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Judges Tosses RICO Managed Care Claims Against PacifiCare


On January 31, 2006, Judge Moreno of the U.S. District Court for the Southern District of Florida granted PacifiCare Health Systems, Inc.'s ("PacifiCare's") motion for summary judgment in In Re: Managed Care Litigation, MDL No. 1334, 00-1334-MD-Moreno. The plaintiff class of physicians had claimed that PacifiCare (along with other commercial health insurers and HMOs) participated in a RICO conspiracy to defraud physicians of proper payment through the misuse of automated claims processing systems and other practices. The plaintiffs had specifically claimed that PacifiCare agreed to the "overall objective" of this conspiracy.

In order to prove that a defendant's agreement with the "overall objective" of a conspiracy rises to the level of RICO liability, according to the judge, a plaintiff must produce 1) evidence of an opportunity to conspire; 2) evidence that the defendant acted in parallel conduct with other conspirators; and 3) "plus factor" evidence, i.e., evidence that the parallel conduct was more than "mere lawful conscious parallelism." The judge found that Plaintiffs' evidence, apart from PacifiCare's use for some period of time of software programs attacked by the plaintiffs, consisted of: A) PacifiCare representatives' attendance at meetings and conferences with other defendants' representatives; B) the fact that PacifiCare and other defendants are customers of Ingenix, a data collection subsidiary of UnitedHealthcare; C) PacifiCare's collaboration with other defendants regarding the merger of trade associations and the planning of joint business activities; and D) PacifiCare's and other defendants' participation in the same industry surveys. The court determined that this evidence may be able to demonstrate that PacifiCare had an opportunity to conspire with other defendants, but could not demonstrate that PacifiCare acted in "parallel conduct" with any other defendant. The court's ruling notes that the judge specifically asked plaintiffs to identify its three best items of evidence demonstrating PacifiCare's "parallel conduct," and the court determined that those three items could establish nothing more than the mere opportunity to conspire.

In its defense on the parallel conduct issue, PacifiCare noted that A) only 20% of its business involves fee-for-service reimbursement (the only form of reimbursement at issue at this point in the case, alleged abuses of capitation payment methods no longer being part of the litigation); B) a large portion of its fee-for-service claims payments are processed in accordance with specific requirements of the Medicare program; C) it did not use ClaimCheck or similar software until after the alleged conspiracy commenced; and D) the fee-for-service damages alleged to have resulted from PacifiCare's conduct are less than one-fifth of one percent of the total alleged damages.

For all of these reasons, the court determined that the plaintiffs failed "to demonstrate that PacifiCare acted in a parallel manner with the other defendants" and therefore did not need to determine whether plaintiffs' evidence was sufficient "plus factor" evidence. Finding that none of plaintiffs' evidence could reasonably be relied upon a jury at trial to prove that PacifiCare had come to an agreement with any other defendant, the court also dismissed plaintiffs' claim that PacifiCare aided and abetted the other defendants' alleged improper conduct. Therefore, the court granted PacifiCare's motion for summary judgment, entirely removing PacifiCare as a defendant in the litigation. The plaintiffs have until February 17, 2006 to cite to additional evidence bearing on the two remaining defendants, United and Coventry, and on March 14, 2006, the court will hear oral argument on those parties' motions for summary judgment.

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Arthur N. Lerner
Partner – Washington, D.C.
Phone: +1 202.624.2820