Montana radiologists, Blues plan settle monopoly lawsuit

Antitrust lawyers had watched the case, which threatened to take away physicians' right to not contract with a health plan.

By Robert Kazel — Posted April 4, 2005

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A radiology practice accused by BlueCross BlueShield of Montana of being a "predatory monopoly" after the physicians dropped out of its network won't have to go out of business, pay damages or rejoin the health plan, under a settlement reached in March.

The physicians of Missoula Radiology, which the Blues plan sued in September 2004 for alleged antitrust violations, did agree to refrain from entering into exclusive contracts with Missoula's two hospitals. But the radiologists did not have to admit to any past anticompetitive actions.

The settlement grew out of a negotiating session between the radiology group, the Blues plan and a court-approved mediator, that took place in early February.

The case, filed in U.S. District Court in Butte, Mont., was being watched closely by health and antitrust lawyers because of the possibility that a successful outcome for the Blues might encourage plans elsewhere to use antitrust laws against large specialty groups that do not wish to join a managed care network.

Donald J. Palmisano, MD, immediate past president of the AMA, applauded the terms of the settlement. "It's the AMA's opinion that it's a victory for the physicians involved," Dr. Palmisano said. "The doctors dropped out of BlueCross. ... Nowhere in the consent decree does it say that the physicians have to join the BlueCross network."

The AMA and State Medical Societies Litigation Center helped advise and fund the Missoula radiologists in the early stage of their defense.

Missoula Radiology and its attorneys would not comment on the details of the lawsuit, which "everyone was very pleased to have over," said Ralph H. Palumbo, a Seattle attorney who represented the practice.

Blues executives declined to be interviewed. The company issued a news release that said the agreement would be sufficient "to restore competition in the market for radiology services." Peter Babin, the Blues' plans CEO and chair when the lawsuit was filed, resigned without explanation on Jan. 7, though no one has said his departure was a factor in clearing the way for a settlement.

The insurer had alleged in its lawsuit that past exclusive arrangements between the doctors and Community Medical Center and St. Patrick's Hospital had prevented additional radiologists from entering the area and, in effect, had allowed Missoula Radiology to set prices for radiological services in the region.

That presence in the market, the health plan said, led to unreasonably high prices for radiological services once the radiologists left the Blues fold in 2003. As of last fall, the group's departure had cost plan subscribers about $1.3 million in out-of-pocket fees because the physicians were out-of-network, the lawsuit said.

The suit by the Montana plan angered many doctors in Missoula and throughout Montana. Some said they saw the company's action as an effort to compel the radiology group to return to the Blues network, and at least two other physician groups in the area left the plan in support of the radiologists after the suit was filed.

The Blues plan has more than 50% of the HMO and PPO business in the state and about twice as many members as the next leading carrier, according to "Competition in Health Insurance: A Comprehensive Study of U.S. Markets," published by the AMA.

The Montana plan said it was acting on behalf of its members in an attempt to hold down the cost of care. A few local businesses and individuals also were plaintiffs in the lawsuit.

Under the terms of the settlement, the radiologists agreed not to enter into exclusive contracts with hospitals or imaging centers in western Montana, except for Advanced Imaging, a scanning facility at Community Medical Center that is jointly owned by the group and the hospital.

Although Missoula Radiology's various exclusive contracts had expired at the time the Blues' lawsuit was filed, the practice typically had negotiated with them, which both the practice and the hospitals said were done to ensure 24-hour call.

The practice also agreed to excuse itself from any hospital committees considering credentialing of radiologists from outside Missoula Radiology and to eliminate any internal noncompete agreements from its physicians' contracts.

The plan dropped its request to be paid three times actual damages, and abandoned its request to order a breakup of the radiology group into two separate practices.

The settlement was good for the radiologists because it was resolved without forcing the group to accept a fee schedule it did not want, thus avoiding a bad precedent, said James E. Jarrett, MD, a board member of the Montana Medical Assn. and an otolaryngologist in Missoula. "What [the Blues] were challenging is the right of the physicians to contract independently, and that became a national issue because that affects all physicians everywhere," Dr. Jarrett said.

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