State medical society lawsuits now target insurance contract provisions

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."