California heats up: will a jury decide the future of medicine? - Managed Care on Trial

Physician Executive, Sept-Oct, 2000 by Earl R. Washburn

Using RICO may provide plaintiffs with a pathway around the ERISA blockade. CMA notes that "RICO appears to provide the most viable legal approach to obtaining the relief physicians and patients need." (12) This filing is a civil RICO action, not a criminal one. The key element in making this a RICO case will be establishing a long-standing pattern of fraudulent practices against providers and patients. On the other hand, lawyers for managed care organizations believe "the (June U.S. Supreme Court) ruling marked the death knell of class action lawsuits against managed care companies that are based on federal benefits law and racketeering claims." (13) Whether or not RICO offers a viable challenge to ERISA preemption remains to be seen.

What is charged?

These excerpts from the suit itself give the flavor of the argument:

* "Physicians have been forced to suffer from patently unfair contract terms, delays, decreases and denials in payment of claims, and the refusal of defendants to provide the data necessary to enable physicians to evaluate the rates provided and the level of risk assumed under the contract." (14)

* "Yet, defendants set reimbursement rates, including capitation rates, to these physician groups at unconscionably low levels which defendants know are not adequate to cover the medical services defendants promise to provide their members and/or know are for services for which there can be no sound actuarial projection because expected usage cannot be controlled or predicted." (14)

* "As a result of defendants' coercive, unfair, and fraudulent activities, these defendants not only intrude into the physician-patient relationship, but utilize their power to dominate and control this relationship for financial gain to the detriment of both patients and physicians." (14)

Certainly, the language of any lawsuit makes for reading that should be kept in context. Nevertheless, most doctors in California and elsewhere would agree with many, if not all, of the complaints in this suit. Marie Kuffner, MD, CMA's President, said, "It is with sadness that we are forced to this last resort. We physicians have tried to work with the for-profit HMOs in the marketplace and have attempted to curb the abuses through the legislative process--all to no avail. We cannot continue to allow our patients' health to be jeopardized by corporate greed. For years these profit-driven companies denied needed services, interfered with medical decisions, and valued dollars more than lives. We are here to say, 'No more in the State of California.'" (15)

Not surprisingly Walter Zelman, President of the California Association of Health Plans, sees things differently. Calling the suit a "publicity stunt," Zelman went on to say, "This is a relatively groundless legal attack which is more about public relations and politics than it is about finding genuine solutions." Foundation Health Systems' Lisa Kalustian added, "The only winners will be the attorneys, not the physicians, the patients, or our health care systems." (10)