Physicians Notch Victory In Suit Against HMOs

In a written statement, Archie Lamb, co-lead counsel for the physician plaintiffs, said, “The HMOs have long claimed that the doctors who made these charges were basing their claims on isolated instances. The granting of class action status shows that the doctors’ charges against the HMOs of fraud and racketeering are consistent around the nation.”

The physician class consists of all medical doctors who provided services to any person insured by any defendant from August 4, 1990, to September 30, 2002.

The California Medical Association and individual physicians first filed the suit in May 2000. Since then, medical associations in Texas and Florida joined the suit.

Until this ruling, the RICO charges against health care companies had been proceeding in two tracks: physician and consumer. The consumer lawsuit first began in late 1999, when Mississippi lawyer Richard Scruggs, famed for his 1998 billion-dollar win against tobacco companies, filed class action suits in Hattiesburg, Miss.

That case and more than 20 others were consolidated in the U.S. District Court for the Southern District of Florida.

In the September ruling, however, Moreno did not grant class action status to consumers.

Status can be established if four conditions are met: numerosity (generally the class consists of more than 40 members); commonality (questions of law or fact are common to the class); typicality (claims made are typical of the class); and adequacy (representation for plaintiffs is adequate).

Moreno ruled that there was insufficient evidence that the claims made by consumers about actions by HMOs were typical of the entire class of HMOs.

If the case is not settled and proceeds to discovery, Lamb and other lawyers will be able to obtain information that has been closely guarded by HMOs.

Among the issues to be explored are whether the HMOs knowingly misrepresented that claims for coverage of medical services would be paid if the services met the company’s medical necessity definition; whether the HMOs’ undisclosed cost-based criteria are different from or more restrictive than the factors included in the medical necessity definition; whether the value of the HMOs’ policies as represented was more than the value of the policies as implemented; and whether the “gag clauses” in HMOs’ contracts with physicians constitute improper interference with physician-patient communication and thus violate the HMOs’ fiduciary responsibilities.

Lawrence B. Lurie, M.D., chair of APA’s Committee on Managed Care, told Psychiatric News, “The decision certainly is welcome because it will open up an examination of cost issues that affect physicians and patients. My experience is that patients typically have no idea that a standard of medical necessity will be applied when they seek treatment. They think they are entitled to the number of outpatient visits specified in their contract. I’m sorry they won’t be formally included in the suit, but we hope their interests will be represented, as well as our own.”

Moreno ruled that the deadline for discovery is January 20, 2003, and the trial date is May 19, 2003.