As if HMOs weren't in enough trouble from new health reform legislation making it easier for them to be sued, they now face a massive lawsuit from the California Medical Association that could cost tens of millions of dollars.
The CMA filed a civil suit earlier this month accusing eight of California's largest health plans of being negligent in paying physicians under contract with them.
The defendants in the suit, filed in San Diego Superior Court, are: Aetna/U.S. Healthcare, Blue Cross of California, Blue Shield of California, HealthNet, MaxiCare Health Plans Inc., PacifiCare of California, Prudential HealthCare and United Healthcare of California Inc.
The suit centers on intermediary organizations that negotiate payment rates with HMOs on behalf of doctors. Some of these are physician management groups like MedPartners Inc. that run into financial trouble, leaving the doctors that contracted with them in the lurch.
The suit claims that when an intermediary group fails, as MedPartners did, HMOs are responsible for paying the physicians in the group.
"What we are saying is really very simple," said CMA President Dr. J.C. Pickett. "In return for receiving a license to operate in the state, HMOs have the legal responsibility of making sure that their patients get the care they were promised when they signed up with the plan. A critical part of this responsibility is ensuring that every patient's physician gets paid for the medical care they provide. Otherwise the whole thing falls apart."
Beyond saying they believe the suit has no merit, spokespersons for several of the health plans declined comment. A spokeswoman for PacifiCare released a statement saying in part that: "PacifiCare works closely with all of its contracted medical groups and (independent physician associations) to ensure timely and appropriate payment to physicians who provide care to our members. PacifiCare strongly disagrees with the claims made by the CMA and will work to resolve the dispute."
Industry groups say the lawsuit is out of line and that state regulators already have dealt with the issue.
"The Department of Corporations has already taken a look at this and they have said the health plans have met their contractual responsibilities," said Cory Black, a spokesman for the California Association of Health Plans.
Late last year, the Department of Corporations denied a motion by the CMA to adopt a regulation that would make health plans liable for payment to providers if an intermediary goes bankrupt.
The lawsuit stems in part from the recent failure of two major Southern California companies that acted as intermediaries between physicians and health plans: MedPartners and FPA Medical Management Co. of California Inc.
When these two independent physicians associations failed, the state ordered doctors who contracted with them to continue seeing patients, even though there was no guarantee that the physicians would be reimbursed for the services provided.
Dr. Gerard Frank, president of the Los Angeles County Medical Association, said doctors in the area have paid out of their own pockets for medicine in order to keep providing adequate care.
"The lawsuit is certainly going to create more animosity between doctors and HMOs, but it's absolutely necessary because we feel the HMOs are getting away with breaking the law," he said.
But Bobby Pena, a spokesman for Aetna/U.S. Healthcare, said that health plans paying doctors for services rendered after the failure of an intermediary are, in effect, paying twice on claims.
"We understand that these providers need to receive their funding," Pena said. "But we developed a relationship with them and the parameters were set that we would pay the medical group and the medical group would pay them. From that standpoint, we have lived up to that."
The lawsuit also contends that the health plans knew FPA was having financial trouble and failed to use reasonable care to fully investigate the stability of the company.
According to the complaint filed by CMA, state law requires health plans to reimburse doctors for the services they provide within 45 days. Interest collects on these unpaid claims at a rate of 10 percent annually, and the total of all the reimbursed services cited by the CMA could total tens of millions of dollars, according to the lawsuit.
The litigation comes on the heels of a report released by the CMA that claims dozens of the state's medical groups are in deep financial trouble.
"Medical groups and independent physicians associations are going bankrupt across the state because HMOs are forcing doctors to do more with less," said Dr. Jack Lewin, executive director of the organization.
The one-two punch of the negative report and the lawsuit was not lost on industry spokesman Black. "This is a very political move," he said. "They had three press conferences in four days and we took a lot of heat."
For reprint and licensing requests for this article, CLICK HERE.