Court clears way for doctors to sue

Bloomberg News, with reporting by M.B. Owenss
January 11, 2005
 

WASHINGTON — In a case with a potentially large financial impact on the nation’s health insurers, the U.S. Supreme Court cleared the way for doctors to sue a number of large insurance company’s managed care organizations (HMOs).

“In this case, physicians are alleging that the HMO’s automated claim systems are systematically underpaying them,” said Gary Shockley, Nashville attorney for the law firm of Baker, Donelson, Bearman, Caldwell and Berkowitz.

UnitedHealth Group Inc., Humana Inc. and other four other health insurers Monday lost their bid to stop a class-action lawsuit that claims 600,000 doctors were underpaid for treating patients. The justices, announcing a list of orders in Washington, made no comment in rejecting an appeal by the HMOs. The companies said a federal appeals court was wrong to uphold a trial judge’s ruling and let the suit go forward as a class action.

Billions of dollars may be at stake as the case returns to a federal trial court in Miami. Two insurers that previously settled the doctors’ lawsuit, Aetna Inc. and Cigna Corp., have already agreed to pay a total of $310 million.

“This case is virtually putting all the nation’s doctors against all the nation’s HMOs,” said Shockley. “HMO’s could be impacted financially not just for their past operations, but also in the future because they may have to alter how they operate.”

Class-action status “places heavy pressure” on the companies to settle “rather than roll the dice and possibly incur potentially crippling, even bankrupting damages awards,” said Blue Cross and BlueShield Association, which said it faces two similar health-care provider lawsuits that may be affected by the legal precedent.

The racketeering lawsuit also names units of WellPoint Inc., PacifiCare Health Systems Inc., Prudential Financial Inc. and Health Net Inc. The providers accuse the insurers of developing processing software that automatically “downcodes” claims submitted by doctors so as to reduce the reimbursement rate.

Lawyers for the doctors say they intend to seek billions of dollars in damages for claims that date back to 1990.

In their appeal, the companies contended that the trial judge and the Atlanta-based 11th U.S. Circuit Court of Appeals, in letting the suit proceed as a class action, didn’t question the allegations in the doctors’ complaint. The insurers said the lower courts ignored evidence that the individual contracts signed by doctors varied so much that a class action wasn’t practicable.

“The court of appeals glossed over the individual differences affecting claims and defenses with respect to each putative class member,” the appeal argued.

The doctors, led by Leonard J. Klay, argued that the trial judge overseeing the case looked at the insurers’ evidence and rejected it. The 11th Circuit said a class action would be the most efficient way to resolve the racketeering claims. “It is ridiculous to expect 600,000 doctors across the nation to repeatedly prove these complicated and overwhelming facts,” the three-judge panel said.

The appeals court ruling was only a partial victory for the doctors. The panel said other claims, including breach of contract and California state-law claims, weren’t suitable for resolution as a class action.