HealthLawProf Blog

Editor: Katharine Van Tassel
Concordia University School of Law

Thursday, August 18, 2005

Physicians' RICO Suit Against MCOs Goes Forward

There's an interesting piece today in the on-line American Lawer about a federal lawsuit against 10 managed care companies claiming that they rigged their software so that legitimate claims for medically necessary and appropriate services were sytematically denied, adding as much as $10 billion to the companies' bottom line over the years.  For their part, the defendants argue that their automated review procedures are are needed to spit out claims for which "the form was filled out incorrectly or because doctors are padding their bills. In a survey reported in the Journal of the American Medical Association in 2000, 39 percent of physicians admitted that they exaggerated the severity of patients' conditions, made up symptoms or altered diagnoses on claims." Here's a quick recap of the litigation history of the case:

The doctors brought their claims under the Racketeer Influenced and Corrupt Organizations Act and had some early success. In 2002 Moreno let the RICO claims go forward. The next year Whatley's team settled with Aetna Inc. and CIGNA Corp., two of the three largest health insurers. Aetna agreed to pay the doctors $500 million; CIGNA, $325 million. Both carriers agreed to modify their practices. They will, for example, no longer ignore exams like the one that Abidin performed.

In 2004 the case hit a setback when the U.S. Supreme Court ruled, 8-0, that insurers could force the doctors in their networks to arbitrate the RICO claims. To keep the case -- and the possibility of triple damages -- alive, Whatley's team switched tacks. The doctors dropped all their claims against the insurers with whom they had contracts, in order to avoid a binding arbitration clause in those contracts. Now the doctors are suing those insurers with whom they did not have a contract -- their insurers' competitors.

Klein, the insurers' lawyer, says the move was transparent. "They sue everybody else for conspiring with the company who they actually have the contract with," says Klein. "It's an absurd proposition." Yet the 11th U.S. Circuit Court of Appeals approved the doctors' reformulation of their case in November 2004; then, on May 31, the Supreme Court declined to intervene a second time, moving the case toward trial. Since that time, four smaller defendants have settled and have agreed to modify their practices. Health Net Inc., Prudential Insurance Company of America, Anthem Inc., and Wellpoint Health Networks Inc. will also pay a total of $200 million before legal fees.


| Permalink

TrackBack URL for this entry:

Listed below are links to weblogs that reference Physicians' RICO Suit Against MCOs Goes Forward: