Judge punishes Pennsylvania Blues plans for not producing documents

The insurers are considering an appeal.

By Amy Lynn Sorrel — Posted Nov. 5, 2007

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In a rare blow, a federal judge in Pennsylvania sanctioned three Blues affiliates and their attorneys, saying they intentionally delayed and impeded discovery in a class-action lawsuit that thousands of the state's physicians filed against the health plans over reimbursement issues.

The judge found that Capital BlueCross, Keystone Health Plan Central, Highmark Inc. and their lawyers acted in bad faith and "flagrant disobedience" of court orders to produce claims and coding information related to allegations of fraudulent payment practices.

In some cases it took the health plans more than a year to turn over records they had, the opinion stated.

"Defendants and their counsel have engaged in a course of conduct which makes it clear that they have not been forthcoming with the most important information in this case," Judge James K. Gardner wrote for the U.S. District Court for the Eastern District of Pennsylvania."To deny [doctors] the data ... is equivalent to denying [them] their day in court."

In the Sept. 28 opinion, the judge ordered the insurers and their counsel to pay doctors' legal expenses, which experts say could amount to several million dollars.

Kutztown (Pa.) Family Medicine, which filed the lawsuit in 2001, declined to comment on the ruling, and the doctors' attorneys did not return calls.

In court documents, the physicians said the health plans' tactics were a "calculated effort" to thwart their case.

Such discovery disputes are not uncommon, said Rocky Wilcox, general counsel to the Texas Medical Assn., one of at least a dozen state medical societies involved in similar class-action lawsuits filed across the country against other insurers.

He said the ruling could prove to be significant because insurance companies generally have ample resources to defend these cases and discourage doctors' lawsuits. Both parties have the right to object to document requests, making sanctions rare, Wilcox said.

"But there has to be some rational basis and not just to delay [a case] and raise expenses," he said.

The Blues' lawyers argued that they were just doing their best to sort through the extensive requests and predominantly electronic claims data that were inherently involved in the mass litigation. They are considering an appeal.

"This is a classic example of lawyers doing what they are supposed to [do], and having [discovery] disputes and seeking assistance from the courts to resolve them," said Lawrence J. Fox, a Philadelphia attorney for Stevens & Lee PC, which represents Capital BlueCross. He said insurers already have turned over a significant amount of material. In some instances, doctors asked for privileged company information that had nothing to do with reimbursement, Fox added.

Mark A. Aronchick, a partner with Hangley Aronchick Segal & Pudlin, one of the firms the court chastised and Keystone's former counsel, said the ruling could have a chilling effect on the way discovery is handled in complex payment cases.

The court, however, in a 77-page opinion, said the health plans and their lawyers abused the process by needlessly challenging doctors' requests nearly every step of the way.

Gardner also found that in some cases, the parties withheld evidence or failed to reasonably investigate whether the insurers actually had information they claimed was not in their possession or was inaccessible. He cited one example in which Capital BlueCross ultimately found 60 boxes of material that doctors had requested for nearly a year. That happened only after the court appointed a special master to oversee discovery, according to court records.

The judge concluded the tactics were used "for the improper purpose of causing unnecessary delay and increasing the costs of this litigation," and called them "a concerted effort to frustrate [doctors'] attempts at obtaining relevant discovery."

Under the court order, the Blues plans and their lawyers will divide up the doctors' attorney's fees and discovery expenses that have accrued thus far.

Highmark attorneys did not return calls for comment.

All three health plans declined to respond to the sanctions order. In court documents, they refuted claims that they had improperly reimbursed doctors.

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