Florida Supreme Court rules that out-of-network doctors can sue HMO

In a separate case, an appeals court said an out-of-network emergency physician could sue insurers for underpayments. Both Florida lawsuits seek class-action status.

By Amy Lynn Sorrel — Posted Nov. 20, 2006

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Florida physicians won a pair of legal victories in lawsuits that could have a significant impact on HMOs' payment practices to out-of-network and in-network physicians. The state's Supreme Court and an appellate court in October issued rulings within one day of each other that allow doctors in two cases to sue several health plans for slow or reduced reimbursements under the state's payment laws.

Physicians say the decisions give teeth to statutes that are meant to ensure that doctors get paid fairly and on time for their services. They also say the ruling gives doctors more leverage in negotiating with insurers for reimbursements.

"It levels the playing field because it says to doctors that these rights that are provided to you are not meaningless," said Jeff Scott, associate general counsel of the Florida Medical Assn., which filed friend-of-the-court briefs in both cases. The American Medical Association/State Medical Societies Litigation Center and other medical groups also joined in the court briefs.

"Without an ability to enforce [the laws], what good do they do?" Scott said.

After five years, the Florida Supreme Court on Oct. 19 unanimously ruled in Westside EKG Associates v. Foundation Health that the out-of-network cardiologists who sued are considered third-party beneficiaries of the HMOs' contracts with members. Therefore, judges said, Westside can go forward with a suit accusing Foundation Health, Humana and BlueCross BlueShield of Florida of breaching those contracts. The doctors say the insurers violated prompt-pay laws by delaying or denying claims.

The court rejected the health plans' argument that the noncontracted doctors do not have the right to enforce Florida's law by bringing a lawsuit. The health plans had argued that state law required physicians to resolve payment disputes out of court to keep health care costs down for patients.

The crux of the issue is not about insurers violating state prompt-pay law, said Bob Wychulis, president and CEO of the Florida Assn. of Health Plans, which filed an amicus brief on behalf of the HMOs. He said the out-of-network doctors were paid appropriately for emergency and nonemergency services.

"But they don't have standing [to sue] on somebody else's contract which they are not a part of," Wychulis said.

Doctors disagree. Jeffrey M. Liggio, an attorney for Ft. Lauderdale-area Westside EKG Associates, said HMOs are required to abide by Florida's law regardless of whether doctors are in the network.

"If an insurance company violates a statute that governs the way it is supposed to treat the people it does business with, then that is a violation of the insurance contract," he said.

The lawsuit, originally filed in 2001, returns to a trial court in Broward County, where the doctors will seek class-action status on behalf of doctors statewide, Liggio said.

If granted, the case would mirror a federal class-action lawsuit that 700,000 doctors nationwide fought against 10 major insurers, alleging that they conspired to downcode or bundle doctors' claims. A number of health plans, including Humana, settled, although the companies admitted no wrongdoing. A Florida federal judge in June dismissed the remaining claims against UnitedHealth Group and Coventry Healthcare, which chose not to settle during the seven-year court battle.

Andrew Berman, an attorney representing Humana in the Westside EKG Associates case, said the company's settlement precluded doctors from seeking a class-action lawsuit.

Doctors' triumph in the Florida Supreme Court came just one day after an appellate court upheld the right of noncontracted orthopedic surgeon Peter F. Merkle, MD, to sue four health plans for underpaying him for his emergency services.

The ruling reverses a trial court decision to dismiss Dr. Merkle's lawsuit, filed in 2004. If the appellate court decision sticks, "it's going to have a significant effect on HMOs as well as patient treatment," because more doctors may be willing to take emergency call, said Patrick W. Lawlor, a lawyer representing Dr. Merkle. Many doctors are not taking call because they are not getting paid fairly, but still pay high liability premiums, he said. The doctor also will seek class-action status, Lawlor said.

The Fourth District Court of Appeal ruled that Florida's Emergency Services statute establishes liability and "clearly imposes a duty on HMOs to reimburse non-participating providers according to the statute's dictates, not based on Medicare reimbursement rates ... to ensure [they] are adequately paid for a service they are required by law to perform."

Under the state law, insurers must pay out-of-network doctors the lesser of: the doctor's charges; the usual and customary charges for similar services in the community; or the charge prenegotiated within 60 days of submitting the claim.

Dr. Merkle alleges that the HMOs named in his lawsuit -- Blue Cross Blue Shield of Florida, Aetna, Vista Healthplan and Neighborhood Health Partnership -- are paying him significantly less. The physician is being paid a rate equal to about 120% of Medicare rates, Lawlor said.

"It's a completely arbitrary number," Lawlor said.

In court papers, the health plans dispute that allegation, and Vista Healthplan said it would appeal the ruling.

Bruce Middlebrooks, spokesman for the Florida Blues, named in the two lawsuits, said: "The courts' decisions are limited to specific issues of the law. ... We will address their merits at the trial level."

Aetna declined to comment on the Merkle ruling; Neighborhood Health Partnership and Foundation Health couldn't be reached for comment.

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Cases at a glance

Westside EKG Associates v. Foundation Health et al.

Venue: Florida Supreme Court
At issue: Whether physicians can sue insurers under the state's prompt-pay law as third-party beneficiaries to an HMO contract with patients. The court said yes.
Potential impact: Physicians say they should be able to sue to enforce the law and receive fair and timely reimbursement. HMOs say, under law, doctors must resolve their disputes out of court to avoid higher health care costs.
Peter F. Merkle, MD, v. Health Options Inc. et al.
Venue: Florida Fourth District Court of Appeal
At issue: Whether an out-of-network emergency physician can sue insurers under the state's Emergency Services Statute for low payments. The court said yes.
Potential impact: Doctors say that insurers are reimbursing them at arbitrarily low rates, keeping doctors out of emergency departments. The HMOs say they are paying doctors fairly under the law.

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