Profession

Courts split on arbitrating pay disputes

A Missouri ruling allows doctors to take insurers to court, while a Tennessee decision puts physicians in arbitration. Both are expected to be appealed.

By Amy Lynn Sorrel — Posted Jan. 22, 2007

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Physicians won one round and lost another fighting the nation's health plans over payment practices.

A Kansas City, Mo., trial court in December 2006 ruled that nearly 2,500 doctors are not locked into arbitrating their individual claims with Blue Cross and Blue Shield of Kansas City, Humana and United Healthcare.

The decision paves the way for the doctors to move ahead with their class-action lawsuit alleging that the insurers had conspired to hold down reimbursement rates in the area.

The doctors' case "creates a factual perfect storm that makes these contracts unconscionable and against public policy," Judge Charles E. Atwell said in his opinion. "To enforce these arbitration agreements would be tantamount to granting immunity to these defendants regarding any kind of claim touching upon conspiracy or relief as part of a class action."

The fees the health plans pay in the Kansas City area are 30% less than what doctors in surrounding cities get for the same services, according to the physicians' antitrust lawsuit.

"When physicians enter into a contract with a payer that contains an arbitration clause, they do not contract for an insurance company to engage in anticompetitive behavior," said Diane Breneman, the doctors' attorney.

Family physician William D. Soper, MD, said the court's decision gives doctors some recourse in negotiating with insurers, instead of being forced to accept their terms.

Arbitrating their separate claims "would be virtually impossible for individual doctors to do because it would be so onerous to pay for," said Dr. Soper, president of Mid America Medical Affiliates, a physician legal advocacy group in Kansas City that is assisting the doctors in their case.

The low fees threaten access to care, he added.

"This whole business with underpayments and collusive behavior interferes with us attracting doctors here," Dr. Soper said.

Insurers deny accusations

Humana and the Kansas City Blues plan denied the price-fixing allegations and said they would appeal the ruling to the Western District of the Missouri Court of Appeals.

"Our provider contracts require that these types of disputes be resolved through arbitration, not the courts," Blues spokeswoman Susan M. Johnson stated.

Humana spokesman Jeff Blunt also maintains that the doctors' contracts mandate out-of-court resolution to help to keep health care costs down for patients.

"Frankly, arbitration is a better way to resolve this for all parties involved because it is fair, fast and less costly," Blunt said.

United Healthcare spokesman Greg Thompson declined to comment, citing the pending litigation.

A setback in Tennessee

The Missouri doctors' case is one of several similar lawsuits winding their way through state and federal courts across the country.

In Tennessee, two physicians did not get the same relief from an appeals court there.

Judges last November ruled that an arbitration clause in the physicians' contracts with Chattanooga-based BlueCross BlueShield of Tennessee precluded them from suing the insurer over payment issues.

Memphis otolaryngologist Zachary Rosenberg, MD, and Jefferson City, Tenn., family physician Dewayne P. Darby, MD, accused the Blues plan of systematically bundling and downcoding reimbursement claims, and arbitrarily denying payment for medically necessary services. The lawsuit seeks class-action status.

"The Blue Cross contract promises 'inexpensive arbitration' yet substitutes a procedure that is ridiculously expensive and burdensome, and requires physicians to pay half of this cost even if they prevail," said David L. Steed, the doctors' attorney.

The dispute resolution process also requires three arbitrators, and doctors must travel to Chattanooga for the hearing, as opposed to meeting locally, Steed explained.

"This creates a lose-lose situation in which the physician's cost of arbitration exceeds the amount Blue Cross owes him in almost every instance," he said.

But the appeals court concluded that the doctors failed to show that the arbitration process would be prohibitively more expensive than going to court.

Given that the doctors are bringing a class-action lawsuit alleging millions of dollars in unfairly denied reimbursements to participating doctors, the dispute would be expensive to resolve whether in court or through arbitration, the court said.

The doctors plan to appeal the decision to the Tennessee Supreme Court.

The Tennessee Medical Assn. filed a lawsuit against BlueCross BlueShield addressing the same issues, but the appeals court has yet to rule on that case.

Tennessee Blues spokeswoman Mary Thompson declined to comment for the story because of the ongoing litigation.

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ADDITIONAL INFORMATION

Cases at a glance

Kansas City Urology Care PA, et al. v. Blue Cross and Blue Shield of Kansas City, et al.; Zachary Rosenberg, MD, et al. v. BlueCross BlueShield of Tennessee Inc.

Venues: Jackson County Circuit Court, Kansas City, Mo.; Tennessee Court of Appeals
At issue: Whether arbitration clauses in the health plans' contracts prevent doctors from challenging the insurers' payment practices in court. A Missouri trial court said no, allowing the doctors' antitrust lawsuit to proceed. A Tennessee appeals court said yes, forcing doctors to arbitrate their reimbursement disputes. Both rulings are expected to be appealed.
Potential impact: Doctors say that arbitration gives them little recourse to address health plans' low fees. The cost of arbitration often exceeds what their individual claims are worth, making it useless, they add. Health plans say that it is a fair and cost-effective way to resolve payment issues.

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