Blues HMO ordered to pay hospital pathologists

Physicians' prolonged strife with health plans over fair compensation yielded a landmark win for doctors in a Florida appeals court.

The 3rd District Court of Appeal ordered Health Options Inc., a BlueCross BlueShield of Florida HMO, to pay a group of out-of-network pathologists $1.5 million for professional services at a pair of in-network hospitals.

The April decision turned on an interpretation of Florida law regulating HMOs and is believed by legal experts to be the first of its kind in the state. The ruling is expected to affect at least 11 other cases pending in Florida.

Doctors also hope it will set an example nationwide, where they are engaged in similar disputes over insurers' alleged attempts to unilaterally foreclose on payments for contracted and noncontracted hospital care.

In 1999, Health Options halted reimbursements to Palmetto Pathology Services PA for the clinical component of the pathologists' work, which doctors say is essential to ensuring accurate test results for patients. That includes activities such as quality control, record keeping, establishing test protocols, regulatory compliance and technical supervision. Instead, the insurer paid the hospitals a lump sum for lab equipment use and general provision of the test services, court records show.

Since the hospitals did not compensate the pathologists for their professional services and doctors are prohibited by law from directly billing patients, the physicians said they were forced to provide free care.

Judges agreed and found that Florida law obligated Health Options to pay the pathologists for the medically necessary services covered under its hospital contracts. Prior case law also established that the out-of-network doctors were intended third-party beneficiaries to the HMO's agreements with patients, the court affirmed. The hospitals were not parties to the lawsuit.

Health Options is appealing to the Florida Supreme Court.

Doctors hope the case will turn the tide in their ongoing frustration with insurers' tactics.

"Courts are recognizing that health plans must be held accountable when they inappropriately refuse to pay for services," said Cecil B. Wilson, MD, immediate past chair of the AMA Board of Trustees. The Litigation Center of the AMA and State Medical Societies, the Florida Medical Assn. and the College of American Pathologists jointly filed a friend-of-the-court brief in the case.

Legal experts say that if the 3rd District Court ruling stands, it is likely to affect other types of inpatient care, such as radiology and emergency services.

Ervin A. Gonzalez, the pathologists' attorney, said HMOs continually refuse to justly compensate doctors for such care, yet physicians are expected to provide it while bearing the liability risk.

"Now the free ride is over," he said, adding that the decision will help maintain quality of care by ensuring qualified doctors provide hospital-based services.

HMOs: Coverage, quality at risk

But health plans say the court misinterpreted the HMO law, which was meant to balance access to care with affordable coverage.

Health Options declined to comment because of pending litigation. The insurer argued in court documents that it had paid the hospitals for their pathology services, and the company does not have a contractual relationship with the pathologists.

Health Options also said it is not required to pay doctors separately for the professional clinical services because the pathologists did not directly treat individual patients, as required by law. The insurer contends it does cover such patient-specific services, but argued in its appeal to the high court that the recent decision conflicts with a 5th District Court of Appeal ruling. Judges in 2002 said patients were not obligated to pay for the professional component of pathology services not covered by their health plan because patients received no direct, "hands-on" treatment.

But Gonzalez said the case did not address the scope of Florida's HMO statute and instead dealt with physicians' ability to balance-bill patients for their professional services.

In a friend-of-the-court brief, the Florida Assn. of Health Plans Inc. said holding HMOs responsible to doctors for such inpatient care would encourage physicians to overcharge for their services and reduce incentives for efficiency and quality control.

The court's interpretation would "only result in inefficiencies, lower quality of care and barriers to HMO coverage because of higher premiums," the FAHP brief stated. "This is contrary to every tenet upon which the HMO system in Florida is based."

Doctors say insurers are more concerned with profits than patient care.

"There has been a concerted effort on the payer side to look at hospital ledgers to see where [insurers] can create savings," said Gregory A. Brodek, a health care lawyer and partner with Duane Morris LLP in Boston. Brodek represents pathologists in Illinois, Tennessee and Texas in similar class-action arbitration cases against UnitedHealthcare, as well as a group of Massachusetts emergency physicians who sued Aetna in March, alleging that it arbitrarily capped reimbursements to the out-of-network doctors.

The Illinois case won class-action status in February. United did not return calls for comment.

Aetna maintains it has complied with Massachusetts law and fairly reimburses emergency doctors. The company's policy "protects our HMO members and customers in Massachusetts from excessive and unreasonable billed charges by a small group of physicians who do not participate in insurer networks," said its spokeswoman, Cynthia B. Michener.

But Brodek said insurers cannot make unilateral decisions with impunity. The Florida ruling "stands for the proposition that these doctors provided a covered service that was medically necessary, and they are entitled to fair payment."