State medical society lawsuits now target insurance contract provisions

All-products clauses and financially driven performance ratings are among the health plan techniques doctors are fighting.

By Amy Lynn Sorrel — Posted March 26, 2007

Print  |   Email  |   Respond  |   Reprints  |   Like Facebook  |   Share Twitter  |   Tweet Linkedin

Physicians had successes in their landmark class-action suit challenging insurer payment practices. But physicians say other contract provisions doctors view as abusive show that health plans might not be serious about long-term change.

The lawsuit that began in 1999 was the first nationally organized effort by physicians to take on managed care in the courts. Now physician organizations are applying what they learned from that litigation to new lawsuits taking on different health plan techniques.

The Medical Society of the State of New York last September filed a class-action antitrust lawsuit against the merged Oxford Health Plans and United Healthcare. The organization is contesting an "all-products clause" that requires doctors to be in both networks or to drop out.

Also in September, the Washington State Medical Assn., several doctors and the American Medical Association/State Medical Societies Litigation Center filed a breach-of-contract and libel lawsuit challenging Regence BlueShield's performance-based network. Physicians argued that it unfairly ranked doctors by using claims data, rather than medical records.

In December 2006, Regence agreed to drop the system. Doctors still are pursuing defamation claims against the insurer for sending letters to patients stating that their physicians did not meet the network's standards.

The Michigan State Medical Society in 2004 challenged Blue Cross Blue Shield of Michigan with a lawsuit accusing the insurer of unilaterally altering doctors' PPO agreements to apply to self-funded employer plans with which doctors were not contracted. The Michigan Osteopathic Assn. also joined in the suit.

The organizations were handed a defeat in December 2006 when the Michigan Court of Appeals ruled against them. If doctors disagreed with the Blues' terms, they are "free to terminate the agreement ... and [Blue Cross Blue Shield of Michigan] is also free to drop [doctors] from the agreement," the court stated.

Instead of appealing, the medical society is pursuing health plan contract reform legislation, said MSMS President Paul O. Farr, MD.

But doctors say they still find themselves turning to the courts to fight back health plans' bolder moves.

"These lawsuits reflect a level of frustration with the take-it-or-leave-it mentality of more aggressive for-profit insurers saying, 'If you don't sign our contract -- tough,' " said AMA Trustee J. James Rohack, MD.

Doctors attest that relations have improved with a number of insurance companies that settled in the consolidated litigation that accused several major health plans of conspiring to deny reimbursement to doctors.

"But that doesn't mean there aren't still ways and mechanisms that the industry can use to manipulate the system," said Archie Lamb, a lead attorney in the payment suit, which was brought by more than 700,000 doctors.

Lamb said the case shined a light on managed care practices and helped pave the way for doctors to be able to take legitimate claims against insurers to court.

"The problem now is, through merger and acquisition, you have a smaller number of players with a lot more power and who are also sophisticated legislatively," he said.

Exercising their muscle

On the new battlefront, physicians say insurers are exercising more control than they are entitled to in order to maintain lean networks and beefy bottom lines.

MSSNY's general counsel, Donald Moy, said the society's lawsuit underscores doctors' concerns that health plan mergers not only pressure doctors but also restrict patient care.

"We've made a lot of improvements, but it seems there's always new challenges," he said.

Pressure on employers to control health care costs also has put the squeeze on doctors.

MSMS legal counsel Daniel J. Schulte said more employers are opting to fund their own insurance packages because it is cheaper than the cost of a typical commercial PPO.

"The only way [insurers] can hang on to business is to be an administrator and to say [to employers], 'Hey, I've already got a network,' " Schulte said. With employers setting coverage terms and insurers administering the plan, this leaves physicians with little sense of what the coverage entails.

The growing dispute over performance and tiered networks also shows plans overstepping their bounds and making medical decisions, as opposed to business decisions, said J. Richard Creatura, the WSMA's attorney. Under the guise of evidence-based quality rankings, insurers are using economic credentialing to disqualify doctors from their panels, he said.

As a last resort, Washington physicians turned to the courts "to try to provide some remedies otherwise not available," Creatura said.

Fed up with insurers' policies, many doctors are opting to divorce themselves from managed care networks. Insurers are responding with policies that pay doctors less for out-of-network services and restrict patients' ability to see the doctor of their choice. This puts doctors in a no-win situation, said Mark H. Gallant, a Philadelphia attorney specializing in managed care issues.

