HMOs' fate rests in Atlanta

AJC ^ | 11/10/02 | staff

[CFW]

The question of who makes your medical decisions -- a doctor or an insurance company -- lies at the heart of a landmark case before the federal appeals court in Atlanta.

The high-stakes legal feud pits hundreds of thousands of doctors against the nation's largest HMOs, with millions of Americans in the middle.

In a decision expected any day, the 11th U.S. Circuit Court of Appeals will decide whether to hear an appeal seeking to throw out a class action lawsuit against the HMOs brought by more than 600,000 doctors nationwide. If the court declines to take the case, the managed care companies must stand trial next spring against a case involving billions of claims, billions of dollars and millions of patients.

Legal experts say if the class action case is allowed to proceed, it may force the HMOs to settle the dispute and change the way health care is delivered nationwide. The HMOs say if they are forced to pay out hundreds of millions of dollars in settlements, it would further increase the escalating cost of health care.

In their lawsuit, the doctors allege the HMOs have engaged in a racketeering conspiracy by illegally delaying and denying reimbursement of health care costs. They also accuse the HMOs -- including some with the largest enrollments in the country -- of fraudulently rejecting expensive but necessary medical treatments.

"One of our goals is to allow medical necessity decisions to be made by doctors, rather than computers and claims adjusters," said Atlanta lawyer Ken Canfield, who represents the Medical Association of Georgia and four Georgia doctors who are among the lead plaintiffs in the HMO litigation.

Canfield said the doctors want a court-ordered injunction that halts the claims processing practices used by the HMOs. While the suit asks for unspecified monetary damages, it also seeks "to change the health care delivery system to make it fairer, more rational and more responsive to the needs of patients," he said.

The HMOs counter that there are mechanisms in place that allow doctors to resolve their payment disputes, and they contend it is the doctors who have improperly jacked up the claims they charge for office visits and medical treatments.

The case has the potential of forcing the HMOs to abandon "cost-containment principles that have kept health insurance affordable for many Americans over the past two decades," said the organizations' appeal, recently filed with the 11th Circuit. It adds that the class action case "threatens to precipitate a major upheaval in the nation's health care system."

Emory University law professor David Bederman said the stakes for both sides are enormous and are likely to turn on the class certification issue before the Atlanta appeals court.

"Your settlement power as a plaintiff increases greatly once you're a class," Bederman said. "That's why the HMOs are fighting tooth and nail on this. Once the defendants have to fight a large, unified class, they know their liability exposure skyrockets."

Three years ago, Georgia's physicians were among the first to sue HMOs for violating prompt pay laws. Since then, Georgia's doctors have joined medical associations in California, Florida, Louisiana and Texas in a national class action case overseen by a federal judge in Miami.

"We're hearing in deafening unison complaints that the HMOs manipulate their computer software, they lie about ever receiving legitimate claims and that they hold claims for excessive periods of time to make money on the float," said Archie Lamb of Birmingham, the lead attorney for the doctors. "And that's just the tip of the iceberg."

Paperwork vs. patients|

David Cook, executive director of the Medical Association of Georgia, said doctors spend so much time disputing HMO claims that they don't have enough time to spend with their patients. These disputes involve the HMOs' denial of payments for medical procedures doctors believe to be necessary as well as the denial or downgrading of reimbursements after claims are filed, Cook said.

"We need to make things as simple and efficient as possible so that physicians who are trained to practice medicine can deliver patient care," he added.

The epic lawsuit, pitting one segment of the U.S. economy against another, encompasses billions of claims submitted by more than 600,000 doctors since 1990.

The processing of these claims has generated paperwork and electronic data that is "many times the volume of the entire Library of Congress," the HMOs' court motion said.

Defendants in the case include Aetna, Anthem, CIGNA, Coventry Health Care, Health Net, Humana, PacifiCare Health Systems, Prudential Insurance, United Health Group and WellPoint Health Networks Inc.

Judge affirms complaint

The HMOs are asking the 11th Circuit to reverse a ruling issued in September by U.S. District Judge Federico Moreno of Miami, who certified the class action case on behalf of the doctors.

In his decision, Moreno said the plaintiff doctors "have done more than just allege a common scheme; they have demonstrated facts which support its existence."

The judge noted that the HMOs meet together in trade groups and other industry organizations "specifically to discuss and develop common plans regarding the processing of provider claims."

Moreno also found that the HMOs uniformly require physicians to use the same type of forms in submitting claims and that the HMOs use the same type of computer software in processing them.

All this gives the HMOs the ability to manipulate billing codes and "delay and wrongfully deny payments," Moreno found.

In their appeal, the HMOs strongly criticized Moreno's findings, particularly his observation that all HMOs require doctors to use a common form when submitting their claims.

The health care organizations noted that the U.S. government and some states require the forms to be used.

"Justifying class litigation on the strength of these observations is akin to commissioning a worldwide class product defect trial against all automobile manufacturers on the grounds that they all power their vehicles with a volatile, flammable substance," the HMOs told the 11th Circuit.

Jeffrey Klein, one of the lead defense lawyers in the case, said the HMOs are hopeful the 11th Circuit will agree that such a large-scale case is unmanageable.

"This involves virtually unlimited numbers of doctors with different claims involving different health plans and different types of employer benefit plans providing different types of coverage over a 12-year period," he said.

Victor Schwartz, general counsel of the American Tort Reform Association, said that if the class action case is allowed to proceed, pretrial discovery -- the legal fact-finding process where defendants must disclose documents to plaintiffs -- could prove "so massive and costly that defendants may settle cases they could win on the merits."

One of the HMO defendants in the litigation, CIGNA, has already begun settlement negotiations.

Atlanta lawyer Michael Terry tried unsuccessfully this year to get the 11th Circuit to approve class action status in a race discrimination case against the Southern Co. He said the 11th Circuit may be responsive to the HMOs' appeal and decide the class action issue.

"The 11th Circuit is known as one of the most anti-class action circuit courts in the country," Terry said. "It's now a conservative Southern court. Its judges vote against class certification the majority of the time."

In the meantime, Moreno, a Miami judge appointed by former President Bush, signed an order Wednesday denying a request by the HMOs to halt pretrial discovery while the 11th Circuit considers whether to hear the appeal.

"This court is confident it correctly certified the class," Moreno wrote.

[TXBubba]

Thanks for the post. I didn't even know this was happening. I despise HMO's. Thankfully my husband has been able to find jobs with company's that offer at least the PPO alternative. My pseudo-liberal sister-in-law thinks HMOs are the greatest things on earth. I just have no desire to get permission from someone to go see a doctor of my choice if I think I need a specialist in some field.

[CFW]

I despise HMO's.

Everyone I know who has HMO insurance hates them as well. It is ludicrous to have someone with no medical training making the decision as to whether or not you need the tests or treatment your physician prescribes.