A New Jersey physician won a round in a state court against the state's largest HMO when a judge certified three classes of plaintiffs in a lawsuit against Horizon Blue Cross Blue Shield of New Jersey. The suit alleges breach of contract and violations of prompt-payment laws.

John Sutter, M.D., a pediatrician from Clifton, N.J., filed suit in April 2002 covering a period of claims activity from 1996 up through the present date.

On Tuesday, New Jersey Superior Court Judge James Rothschild issued an opinion certifying that Sutter and a class of about 40,000 New Jersey physicians could go forward with a suit regarding prompt-payment issues.

Rothschild denied class certification for physicians of all specialties on an element of Sutter's suit regarding downcoding, bundling of claims and refusal to recognize modifiers. The judge allowed the suit to go forward on those issues as a class limited to Sutter and other pediatricians, but added he would allow nonpediatricians to apply for injunctive relief on downcoding, bundling and refusal to recognize modifiers.

The court also approved class-action status for all New Jersey physicians under a portion of the suit involving capitated payments.

"Overall, it's a big victory," said Sutter's attorney, Eric Katz of Newark. Katz said he has been in discussions with other specialists with an eye to appealing the one part of the suit that was denied.

In his 36-page opinion, Rothschild gave weight to two financial analyses of Horizon prompt-payment compliance "or rather, non compliance." One was by University of Tennessee economist Teresa Waters, hired by the plaintiffs, and the other was an independent look by the New Jersey Department of Banking and Insurance released in 2003 and covering 2001 and 2002.

"Both documents provide plausible statistical analysis -- Dr. Water's analysis being the more exhaustive -- of Horizon's failure to adhere to the prompt pay laws," Rothschild wrote, adding, however, that neither are sufficient in themselves to prove Sutter's case.

The suit is for both actual and punitive damages for an amount Katz estimates will run into tens of millions of dollars.

Katz said the next step is for Rothschild to approve an order giving legal force to his opinion. At Rothschild's request, Katz said he drafted the several-page order and submitted it to Horizon's counsel for review and comment before forwarding it to the judge for signature. Horizon will have 20 days from the day the order is signed to file notice of intent to appeal.

Horizon counsel Maxine Neuhauser was traveling Thursday and unavailable for comment by press time.