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Managed Care Lawsuit Watch - June 2004


This summary of key lawsuits affecting managed care is provided by the Health Care Law Group of Crowell & Moring LLP. If you have questions or need assistance on managed care law matters, please contact Art Lerner or any member of the health law group.

Please click to view the full Crowell & Moring Managed Care Lawsuit Watch archive.

Cases in this issue:

American Chiropractic Assoc., Inc. v. Trigon Healthcare, Inc.
4th Cir. No. 03-1675 (5/6/04)

Affirming the 2003 decision made by the U.S. District Court for the Western District of Virginia, the Fourth Circuit held that Trigon Healthcare, its affiliated companies, medical doctors and medical associations had not participated in an “anticompetitive conspiracy” and were not in violation of state and federal antitrust laws and the Racketeer Influenced and Corrupt Organizations Act (“RICO”). Specifically, the Court found that Trigon had not conspired to prevent chiropractors from rendering care to plan beneficiaries, nor precluded adequate reimbursement to the chiropractors. The Fourth Circuit also held that Trigon could not have conspired with doctors serving on its Managed Care Advisory Panel because of the intracorporate immunity doctrine, under which one corporate entity cannot conspire with a related corporate entity. The Court agreed with the lower court’s finding that Trigon “had no economic motive” to preclude referrals to chiropractors and further stated that the ACA did not explain “why Trigon would, as an economic matter, attempt to exclude chiropractors from its provider network or dissuade patients from the use of chiropractic services if chiropractic care is more cost-effective than other medical care.” Finally, while the Fourth Circuit did not agree with the lower court that the ACA’s RICO claim was preempted by the McCarran-Ferguson Act, the Fourth Circuit did affirm the lower court’s dismissal of the RICO claim on the grounds that the ACA failed to allege a claim for mail or wire fraud or any other RICO violation.

Chambers v. Coventry Health Care of Louisiana, Inc.
E.D. La. Civ. Act. No. 04-1086 Section “L” (5)

The U.S. District Court for the Eastern District of Louisiana issued an injunction, ordering Coventry, an HMO, to cover a PET fusion scan for Chambers, a 62-year old colon cancer patient, after his physician requested authorization for such procedure. Coventry denied the requests for coverage on the grounds that the PET fusion scan was experimental and investigational, and therefore excluded under the explicit provisions of its plan. Chambers sought a temporary restraining order, and preliminary and permanent injunctions, seeking to prohibit Coventry from enforcing the experimental and investigational provisions of its plan. Coventry removed the case to Federal court because the case arose under ERISA.

In determining whether to issue the preliminary injunction, the Court looked to see if Chambers clearly carried the burden of persuasion on each of the following elements: (1) a substantial likelihood of prevailing on the merits; (2) a substantial threat of suffering irreparable injury if the injunction is not granted; (3) the threatened injury outweighs that threatened harm to the party to be enjoined; (4) granting the preliminary injunction will not disserve the public interest.

The Court held that Chambers carried his burden and granted the preliminary injunction, enjoining Coventry from denying coverage for one PET fusion scan. A trial on the merits will be held to determine whether PET fusion scans are experimental. While the Court recognized that Coventry can decide what it will consider to be experimental and investigational, it must base its decision on “appropriate and sound methodology.”

QualChoice Inc. v. Rowland
6th Cir. No. 02-3614 (5/11/04)

The U.S. Court of Appeals for the Sixth Circuit dismissed for lack of subject matter jurisdiction an action by a health plan administrator against a beneficiary for reimbursement of medical payments. QualChoice advanced Rowland, the beneficiary, more than $80,000 for medical expenses incurred in a collision with a railcar. The plan documents contained a provision requiring beneficiaries to reimburse the plan following settlement with a third-party. Rowland received a $107,000 settlement from the railroad company, paid out over the course of 44 months. QualChoice asked for restitution or imposition of a constructive trust or equitable lien on the funds which Rowland possessed from the settlement, arguing that ERISA authorized its recovery. The court held that a plan administrator’s action “to enforce a plan-reimbursement provision is a legal action, regardless of whether the plan participant or beneficiary recovered from another entity and possesses that recovery in an identifiable fund.” The court emphasized that the source of the QualChoice claim was a contract to pay money, and that the ERISA-authorized remedies available in equity “are not proper mechanisms for enforcing this right.”

Rizzo v. Bankers Life & Casualty Company
N.D. Ill. No 04-C-292 (04/27/2004)

State law unjust enrichment claims brought by a beneficiary of a collectively bargained health plan against his insurer based on payments the insurer received from the third-party tortfeasor are pre-empted by ERISA.

The Plaintiff’s son was insured as his dependent through the group health insurance policy issued by Bankers Life & Casualty Company, in accordance with the terms of the health insurance plan Rizzo received through his local union chapter. Under the terms of the plan, the trust established by the local union was both the plan sponsor and administrator.

Following a motorcycle accident, Rizzo signed a reimbursement agreement which stated that he would reimburse Bankers for all payments made stemming from his son’s accident to the extent that Rizzo recovered any money through his litigation against the third-party tortfeasor responsible for the accident. When this litigation settled, Bankers was paid over $378,000. In his complaint, Rizzo claimed that he paid over $100,000 in additional medical costs not covered by Bankers, and that Bankers was unjustly enriched by receiving the settlement payment. He claimed that Bankers was also responsible for these costs.

Bankers removed the case to federal court, and then filed a motion to dismiss. Rizzo filed a motion to remand the case back to state court. The Court denied the motion to remand, finding that Rizzo would bring a claim under § 502(a) as a plan beneficiary, and that his claim for failure to provide benefits was equivalent to a § 502(a) claim to recovered benefits. Further, Rizzo’s unjust enrichment claim was really seeking to clarify his rights under the plan’s terms, and required interpretation of the plan terms. The Court held that this all falls within ERISA’s preemptive scope.

The Court granted Bankers’ motion to dismiss on the grounds that an ERISA lawsuit to recover benefits may only be brought against the plan as an entity. Bankers is not the plan, nor the plan administrator.

Vista Health Plan Inc. v. Texas Health and Human Services Commission
Tex. Ct. App., No. 03-03-00216-CV (5/20/04)

Vista Health Plan brought suit against the Texas Department of Health in an attempt to hold the agency responsible for the allegedly inadequate reimbursement rates that Vista received pursuant to its contract with HMO Blue. The agency contracted with Blue for the provision of services to Medicaid-eligibles, and Blue subcontracted with Vista to provide Medicaid managed care services to Blue’s members. Under the contract between Blue and Vista, Vista received capitated payments for the provision of services to Blue’s members. A dispute arose between Vista and Blue about the adequacy of the capitated payments for premature infant care. Vista claimed that premature infant care should be covered by Medicare or reimbursed on a fee-for-service basis, and sued Blue for breach of contract. In conjunction with that dispute, Vista claimed that the agency violated the Medicaid Act by entering into a contract with Blue that involved an invalid interpretation of the law. The Texas Court of Appeals held that it lacked jurisdiction over the claim against the agency because the case presented no justiciable controversy. The court emphasized that the true dispute was between Vista and HMO Blue, and that there was no discrete controversy to be resolved between Vista and the state agency.

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