties decided to settle. Rather than simply settling the claims of the orthopedic surgeons who brought the lawsuit, the parties expanded the case to a class action, to cover any physicians who might potentially have claims against IBC.

The medical societies of Pennsylvania and New Jersey as well as the Pennsylvania Psychiatric Society attempted to intervene in the lawsuit to oppose the proposed settlement. Although the judge allowed the Pennsylvania Orthopaedic Society to appear as a party in the lawsuit, he would not allow these other medical societies to do so.

The trial court entered a 136 page order, which approved the settlement agreement. It also invalidated the vast majority of the approximately 13,000 elections by physicians to "opt out" of the plaintiff class and ordered that new notices be sent to those physicians who had opted out, attempting to bring these physicians back into the plaintiff class. The order found that the opt outs had been procured through misrepresentations in communications sent by certain state medical societies (and by counsel to one of these societies) to their members. The trial court enjoined "medical societies/associations" from communicating in any manner with class members about the settlement unless such further communications were first approved by the trial court.

The "gag order" expired coincident with the expiration of the new opt out period. Although approximately 11% of the plaintiff class opted out a second time before the deadline, IBC elected to proceed with the previously approved settlement, which the trial court finally approved.

The Superior Court affirmed the approval of the settlement. It found that there were no grounds for enjoining the AMA. However, it also found that the AMA had not been bound under the gag order.
The Pennsylvania Supreme Court denied an appeal.

Litigation Center involvement
The AMA asked for leave to file a brief as amicus curiae so that it could advise the court about certain deficiencies in the settlement agreement, but the court refused to allow it to do so.

The AMA and the state medical societies most directly impacted by the settlement believed that the trial court’s "gag order" significantly infringed on their rights of free expression and association, guaranteed by, among other laws, the First Amendment to the United States Constitution. Various appeals were filed, including an appeal by the AMA.

Pennsylvania Superior Court principal brief.

Pennsylvania Superior Court reply brief.

39 Cal. Rptr.3d 456 (Cal. App. 2006)

Also under Managed care payments

Issues
The principal issues in this case are whether, under California law, (a) out-of-network physicians who provide emergency services can "balance bill" (i.e., bill patients for the remaining balance after an insurer/managed care organization has paid a portion of the fee charged) patients who subscribe to managed care plans and (b) the Medicare rate for physician services (and the services of other health care providers) should be deemed "reasonable" compensation for those services.

AMA interest
The AMA believes that physicians should be fairly paid for their services, particularly when those services are rendered under emergency situations and under the force of legal compulsion.

Case summary
Northridge Emergency Medical Group and a co-defendant, Saint John’s Emergency Medicine Specialists, Inc. ("the physicians"), rendered emergency room medical services to a number of patients covered by a managed care plan. The physicians did not participate in the plan, and they submitted bills for their services to Prospect Medical Group.¹ Prospect, in turn, paid the physicians the Medicare payment rates for the services rendered. In most instances, this was less than the amount the physicians had billed.

The physicians then billed the patients for the difference between the Prospect payments and the amount of their usual charges. The patients forwarded their bills to Prospect. On receiving the balance bills, Prospect sued the physicians.

The suit sought a declaratory judgment to prohibit the physicians from balance billing their patients. It relied on Cal. Health & Saf. Code §1379.

The physicians moved to dismiss the complaint, which motion the trial judge granted. Prospect appealed to the California Court of Appeal, which ruled in favor of the physicians as to both issues. Prospect then appealed to the California Supreme Court.

The California Supreme Court reversed the trial court and the Court of Appeal, holding against the physicians. It found that, when read as a whole, Cal. Health & Saf. Code § 1379 impliedly prohibited balance billing, even for emergency services.

Litigation Center involvement
The California Medical Association (CMA) filed an amicus brief supporting the emergency physicians, which the Litigation Center joined. The Litigation Center also contributed to CMA’s subsidy of the Northridge physicians’ litigation expenses.

California Supreme Court brief.

Also under Prompt payment laws

Issues
The issues in this appeal were (a) whether physicians may bring a lawsuit on their own behalf under the Pennsylvania Healthcare Act ("Act 68") to receive interest on untimely payments from a health insurance company and (b) whether physicians have an implied contractual right to receive such interest.

AMA interest
The AMA supports fair policies and practices regarding payment for physician services.

Case summary
This case was brought as a purported class action on behalf of physicians and other health care providers practicing in Pennsylvania who had signed participation contracts with Aetna U.S. Healthcare. The complaint alleged a variety of contractual breaches, including failure to reimburse pre-approved medical services and failure to pay claims in a timely fashion. The complaint sought interest on late payments pursuant to Act 68 and pursuant to an implied right under the participation contract.

The trial court dismissed a number of the claims on motion and held, via a summary judgment, for the defendants on the remaining claims. The court noted that the alleged unpaid amounts were, by admission of the plaintiffs, in fact paid. The court further found that a private physician, acting on his own behalf, could not seek interest on these late payments in a lawsuit. The court held that Act 68 allows interest charges only at the order of the Pennsylvania Insurance Commissioner, which had not happened here. Furthermore, the court held, the provider contract neither explicitly nor implicitly promised to pay interest charges.

