HMO ordered not to withhold payments to podiatrists

The Illinois Supreme Court distinguishes between a corporate registration and a professional license.

By Mike Norbut — Posted Nov. 14, 2005

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An HMO cannot refuse to pay claims filed by a group of incorporated podiatrists because the group did not have an updated corporate certificate, the Illinois Supreme Court ruled this fall.

The decision, which reversed rulings by courts on both the trial and appellate levels, offers significant protection to physician groups because it distinguishes a state-issued corporate certificate from a medical license.

That means "just because your corporate entity doesn't have a $50 piece of paper," an insurance company can't hold that against you, said John Roberts, the podiatrists' attorney from Wildman, Harrold, Allen & Dixon in Chicago.

"The court saw the certificate as a revenue-generating mechanism not designed to protect the public safety," Roberts said.

Illinois law, which is similar to many states, requires that medical professionals who form corporations register with the state's Dept. of Professional Regulation annually. Doctors receive a certificate with a completed form and $50.

That piece of paper does not carry the same importance as a professional license, the court ruled in Chatham Foot Specialists PC vs. Health Care Service Corp., d/b/a BlueCross BlueShield of Illinois.

The September ruling stems from a 2001 case in which the podiatrists accused BlueCross BlueShield of breaching its contract by intentionally and systematically withholding payments for services.

The Blues asked the court to dismiss the lawsuit, arguing that the podiatry group did not have standing to sue because it did not have its annual corporate certificate of registration required under the Illinois Medical Corporations Act. A Blues spokesman declined comment, citing Blues policy not to discuss pending litigation.

The podiatrists, meanwhile, said that because they were licensed professionals, their lack of a corporate certificate shouldn't have a bearing on their contract with BlueCross BlueShield.

High court ruling a relief for doctors

While the two lower courts agreed with the Blues, the Supreme Court sided with podiatry group. The decision hinged in large part on the difference between corporate certification and professional licensure. The justices concluded that a professional must prove competency to be licensed, while a corporate certification does not require any separate training or professional examination.

For example, an unlicensed person "does not become 'licensed' simply by virtue of being part of a professional service corporation that holds a current certificate of registration," the court stated. "Conversely, a duly licensed professional does not become 'unlicensed' simply because that individual provides services through an unregistered professional service corporation."

The court also gave credence to state statistics the doctors presented that showed about 50% of Illinois medical corporations do not have a current certificate. Considering the Blues' extensive doctor network, it was safe to assume the insurer had paid other medical corporations that didn't have updated certificates, Roberts said.

In ruling that the corporate certificate was not necessary to protect public safety, the court sent the case back to the trial court to hear the podiatrists' original lawsuit.

In a four-count complaint that alleges breach of contract, fraud, consumer fraud and insurance code violations, doctors in the group say BlueCross BlueShield owes them more than $1 million in unpaid bills.

If the court had ruled in favor of the Blues, the decision could have had repercussions for all licensed health care professionals, Roberts said. Not only would practices that didn't have a certificate be vulnerable to withheld payments, but banks also could have foreclosed on loans because of the same violations, he said.

"The court understood the ramifications to rule in the way it did," Roberts said.

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Case at a glance

Chatham Foot Specialists P.C. vs. Health Care Service Corp., d/b/a Blue Cross Blue Shield of Illinois

Venue: Illinois Supreme Court
At issue: Whether a podiatry group has standing to sue an insurer on allegations that the company withheld payments because the group's corporate certificate was not up to date. The court said yes.
Potential impact: Doctors say the decision lends protection to medical practices that could have let their certificates lapse. A ruling in favor of the insurer might have made medical groups vulnerable to companies withholding payments or other financial distress, such as banks foreclosing on loans.

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