Judge OKs class action against health plans

600,000 physicians are included in the massive lawsuit, but patients' suits must go forward individually.

By Tanya Albert, amednews staff. Oct. 14, 2002.

If you're one of the estimated 600,000 physicians who has treated patients insured by some of the biggest health plans over the past decade, you stand to reap the benefits of a lawsuit working its way through the federal court system.

The payoff could be financial. It could also mean a change in the way health plans reimburse physicians.

Case at a glance
Lawsuit time line
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U.S. District Judge Federico A. Moreno in September granted class-action status to lawsuits filed against Aetna Inc., CIGNA Corp., Humana Inc., Foundation Health Systems Inc., PacifiCare Health Systems, Prudential Insurance Co., UnitedHealthcare and Wellpoint Health Networks Inc.

"Doctors have been looking forward to seeing movement, and that is what they are seeing right now," said California Medical Assn. President-elect Ronald Bangasser, MD. "This is really viewed as an important step."

Lawsuits filed by medical associations and individual physicians from around the country -- combined and assigned to Moreno, of the U.S. District Court, Southern District of Florida Miami Division -- accuse the companies of breaching contracts and defrauding physicians, in violation of the federal Racketeer Influenced and Corrupt Organizations Act. Bundling, downcoding and arbitrarily denying claims are a few of the methods physicians say health plans used to reduce payments.

"Our allegations are that it is a systematic scheme and we've proven that enough to go forward as a class action," said Archie Lamb, co-lead counsel representing individual doctors and medical associations in California, Florida, Georgia, Louisiana and Texas. "The battle in this litigation is far from over, but today is a great day for physicians and their patients."

Lawsuits filed by individual physicians seek an unspecified amount of money from the health plans for economic damages that physicians have incurred. The number will become clearer as discovery, which started Sept. 30, goes forward, Lamb said. The medical associations are not asking for money. Instead, they want system change.

The lawsuit focuses on downcoding and bundling.

"We hope that these matters that have been driving physicians crazy for years will have a satisfactory resolution so that physicians won't have to spend so much time and effort chasing after being paid for services," said Donald P. Wilcox, general counsel for the Texas Medical Assn. "The questions now are how much good will come from the lawsuits and how long do we have to wait?"

Moreno ordered the two sides to agree on a mediator by Oct. 30 to discuss the possibility of settling the case. They are slated to update the judge on any progress toward a potential settlement in March 2003.

Even as discovery begins, however, health plans are set to appeal Moreno's decision to certifying the physician lawsuits as a class action.

"We are confident that -- as with other trial court orders approving gargantuan RICO classes encompassing divergent claims -- the 11th Circuit Court of Appeals will vacate the order and hold that the physicians' claims must be pursued individually," said Brian Boyle, a Washington, D.C.-based attorney on the health plans' defense team. "Trial lawyers who represent these physicians hope to throw every imaginable physician grievance against every conceivable health plan into the same jury trial. The result would be a confusing mess, fair to no one."

Members of the class

Should Moreno's ruling stick, physicians don't need to do anything special to become part of the class. For now, they are automatically included as the litigation moves forward.

If the case is settled, doctors would receive a letter in the mail explaining the settlement and would then have a chance to opt out if they didn't agree with the terms, Lamb said.

According to court documents, the classes are defined as follows:

Global class: All physicians who provided services to any person insured by any defendant health plan between Aug. 4, 1990 and Sept. 30, 2002.
National subclass: Medical doctors who provided services to any person insured by a defendant health plan, when the doctor has a claim against the health plan and is not bound to arbitrate the claim.
California subclass: Medical doctors who provided services to any person insured in California by any defendant health plan when the doctor was not bound to arbitrate the claim asserted.

In his decision, Moreno said that he was certifying the case as a class action because physicians proved that if the health plans did have an automated system of bundling or downcoding claims, a bonus or incentive system to claims employees or a habit of making medical necessity determinations based on nonmedical criteria, it would have impacted doctors the same way nationwide.

"Defendants [health plans] have implemented systematic claims processes whereby defendants have the ability to manipulate CPT codes, downcode and bundle claims, delay and wrongfully deny payments," Moreno wrote in his 39-page order. "Most defendants use software sold and licensed by McKesson HBOC or comparable software which is capable of modifying CPT codes and, accordingly reimbursement rates."

But Moreno also noted the physician class remains subject to decertification. Doctors will ultimately have to prove that had they known all of the facts about a health plan's claims-processing policies that they would not -- as a class -- have agreed to treat the plan's subscribers.

Patients -- who separately filed dozens of lawsuits against health plans -- won't have a chance to go forward with their case as a class action.

Moreno said the patients didn't prove that their experiences were similar enough to merit the certification. He also noted that a potential class involving 145 million people would be unmanageable.

ADDITIONAL INFORMATION:

Case at a glance

Managed care litigation

Venue: U.S. District Court, Southern District of Florida, Miami Division
Issue decided: Lawsuits brought against the nation's largest health plans by physicians and state medical societies were awarded class-action status.
Potential impact: The outcome of the lawsuits could potentially affect about 600,000 physicians. Physicians say this is a big step toward their goal of changing how health plans contract with physicians, including putting an end to what they say are systematic bundling of claims and arbitrary claim denials. Health plans say they will appeal the class-action status to the 11th U.S. Circuit Court of Appeals.

Lawsuit time line

January 2000: Alabama physician files first lawsuit accusing a health plan of racketeering.
May 2000: California Medical Assn. accuses three plans of extortion and racketeering.
October 2000: About 20 doctors from seven states have filed similar suits against eight of the largest managed care firms. All suits are sent to U.S. District Judge Federico A. Moreno for pretrial motions and hearings.
December 2000: Moreno sends some lawsuits to arbitration.
March 2001: Moreno rules that physicians' claims that HMOs breached contracts can go forward. He dismisses federal prompt-payment claims.
May 2001: Moreno rules discovery can start.
June 2001: Several plans appeal decision that some cases won't go to arbitration. The court imposes stay on discovery.
March 2002: 11th U.S. Circuit Court of Appeals panel upholds arbitration decision.
July: Moreno lifts stay on discovery.
Sept. 26: Moreno says physician lawsuits can go forward as class action lawsuits.
Sept. 30: Discovery in physician lawsuits begins.
Oct. 30: Physicians and health plans must agree on mediator.
March 2003: Physicians and health plans to report on mediation progress.

Weblink

In re: Managed Care Litigation, U.S. District Judge Federico A. Moreno's order regarding class-action status of patient and physician lawsuits against health plans