A Letter from CMA’s RICO Attorneys on the Wellpoint Settlement - 10/13/05

Article from California Physician Online

With the deadline to opt out of the Anthem/Wellpoint settlement approaching, some physicians have begun circulating to their colleagues a recommendation that they opt out and/or object to the settlement. Below is a letter to physicians written by CMA’s RICO attorneys in response to the issues that have been raised.

To Members of CMA: Since May of 2000, we have had the privilege of representing CMA in a lawsuit against the leading for profit health plans in the country. We have made claims that these managed care companies have improperly denied, delayed, and diminished payments to doctors for medically necessary services. We have also had the pleasure of representing 23 physicians who serve as class representatives for the more than 700,000 individual physician plaintiffs.

One of the 23 physicians has recently begun objecting to the RICO settlement that was reached with Wellpoint. The settlement resulted from a mediation process supervised by a court-appointed mediator. We must respectfully disagree with this physician’s conclusions and her effort to derail the settlement by encouraging others to object and opt out. Following is our explanation of why we disagree.

First, this physician failed to recognize the very substantial relief that is part of the Wellpoint settlement. For example, section 7.18 requires that Wellpoint pay claims of doctors more promptly than any state or other settlement; California law requires that doctors’ claims be paid within 45 days, but under the settlement Wellpoint will now be required to mail a check or transmit an electronic funds transfer within 15 days of receipt of a complete electronic claim or 30 days of receipt of a complete paper claim. Section 7.19 prohibits automatic downloading. Section 7.20 requires that Wellpoint end the most abusive coding practices that have been identified by AMA and, among other provisions, requires the recognition of modifiers 25 and 59 and precludes reduced payment for add-on codes and modifier-51 exempt codes. Section 7.16 requires that Wellpoint apply a definition of medical necessity that gives emphasis to the treating physician’s opinion. We could go on for pages and will gladly describe the benefits of the settlement in more detail to any doctor who wants to listen. At the same time, we did not get all the relief that we wanted to obtain and tried to obtain.

Second, this physician has underestimated the gamble involved in turning down the settlement and proceeding to trial. The claims in the lawsuit are based on the Racketeering Influenced and Corrupt Organizations Act (RICO). There is a substantial question about whether private parties, as opposed to the government, can obtain injunctive relief under RICO. A number of courts have ruled that no such relief is available. The U.S. Supreme Court has granted certiorari on the issue of whether such injunctive relief is available under RICO and it will hear that issue this term. If the Supreme Court rules that no injunctive relief is available, then we would not be able to obtain in court any of the relief that is in section 7 of the settlements with Aetna, Cigna, Health Net, and now Wellpoint. Even assuming that we could get some injunctive relief under RICO, plaintiffs face substantial risks should the settlement be rejected and the case were to proceed to trial. For example, Judge Moreno has granted summary judgment on all capitation issues. Therefore, we cannot obtain in court the kind of relief that is in all of our settlements; directing that capitation payments must be made at the time of enrollment as opposed to the managed care company holding the capitation payments until a member becomes sick and needs to be assigned to a physician for treatment. We would also not be able to obtain any monetary recovery for the defendants’ improper capitation practices. One must remember that we are discussing a settlement, which is by its very nature a compromise. If we insisted on recovering everything we could possibly obtain if we tried the lawsuit and won, no defendant would have any incentive to settle and would take the controversy to trial. Moreover, you as members of the plaintiff class have significant risk in the case; there is never any guarantee that a plaintiff will prevail to the maximum extent possible on every claim in any case. To make matters worse, the objecting physician is complaining in some respects because we did not obtain relief that we could not get even if we tried the case and won everything.

Third, this physician has criticized the settlement because it does not provide more relief in the area of rental networks and workers’ compensation. However, this physician fails to recognize that we have not been allowed to amend our complaint since September of 2002. As of that time, no plaintiff had brought to our attention the need to address these issues, and they are not in the claims that we have alleged. Therefore, if we go to trial and win everything, there will not be any relief in this important area. We did obtain some relief in these areas; we wanted and tried to negotiate for more. However, when the Anthem/Wellpoint knew that we could not obtain any relief after a trial, we had no ability to accomplish any more in these areas.