"Plans try to frustrate patients' rights and penalize providers as to what they will pay. The indirect result is it encourages more doctors to be in the network," Gallant said.

Experts say they have seen increased litigation between out-of-network doctors and plans.

Arguing against litigation

Insurers, meanwhile, contend that the courts are not an effective tool for resolving tensions and that litigation only will increase costs.

"It's an unsustainable situation, and we feel strongly that collaboration is the solution," said Jeffrey Robertson, MD, chief medical officer for the Regence Group. He said the company's performance network "was never a disguised effort at merely reducing costs. This is about improving the quality of health care."

Michigan Blues spokeswoman Helen Stojic said the company gives physicians a high degree of input in decisions over contracting and medical policy. United did not return calls for comment.

America's Health Insurance Plans, a national trade group, says insurers are simply devising high-quality, affordable products that deliver choices to employers and consumers.

"Insurers have every incentive to do the right thing by consumers, and there is an incredible amount of competition," said AHIP spokeswoman Susan Pisano.

Medical and legal experts expect a long road ahead for physicians pursing the latest litigation.

Gallant said the courts historically have dealt mixed reviews to doctors. "You have the tension, on one hand, as plans pursue aggressive tactics that seem questionable," he said. "But on the other hand, anything we can do to rein in health costs is favorable, and sometimes courts will allow [certain insurance practices] and say it is in favor of public policy."

Back to top


Several cases at a glance

Washington State Medical Assn. et al. v. Regence BlueShield
Venue: King County Superior Court, Seattle
At issue: Whether a health plan defamed physicians and breached contracts with them when it excluded doctors from a performance-based network based on poor ratings derived from claims data.

Medical Society of the State of New York et al. v. United Healthcar
Venue: Supreme Court of the State of New York, County of New York
At issue: Whether an all-products clause -- requiring doctors who are in the separate networks to participate in both or face termination of their contracts -- violates state antitrust laws by tying the two merged plans together.

Oxford Health Plans; Michigan State Medical Society and Michigan Osteopathic Assn. v. Blue Cross Blue Shield of Michigan
Venue: Michigan Court of Appeals
At issue: Whether the Blues' PPO agreements with doctors apply to self-funded health plans set up by employers with which the doctors did not contract, and whether the insurer has the right to unilaterally amend the fees under the employer plans. The appeals court said yes. Doctors are pursuing legislation instead of an appeal.

Back to top

Taking a different route

In response to a court defeat, the Michigan State Medical Society is working on legislation that it hopes will force change in the way health plans contract with doctors. Physicians plan to push in this legislative session for measures that would:

  • Limit the amount of time an insurer would have to audit doctors' claims retroactively.
  • Require adequate fee disclosure.
  • Require termination from a contract to be for a specific cause.
  • Create a nondiscrimination clause that prohibits plans from excluding qualified doctors from their networks.
  • Prohibit all-products clauses that require doctors to participate in every business arrangement offered by the plan.
  • Create a reasonable definition of covered services.
  • Stipulate standards for amending contracts with physicians' consent, not just notification of changes.

Back to top



Read story

Confronting bias against obese patients

Medical educators are starting to raise awareness about how weight-related stigma can impair patient-physician communication and the treatment of obesity. Read story

Read story


American Medical News is ceasing publication after 55 years of serving physicians by keeping them informed of their rapidly changing profession. Read story

Read story

Policing medical practice employees after work

Doctors can try to regulate staff actions outside the office, but they must watch what they try to stamp out and how they do it. Read story

Read story

Diabetes prevention: Set on a course for lifestyle change

The YMCA's evidence-based program is helping prediabetic patients eat right, get active and lose weight. Read story

Read story

Medicaid's muddled preventive care picture

The health system reform law promises no-cost coverage of a lengthy list of screenings and other prevention services, but some beneficiaries still might miss out. Read story

Read story

How to get tax breaks for your medical practice

Federal, state and local governments offer doctors incentives because practices are recognized as economic engines. But physicians must know how and where to find them. Read story

Read story

Advance pay ACOs: A down payment on Medicare's future

Accountable care organizations that pay doctors up-front bring practice improvements, but it's unclear yet if program actuaries will see a return on investment. Read story

Read story

Physician liability: Your team, your legal risk

When health care team members drop the ball, it's often doctors who end up in court. How can physicians improve such care and avoid risks? Read story

  • Stay informed
  • Twitter
  • Facebook
  • RSS
  • LinkedIn