Blues settlement in class-action suit shifts focus to last HMO holdouts

Only two defendants are left in mass physician litigation that challenges how health plans pay doctors.

By Amy Lynn Sorrel — Posted May 21, 2007

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Closing what the nation's physicians hope is one of the final chapters in their nearly decade-long stand against the managed care industry, the Blues are the latest health plans to settle doctors' claims of improper payment practices.

In the April deal that includes 900,000 physicians, the BlueCross BlueShield Assn. and more than 30 of the nation's Blues and their subsidiaries agreed to pay doctors $128 million and make several business changes. The agreement mirrors previous settlements in a federal class-action lawsuit involving multiple insurers. Medical and legal experts say the successes have forced changes in doctors' relationships with the industry.

Physicians see this settlement as a particular victory because the Blues are one of the country's largest health plans, covering 98 million lives. They hope the agreement will compel the two companies remaining in the class-action litigation -- UnitedHealthcare and Coventry Health Care -- to follow other insurers' lead.

Some experts say the Blues settlement signals an era of cooperation that inevitably will affect other insurers.

"The marketplace is going to demand that they make the same changes or employers won't contract with them, and as a result, they are going to be left behind," said Ohio lawyer Randall S. Rabe, who specializes in managed care litigation at Nelson Levine de Luca & Horst.

He said the case has drawn attention to health plans' business practices in general and could spark other regional lawsuits challenging them if they are inappropriate.

"[Insurers] can either wait until somebody sues [them], or see what's happening and start to make changes voluntarily," Rabe said.

The April agreement signifies that more than 90% of the country's Blues have resolved this class-action lawsuit with physicians, the doctors' co-lead counsel Archie Lamb said. Some state Blues plans settled earlier. The latest deal essentially extinguishes other individual state or federal actions brought against the insurer on this issue.

In addition to creating the $128 million compensation fund, the Blues agreed to revise their claims-payment procedures, set up independent review boards to arbitrate billing disputes, and pay up to $49 million in attorney's fees. The Blues deny any wrongdoing.

The changes bring the estimated value of the settlement to more than $1 billion.

Doctors hopeful, but cautious

Physicians anticipate that this settlement will foster better communication with the Blues. "Now we can go forward taking care of patients," said William W. Hinchey, MD, president of the Texas Medical Assn., one of the medical societies involved.

Given the Blues' influence as the largest commercial health insurance plan in the state, "this [agreement] will affect a lot of doctors and patients in Texas," he said, calling it "a relief."

Michael A. Pope, the Blues' lead counsel in the settlement, said it would strengthen relationships between doctors, the plans and patients.

"Anything like this [litigation] that became a distraction to communication between plans and doctors is not good," he said. "This [settlement] puts that behind us and allows us to focus on serving patients and customers and keeping health care costs down, and working with doctors to do that."

The Blues settlement awaits preliminary court approval by federal Judge Federico A. Moreno in the U.S. District Court for the Southern District of Florida in Miami. In early May, a hearing date was yet to be scheduled.

The case, Love v. BlueCross BlueShield Assn., paralleled a larger lawsuit that accused 10 major health plans of conspiring to defraud doctors by reducing and denying reimbursements in violation of the federal Racketeer Influenced and Corrupt Organizations Act. Seven of those plans settled over the past four years, and one plan was acquired by another.

In June 2006, Moreno dismissed the claims against UnitedHealthcare and Coventry. Doctors are appealing the ruling to the 11th U.S. Circuit Court of Appeals.

"To preserve this growing commitment to progressive cooperation, the AMA calls on all health insurers to voluntarily and permanently establish business practices that permit fair and open dialogue with physicians," American Medical Association President William G. Plested III, MD, said in a statement.

United and Coventry did not return calls for comment.

New climate for physicians

For now, doctors hope that their successes -- thus far at least -- will force insurers to play by the rules when it comes to reimbursement processes.

"For the most part, this industry has been changed as much as we can under these circumstances. It's not perfect, but it's a whole lot better than what it used to be," Lamb said.

Despite some improvements, doctors say their relations with some of the health plans that settled have not been all that rosy.

"It takes constant oversight to make sure what they've agreed to they are actually doing," said Robert W. Seligson, president of the Physicians Advocacy Institute Inc., a nonprofit organization established with funds from earlier settlements to make sure that insurers comply with the agreements and ensure quality.

For example, doctors are still experiencing some "hassle factors" with medical necessity appeals, contract issues and claims processing, said Seligson, also executive vice president and CEO of the North Carolina Medical Society, a party in the suits.

Florida family physician E. Rawson Griffin III, MD, said the settlements with Aetna and Cigna "didn't change a thing," and he dropped out of both plans because of reimbursement problems. Aetna, for example, offered him a contract for 15% less than a previous one.

Aetna spokeswoman Cynthia B. Michener said the company is committed to a strong relationship with health care professionals. "Aetna remains proud of its leadership role four years ago in adopting standards through the settlement that the judge acknowledged set a standard for an 'efficient and fair' relationship with the physician community."

Cigna did not return calls seeking comment.

TMA General Counsel Rocky Wilcox said that doctors remain "vigilant" about other types of policies that insurers have introduced since the settlements, such as performance-based networks.

Also, Cigna's agreement, for example, is set to expire in September, which raises new fears, he said.

"The question is what happens now, and we are meeting with Cigna to find out if they are going to continue to follow those provisions or not," Wilcox said.

Charles X. Gormally, a health lawyer and partner with New Jersey-based WolfBlock, expects that the battle will be fought in state legislatures, rather than the courts, to effect lasting change.

But some experts say that although there have been some successes, the case has created a deep divide between doctors and health plans.

"What's obvious is that as a result of this, we have lost some ability to communicate in a non-litigious way in a very contentious field at the moment," said Julie A. Barnes, a managed care lawyer at Crowell & Moring LLP in Washington, D.C. "What we should be doing is working toward the common goal of rendering cost effective and quality care."

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A long fight

1999-2000 Doctors and state medical societies across the country begin filing lawsuits against health plans.

Oct. 23, 2000 U.S. District Court judge for the Southern District of Florida, Miami, consolidates cases.

Sept. 26, 2002 Miami federal judge grants class-action status.

May 21, 2003 Aetna settles.

Sept. 4, 2003 Cigna settles.

May 2, 2005 Health Net settles.

May 5, 2005 Prudential Insurance Co. of America settles.

July 11, 2005 WellPoint Health Networks Inc./Anthem settles.

Oct. 17, 2005 Humana Inc. settles.

June 19, 2006 Miami federal judge dismisses claims against UnitedHealthcare and Coventry Health Care, a ruling doctors are appealing to the 11th U.S. Circuit Court of Appeals.

April 27, 2007 BlueCross BlueShield Assn. plans settle

Sources: link; state medical societies

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Prescription for change

More than 30 Blue Cross and Blue Shield plans and subsidiaries in April settled claims that the company improperly paid physicians. Going forward, the Blues have agreed to:

  • Pay physicians more than $128 million.
  • Uniformly define medical necessity and set clinical guidelines.
  • Establish an independent review board to resolve reimbursement disputes.
  • Promptly pay clean electronic claims within 15 business days and paper claims within 30 days.
  • Set up a mechanism to address disputes regarding the Blues' compliance with the settlement.
  • Provide fee schedules to doctors.
  • Create a physician advisory committee.
  • Give 90 days' notice of policy changes and annual fee schedule amendments.

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External links

HMO Crisis; includes information on class-action lawsuit filings and settlement agreements (link)

HMO Settlements; includes information on class-action lawsuit filings and settlement agreements (link)

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