Fourth, efforts to encourage physicians to object or opt out are actually counterproductive. In the settlement with Wellpoint, we negotiated a more limited covenant not to sue. CMA and doctors who remain in the settlement are free to sue Blue Cross of California and other Wellpoint entities for their rental network and other business practices that take place after the effective date of the settlement. We negotiated this provision to ensure that we were doing no harm to physicians. However, making and continuing to pursue objections could result in the effective date being delayed, and the opportunity for physicians to assert these claims would likely be delayed, as well.

This physician objector’s position should be contrasted with the actions taken by a number of other physicians and physician organizations. The other 22 physicians who serve as class representatives analyzed the same information and concluded that the settlement is in the best interests of physicians across the country. These 22 class representatives include several doctors from California. All these physicians approved the agreement and signed it. In California, this settlement and all of the other settlements and litigation were carefully reviewed by a RICO technical advisory committee (TAC) consisting of 14 physicians from various geographic and practice areas in California. The other members of the TAC devoted hundreds of hours to their tasks, and not one other TAC member cast a dissenting vote against the settlement.

We would be remiss, and frankly unfair to a number of physicians in California, if we did not respond to the suggestion that various officials of CMA involved in the settlement process have conflicts of interest. CMA’s current President, Michael Sexton, M.D., has chaired the RICO TAC since its inception. He has spent hundreds of hours in TAC meetings and even more time conferring with counsel and reviewing countless documents. No one has alleged that Dr. Sexton or any other member of the TAC had any conflict of interest. Many of the compromises that were reached in the settlement occurred during a court-ordered mediation in Florida, where Dr. Sexton, CMA General Counsel Catherine Hanson, and CMA CEO Jack Lewin, M.D., attended in person along with a number of other representatives of the plaintiffs, and all class representatives were consulted by conference call. The court-appointed mediator, who is a former judge and who has also served as the special master resolving discovery disputes in the RICO case, pushed hard for the compromises that were made. He has reviewed this physician’s position and has concluded in no uncertain terms that her position is not well taken. No better settlement could have been negotiated. If this settlement were to be set aside, no better settlement would replace it.

The members of CMA should understand that the effort to fight the injustices of managed care, including silent PPOs, has not ended. CMA has appointed a special TAC to review and make recommendations with respect to the issue. Along with the TAC, the lawyers who brought the RICO litigation are carefully investigating the most effective legal strategies to use in combating the silent PPO problem. Unfortunately, addressing the problem in a meaningful way is not as clear-cut as we would like for it to be. The physician who is objecting to the settlement complains about the California Foundation for Medical Care networks, but our investigation thus far has shown that in those networks, doctors are paid reimbursement rates of 120 to 135 percent of Medicare rates, while in the Blue Cross Prudent Buyer Network, doctors are generally paid 85 percent of Medicare rates. We want to be very careful that we do not take action that has the effect of reducing reimbursement rates for any doctors. This physician is a non-contracted physician. We want to represent her interests, but also want to represent the interests of the many contracted physicians in California and the nation.

This physician dissenter has encouraged doctors to object or opt out of the settlement with Wellpoint. We respectfully disagree and submit that other doctors should follow the lead of the 22 other physician class representatives and the dozens of medical societies that have approved the agreement. We agree with this physician on one point: If you have pending litigation or if you have consulted an attorney about litigation of your own, we recommend that you consult that lawyer about the course of action that you should take. We believe that practically every physician would be better served by participating in the settlement, but we have no hesitancy about having other lawyers review the settlement, and a physician client’s individual situation, to determine the best course of action for their client.

In closing, we are grateful for the privilege of representing CMA and the doctors in California. We are the first to admit that the settlements we have achieved so far are not perfect, but all of us must acknowledge that perfect can be the enemy of good. If any of us expect perfection in this world, we are afraid that we will not find it. We firmly believe that we have improved the situation for doctors through the efforts we have taken, and if we leave any situation better than when we found it, we have achieved success.

Sincerely,
Archie Lamb, Joe Whatley, and Nick Roth
CMA’s RICO Attorneys