Doctors Get Class Status for Lawsuit Against Top HMOs;
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home / healthcare / in the media

The Los Angeles Times
Sep 27, 2002

by Don Lee and Ronald D. White, Times Staff Writers

Doctors Get Class Status for Lawsuit Against Top HMOs;

Fraud claims could alter California's managed-care system. In same decision, judge denies bid to combine allegations by patients.
The nation's biggest HMOs on Thursday suffered a major setback in their long-running court battle with doctors suing them for fraud, but they won a key victory in a companion case brought by consumers who claimed the insurers put profits before care.

A federal judge in Miami ruled lawyers could group the claims of as many as 600,000 physicians into a class-action suit. In the same decision, U.S. District Judge Federico Moreno denied class certification to an estimated 145 million patients covered by such health maintenance organizations as Aetna Inc. and Cigna Corp., meaning that patients will have to pursue claims in individual suits.

The two cases brought together in one place much of the nation's anger and frustration with managed health care. They have potentially huge consequences for health insurers, doctors and consumers, who have been battling in courts around the country over fees paid to doctors and care given or denied to patients.

Though the cases are national in scope, they have particular resonance for California, which has been a pioneer in managed health care. The California Medical Assn. was one of the major plaintiffs in the doctors' lawsuits against the nation's major HMOs, including WellPoint Health Networks Inc. of Thousand Oaks, Health Net Inc. of Los Angeles and PacifiCare Health Systems Inc. of Cypress.

"The suit, if it succeeds at this level, will mandate changes in the payment provision of all physician contracts with health plans in the United States," said Albert Lowey-Ball, a California-based health-care consultant.

Lawyers for the doctors, who accused big health insurers of systematically cheating them of their fair payments, said the ruling could pave the way for significant damages and changes in the managed-care industry.

"I feel good, I feel great," said Dr. Marcy Zwelling-Aamot, a Long Beach internist who is active in the CMA. As a solo practitioner, Zwelling-Aamot said she has had many frustrating days with insurers over payments. Sometimes, she said, an insurance company would arbitrarily cut her fees, with no explanation. "What I want is a fair marketplace," she said.

The HMO industry association in Washington blasted the decision, saying it made no sense to lump together what amounted to individual payment disputes.

"It's certified as a giant collection action of every physician in the United States," said Karen Ignagani, president of the American Assn. of Health Plans.

Representatives of several HMO companies declined to comment. Washington attorney Brian D. Boyle, a member of the defense team, said the decision against the HMOs would be appealed.

"One of the principal points we'll make is that the two rulings are fundamentally at war with each other," Boyle said.

In his ruling, Moreno said there was evidence that suggested commonality in the various claims brought by doctors, citing a common practice of automated "down-coding" of medical services billed by doctors, which results in doctors getting paid less than what they billed. The plaintiffs have "done more than just allege a common scheme but ... have demonstrated facts that support its existence," Moreno wrote.

Archie Lamb, an Alabama attorney and co-lead counsel for the doctors, said he could not estimate the damages that could be won because insurance companies have closely guarded their payment information. But he said it is easily in the tens of millions of dollars. Lamb said he would seek to open the books when discovery proceedings begin next year.

Lamb said one goal of the class-action suit would be to reform how the insurance industry operates.

"The paramount thing is changing their business practices, the way they process claims and dictate medical necessity," he said.

Although Lamb and others said a victory by the doctors ultimately would provide benefits for consumers--in providing care to the needy and having more stable doctor-patient relations--others were skeptical.

"Ultimately the money here is going to be coming out of the pocket of the people who pay the health insurance premiums and for people with chronic illnesses," said Dr. Alan Garber, director of the Health Services Research Training Program at Stanford University.

In denying the class status to HMO subscribers, Moreno went along with a fairly consistent pattern in federal courts of disallowing groups of patients to sue their HMO. Consumer advocates and legal experts said one reason may be that it is harder to calculate damages in consumer health issues.

The patient suits sought damages including treble damages under the civil racketeering statute.

"It's a shame that doctors who make about $200,000 can have justice when their pay goes down and working conditions are admittedly unfair, but patients whose lives are in the hands on these corporations can't find their way into the court," said Jamie Court, executive director of the Foundation for Taxpayer & Consumer Rights in Santa Monica.

Court said his organization in the past has sought unsuccessfully to get class certification for HMO patients involving similar denial of care claims.

Stocks of health insurers were mixed Thursday. Among them: Aetna rose 41 cents to $37.78; Cigna was up $2.70 to $73.90; Humana Inc. fell 48 cents to $12.00; Health Net was up 45 cents to $22.00; UnitedHealth Group Inc. rose 20 cents to $87.54; and WellPoint fell 38 cents to $73.15, all on the NYSE. PacifiCare was up 18 cents to $22.88 on Nasdaq.

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