The plaintiff physicians appealed to the Superior Court which affirmed, holding, among other things, that physicians do not personally have the right to sue for the late payment interest that the Pennsylvania statues require be paid to them.

The plaintiffs then asked the Pennsylvania Supreme Court to hear the case. However, the Pennsylvania Supreme Court denied the petition for review, concluding the lawsuit.

Litigation Center involvement
The Pennsylvania Medical Society and the Litigation Center filed an amicus curiae brief in the Superior Court in support of the physicians. The brief argued that an implied private right of action should be found under Act 68.

The Litigation Center, along with the Pennsylvania Medical Society, also submitted two amicus curiae briefs to support the physicians’ request for appeal in the Pennsylvania Supreme Court. The first brief pointed out that 47 states have laws governing prompt payment of medical claims, and some of the courts interpreting their state laws have resolved the private right of action issue differently from the Pennsylvania Superior Court. The second brief advised the Supreme Court of a recent decision by the United States Supreme Court, to whom the Pennsylvania Supreme Court has traditionally looked for guidance, which sets forth new criteria to establish the viability of an implied private right of action. Thus, this matter is of great national importance, and the issues are unsettled. Both considerations were offered as reasons for granting Supreme Court review.

Pennsylvania Superior Court brief.

Pennsylvania Supreme Court initial brief.

Pennsylvania Supreme Court second brief.

Also under Managed care payments

Issue
This case concerned Harris Health Plan’s contractual provisions containing withhold and penalty clauses applicable to physicians’ patient treatment.

AMA interest
The Litigation Center wanted the court to be advised of those principles of medical ethics that caution against lay interference in the practice of medicine and against financial incentives that unduly intrude on physicians’ objectivity in treating their patients.

Case summary
Physicians who had contracted with Harris Health Plan brought a class action against Harris, challenging certain provisions intended to establish financial incentives to physicians with respect to the medical care decisions they made in treating patients. The trial court preliminarily enjoined Harris from enforcing the withhold and penalty provisions of its contracts with the plaintiff physicians, because those provisions violated the Texas Insurance Code.

The case was settled. As part of the settlement, financial incentives were restricted and withhold clauses have been removed from physician contracts. In addition, approximately $4 million was refunded to the physicians.

Litigation Center involvement
The Litigation Center joined the brief of the Texas Medical Association in support of the physicians seeking affirmance of the trial court’s injunction.

Also under Arbitration and Managed Care Payments

Issue

The issue in this case is whether an arbitrator can authorize a class arbitration without a specific provision in the arbitration agreement that allows such action.

AMA interest

The AMA supports lawsuits that seek redress from insurers who engage in inappropriate or inaccurate downcoding and/or recoding practices.

Case summary

Dr. John Sutter signed a participation contract with Oxford Health Plans.  This contract required as follows:

“No civil action concerning any dispute arising under this Agreement shall be instituted before any court, and all such disputes shall be submitted to final and binding arbitration … pursuant to the Rules of the American Arbitration Association.”

Dr. Sutter filed an arbitration claim, alleging that Oxford had systematically bundled, downcoded, and delayed payments for his services and the services of approximately 20,000 other physicians in its network.  He requested that the claim be tried on a class basis.  After considering the scope of the arbitration clause, the arbitrator inferred an intent within that clause to allow class arbitration, and he ordered that the arbitration proceed as a class action.

Oxford then sued in the United States District Court of New Jersey to have the class arbitration award vacated, and the case bounced back and forth between the District Court and the Third Circuit Court of Appeals.  On April 3, 2012, the Third Circuit found that the arbitrator had interpreted the arbitration clause reasonably and was entitled to some deference in making that interpretation.  It affirmed the District Court order denying Oxford’s motion to vacate the arbitration award.

Oxford appealed to the United States Supreme Court.  Oral argument was heard on March 25, 2013.

Meanwhile, the arbitration remains pending, as the arbitrator has not yet reached the merits of the case.

Litigation Center involvement

The Litigation Center, along with the Medical Society of New Jersey, filed an amicus brief in support of Dr. Sutter.

United States Supreme Court brief

Issue

The issue in this case was whether Health Research Insights (HRI), a collection agency, illegally sought recovery of alleged overpayments to physicians for upcoding of evaluation and management (E&M) services.

AMA interest

The AMA believes that physicians should be protected from allegations of fraud and abuse due to differences in interpretation and inadvertent errors in coding of the E&M documentation guidelines. 

Case summary

The Tennessee Medical Association (TMA) and two of its members sued HRI, the Nashville, Tennessee Board of Education, and Blue Cross Blue Shield of Tennessee, Inc. (BCBST).  The complaint alleged that the plaintiff physicians signed network participation agreements with BCBST, under which they rendered medical services at reduced rates to beneficiaries of BCBST health plans.  The complaint further alleged that the Nashville Board of Education, through its employment of HRI, used underhanded and overly aggressive collection practices to seek recovery of alleged overpayments to in-network BCBST physicians for upcoding of E&M services.  

