Supreme Court Rules in Favor of Arbitration with Physicians in HMO Suit
The Supreme Court yesterday ruled that HMOs PacifiCare Health Systems and UnitedHealth Group could send disputes with their physicians to arbitration, "preventing physicians from taking their racketeering claims directly to the courts" in a larger lawsuit, the Los Angeles Times reports. The 8-0 decision reverses past decisions by a federal judge and the 11th U.S. Circuit Court of Appeals, which had ruled that arbitration agreements between HMOs and their physicians were "too restrictive" because they did not allow for punitive or triple damage awards, important provisions in federal racketeering laws, the Times reports. In the decision, Justice Antonin Scalia wrote that physicians who signed arbitration agreements with HMOs are required to take their dispute to arbitration first because "it was too early for the court to act" and "it wasn't clear that arbitrators are prevented from awarding triple damages," the Times reports. The case is part of a larger lawsuit filed on behalf of about 600,000 physicians by state medical associations in California, Florida, Georgia, Louisiana and Texas (White, Los Angeles Times, 4/8). U.S. District Judge Federico Moreno in September 2002 approved class-action status for the lawsuit, which alleges that Aetna, United Health, Cigna, Coventry Health Care, WellPoint Health Networks, Humana Health Plan, PacifiCare and Anthem BlueCross BlueShield delayed or denied reimbursement for health services and rejected claims for necessary medical treatments as part of a racketeering conspiracy (California Healthline, 11/22/02). In the smaller case, attorneys for the physicians argued that arbitration agreements were not applicable in the dispute because the HMOs had violated the federal Racketeer Influenced and Corrupt Organization Act (MacDonald, Hartford Courant, 4/8). Attorneys for PacifiCare and UnitedHealth maintained that the appeals court decision violated the Federal Arbitration Act, a law enacted to promote alternatives to lawsuits. According to legal analysts, the HMOs made the argument in an effort to reduce the size of the class-action lawsuit and to avoid larger settlements (Los Angeles Times, 4/8).
Karen Ignagni, president of the American Association of Health Plans, praised the Supreme Court decision, which she said "represents validation by the Supreme Court of the principle of arbitration" (Hartford Courant, 4/8). Jeffrey Klein, an attorney for UnitedHealth, said the decision "reaffirms cost-effective arbitration as the best forum to resolve disputes between doctors and managed-care companies." However, attorneys for the physicians predicted that the decision would not affect the larger case. Archie Lamb, co-lead counsel for the 14 law firms that represent the physicians, said that the decision was "very narrow" and did not affect the larger claim of "conspiracy in the managed care industry" to limit physician reimbursements. Dr. Ronald Bengasser, president of the California Medical Association, said that the decision would not likely reduce the size of the class-action suit because most physicians are under contract with several HMOs, not only PacifiCare and UnitedHealth (Los Angeles Times, 4/8).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.