Federal judge rules HMOs must fork over internal documents
The nation's top HMOs have lost their most recent bid to prevent doctors and their attorneys from getting their hands on internal documents that the doctors say will prove the insurers skimp on patient care to maximize their profits.
On July 30, 2002, Miami U.S. District Court Judge Federico Moreno ordered Aetna US Healthcare, Anthem Blue Cross Blue Shield, CIGNA HealthCare, Coventry, Humana Health Plan, PacifiCare Health Systems, UnitedHealthcare, and WellPoint to begin providing documents requested by the doctors' attorneys who allege that the HMOs have violated contracts and defrauded doctors in violation of the federal Racketeer Influenced and Corrupt Organization Act (RICO).
"The judges order for the HMOs to open themselves for discovery is an important catalyst if we are going to engage in serious discussions about improvement in managed care," says Archie Lamb, co-lead council representing the state medical associations of California, Florida, Georgia, Louisiana, and Texas, as well as individual physicians.
The California Medical Association and individual physicians originally filed the lawsuit in May 2000. With other states joining in as plaintiffs, the lawsuit has since been consolidated with other litigation in the U.S. District Court in Miami against dozens more defendant health plans.
"We now look forward to the opportunity to documenting all the dirty little secrets that HMOs play every day on doctors and their patients," says Dr. Fred L. Merian, president of the Texas Medical Association. "The whistle blowers, depositions, and evidence will paint an alarming portrait of what many Americans suspect about how managed care really works."
What's happened until now
|"We now look forward to the opportunity to documenting all the dirty little secrets that HMOs play every day."|
The protracted legal dispute centers on allegations that the insurers engage in deceptive business practices. In March 2002, a federal appeals court upheld a March 2001 ruling by Moreno in which he threw out several charges against the HMOs but the ruling also allowed other charges to proceed.
Moreno ordered full discovery in the landmark lawsuit on May 9, 2001, but that ruling was stayed pending the outcome of the appeal. Lawyers for the doctors may now proceed with discovery, the process by which each party requests relevant information and documents from the other side in an attempt to "discover" facts pertinent to the case.
At the time he ordered discovery, Moreno also threw out racketeering and other charges against some of the insurers in response to a motion filed by the insurers to dismiss the lawsuit. But the decision was only a partial victory for the insurers.
|"These lawyers stand to extract millions or even billions of dollars in legal fees out of the nation's health care system."|
While Moreno dismissed RICO and federal and state prompt pay violation charges, he ruled that the federal Employee Retirement Income Security Act does not preempt the doctors' claims that the insurers breached their contracts with them. The doctors allege that the HMOs violate their agreements with the doctors by systematically reducing, delaying, and denying payments and reimbursements to providers by routinely "downcoding" claims submitted by doctors to reduce payments, and by concealing business practices such as offering incentives to doctors to limit their patients' medical care.
In their motion to have the lawsuits dismissed, the insurers argued that a 2000 U.S. Supreme Court ruling in Pegram vs. Hedrich showed that no HMO can financially survive without offering doctors rewards for treatment rationing.
In his ruling, Moreno disagreed. "Defendants read Pegram as if it were a talisman before which all plaintiffs' claims should fail. Yet the court in Pegram did not fashion an all-encompassing cloak of immunity for the health care industry."
Officials with the American Association of Health Plans (AAHP) have said repeatedly that the lawsuit is without merit. They allege that managed care litigation only lines lawyers' pockets at the expense of consumers.
According to the AAHP: "These lawyers stand to extract millions or even billions of dollars in legal fees out of the nation's health care system and, consequently, cause millions of Americans to lose health care coverage."