On December 8, 2010, the parties settled their lawsuit.  Under the settlement, HRI was enjoined from making further misrepresentations in its collection efforts, and it was required to refund the money it had previously collected from physicians.

Litigation Center involvement

The Litigation Center contributed toward the TMA litigation expenses.

(Thurston Cnty., Wash., Super. Ct.)

Outcome:    Very Favorable

Also under Medicaid, Regulatory burdens

Issue

The issue in this case is whether regulations imposed on emergency physicians who seek payment for treating Medicaid patients are valid.

AMA interest

The AMA believes that Medicaid funding should be sufficient to enable the program to serve its purpose as a safety net for the nation’s most vulnerable populations.

Case summary

As part of its 2011-2013 budget, the Washington legislature directed the Washington State Health Care Authority (HCA) to impose a three-visit-per-year limit on non-emergent emergency department visits by Medicaid patients.  The legislature also directed HCA to “collaborate closely with the Washington state hospital and medical associations in identification of the diagnostic codes … that will be used to determine whether an emergency room visit is a nonemergency condition.”

HCA asserted that, as a result of meetings with hospital and physician groups, it developed a list of services for non-emergency conditions.  The physicians and hospitals, however, denied that the meetings were conducted in good faith and contended that HCA unilaterally and somewhat arbitrarily (and erroneously) decided which codes could be deemed to indicate the absence of an emergency.  HCA then posted approximately 700 ICD-9 codes on its website for procedures which it considered to be of a non-emergency nature.

HCA notified all Washington Medicaid recipients that HCA would only pay for three non-emergency visits to the emergency room per recipient per year.  HCA then adopted an emergency regulation, which, with certain exceptions, limited Medicaid coverage to “a maximum of three emergency room visits that do not meet the definition of emergency services per client, per state fiscal year.”  The revised regulation also provided that HCA “will retroactively recoup payments from all of the billing providers, [including] … professional … fees.”

The Washington Chapter of the American College of Emergency Physicians sued HCA, and the Washington State Medical Association (WSMA) later intervened as an additional plaintiff.  The suit claimed that HCA’s adoption of the non-emergency ICD-9 codes was improper because (1) HCA did not meet the requirements for adopting an emergency regulation, (2) HCA did not collaborate sufficiently with the state hospital and medical associations before publishing the list on non-reimbursable ICD-9 codes, (3) HCA violated various state and federal laws governing Medicaid programs, (4) the HCA policy violated the Supremacy Clause of the United States Constitution, and (5) “the list of ineligible diagnostic … include[d] numerous diagnoses that represent true emergencies.”

On November 11, 2011, the court found that HCA had violated the required rule making procedures in adopting its emergency regulation.  It therefore held the regulation invalid.

Subsequently, the parties negotiated a settlement.

Litigation Center involvement

The Litigation Center contributed to the WSMA legal expenses.

Also under Emergency services, Managed care payments

Issue

The issue in this case is whether the Washington State Insurance Commissioner should interpret a Washington statute to require that insurance companies pay for out-of-network emergency services according to billed charges, as opposed to in-network charges.

AMA interest

The AMA supports prompt and fair payment for emergency services.

Case summary

RCW 48.43.093 is part of the Washington State Insurance Code.  The relevant provisions are as follows:

"(a) A health carrier shall cover emergency services necessary to screen and stabilize a covered person if a prudent layperson acting reasonably would have believed that an emergency medical condition existed.

(c) Coverage of emergency services may be subject to applicable copayments, coinsurance, and deductibles, and a health carrier may impose reasonable differential cost-sharing arrangements for emergency services rendered by nonparticipating providers, if such differential between cost-sharing amounts applied to emergency services rendered by participating provider versus nonparticipating provider does not exceed fifty dollars.”

The Washington State Medical Association (WSMA) helped to craft this law when it was enacted in 1997.

When the statute was enacted and for many years thereafter the Washington Insurance Commissioner interpreted it to require health insurers to pay for out-of-network emergency services, except for those copayments and deductibles that would apply to in-network services, plus a maximum $50 differential.  However, the Insurance Commissioner subsequently reconsidered his interpretation and decided that health insurance companies need only pay for out-of-network emergency services at the rates paid to in-network services.  The patients would then be liable for any shortfall.  Those physicians who provided the emergency services would also suffer a shortfall, if the patients required the proceeds of their insurance policies to make the payments.

WSMA and the Washington Chapter of the American College of Emergency Physicians (Washington ACEP) sued the Washington Insurance Commissioner, Mike Kreidler, seeking a writ of mandamus and a declaratory judgment, which would compel the Insurance Commissioner to require health insurance companies to pay the entire out-of-network billed charge, except for copayments and deductible that would apply to in-network services and a maximum $50 differential.

The Superior Court entered summary judgment against the plaintiffs.  It held that it lacked jurisdiction, as “a health carrier … is a necessary party for adjudication of relief.”

WSMA and Washington ACEP are appealing to the Washington Court of Appeals.  Oral argument was held on February 19, 2013.

Litigation Center involvement

The Litigation Center contributed toward WSMA’s legal expenses.