500 F.3d 322 (3rd Cir. 2007), 07-1231, Grider v. Keystone Health Plan Cent., Inc.

Docket Nº:Keystone Health Plan Central, Inc.; Capital BlueCross; James M. Mead; Joseph Pfister, Appellants, No. 07-1231.
Citation:500 F.3d 322
Party Name:Natalie M. GRIDER, M.D.; Kutztown Family Medicine, P.C. v. KEYSTONE HEALTH PLAN CENTRAL, INC.; Thomas F. Bickman; Highmark, Inc.; John S. Brouse; Capital BlueCross; James M. Mead; Joseph Pfister.
Case Date:August 28, 2007
Court:United States Courts of Appeals, Court of Appeals for the Third Circuit
 
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500 F.3d 322 (3rd Cir. 2007)

Natalie M. GRIDER, M.D.; Kutztown Family Medicine, P.C.

v.

KEYSTONE HEALTH PLAN CENTRAL, INC.; Thomas F. Bickman; Highmark, Inc.; John S. Brouse; Capital BlueCross; James M. Mead; Joseph Pfister.

Keystone Health Plan Central, Inc.; Capital BlueCross; James M. Mead; Joseph Pfister, Appellants, No. 07-1231.

Highmark, Inc.; John S. Brouse, Appellants, No. 07-1232.

* Crowell Moring LLP; Kathleen Taylor Sooy; Michael L. Martinez, Appellants, No. 07-1270

(* Pursuant to F.R.A.P. 12(a)).

Nos. 07-1231, 07-1232, 07-1270.

United States Court of Appeals, Third Circuit.

August 28, 2007

Argued June 19, 2007.

On Appeal from the United States District Court for the Eastern District of Pennsylvania (D.C. No. 01-cv-05641) District Judge: Honorable James Knoll Gardner.

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Malcolm J. Gross, Gross, McGinley, LaBarre & Eaton, Allentown, PA, Kathleen T. Sooy (Argued), Clifton S. Elgarten, Tracy A. Roman, Crowell & Moring, Washington, DC, for Appellants (No. 07-1231), Keystone Health Plan Central, Inc., Capital BlueCross, James M. Mead and Joseph Pfister.

Daniel I. Booker, Donna M. Doblick, James C. Martin (Argued), Reed Smith, Pittsburgh, PA, Sandra A. Girifalco, Stradley, Ronon, Stevens & Young, Philadelphia, PA, for Appellants (No. 07-1232), Highmark, Inc. and John S. Brouse.

Clifton S. Elgarten, Tracy A. Roman, Crowell & Moring, Washington, DC, for Appellants (No. 07-1270), Crowell Moring LLP, Kathleen Taylor Sooy and Michael L. Martinez.

Louis C. Bechtle, Conrad, O'Brien, Gellman & Rohn, Philadelphia, PA, Joseph A. O'Keefe, O'Keefe & Sher, Kutztown, PA, Francis J. Farina, Devon, PA, Kenneth A. Jacobsen (Argued), Wallingford, PA, for Appellees Natalie M. Grider, M.D., and Kutztown Family Medicine, P.C.

Before: McKEE, FISHER and CHAGARES, Circuit Judges.

OPINION

FISHER, Circuit Judge.

This appeal requires us to explore the limits of the All Writs Act, 28 U.S.C. § 1651(a), as it relates to actions by one federal court that may affect those in a different federal court. Specifically, in this case, Dr. Natalie Grider and Kutztown Family Medicine P.C., representing a class of approximately 6,000 doctors in Central Pennsylvania, filed a suit against Keystone Health Plan Central, Inc. ("Keystone"); Keystone's two former fifty-percent owners, Highmark, Inc. ("Highmark") and Capital Blue Cross ("Capital"); and each company's chief executive officer, Joseph Pfister, John Brouse, and James Mead. The suit alleges that Keystone's claims handling practices violated the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. §§ 1961-1968, and Pennsylvania's "prompt pay" statute, 40 Pa. Stat. §§ 991.2101-991.2193. Around that time, similar nationwide claims were consolidated by a Multidistrict Litigation ("MDL") panel in the United States District Court for the Southern District of Florida ("Florida MDL"), which declined to add the Grider case as an tag-along action because it was at a more advanced stage in its proceedings. Recently, however, as the parties in the Florida MDL moved towards a comprehensive settlement agreement, the United States District Court for the Eastern District of Pennsylvania issued an injunction under the All Writs Act prohibiting the Grider Defendants from settling or attempting to settle claims in the Florida MDL that would have the effect of also settling the claims in Grider. The question presented to us is whether this is a permissible exercise of power under the All Writs Act.

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For the reasons that follow, we conclude that it is not, and we will therefore vacate the injunction issued by the District Court.

I.

A. The Grider Case

This case involves a certified class of approximately 6,000 doctors in Central Pennsylvania who were providers with the Keystone health maintenance organization ("HMO"), which operates exclusively in Central Pennsylvania. These doctors had signed contracts with Keystone to provide medical services to patients who subscribed to the Keystone HMO. To receive reimbursement for services they provided to subscribers, the doctors submitted claims on forms provided by Keystone, using a standardized set of numerical codes provided by the American Medical Association, which are referred to as "CPT codes." These codes are provided for virtually every medical procedure in order to avoid variations in descriptions given by doctors. Because each code only represents a single procedure, one visit to a doctor may result in a reimbursement claim containing multiple CPT codes. A typical claim form, for instance, may have one code for the office visit itself, and another for the administration of a particular test.

During the class period certified by the District Court, when a doctor within Keystone's network submitted one of these claim forms, it was processed through a company named Synertech, Inc. ("Synertech"). Synertech is located in Central Pennsylvania, and used a proprietary software system owned by Tingley, Inc. to process these claims.

In addition to being reimbursed on a fee-for-service basis, many doctors in Keystone's network also received reimbursements for certain pools of patients--usually employees of a large employer--under contractual "capitation" arrangements with Keystone. Approximately 28% of the certified class members in this case are family practice providers, most of whom were under contractual capitation arrangements with Keystone. Under these capitation agreements, doctors are paid a set monthly fee in exchange for providing basic medical services--such as examinations and treatment for minor illnesses--to a pool of patients. More complicated medical procedures not on the list of capitation services are supposed to be billed to Keystone and paid on a fee-for-service basis.

On October 5, 2001, the Plaintiffs in this case filed an action in Pennsylvania state court, which the Defendants promptly removed to the United States District Court for the Eastern District of Pennsylvania. The suit alleges that Keystone violated RICO by not processing and paying claims as it had promised to do in its contracts and other communications with the doctors in its network. According to the Plaintiffs, Keystone used automated systems and software built into Synertech's computerized claims processing operations to systematically "bundle" two or more CPT codes. By doing so, it would pay for only one procedure, thereby reducing payments to doctors. The Plaintiffs also allege that Keystone used Synertech's software to systematically "downcode" the doctors' claims by automatically changing the CPT code on a claim form to a less costly procedure.

In terms of the capitation agreements, the Plaintiffs allege that Keystone secretly reduced monthly capitation payments to participating doctors. Specifically, they claim that Keystone "shaved" capitation payments by "secretly: 1) shifting patients off of a doctor's capitation roster to so-called 'dummy accounts' set up by Keystone, whereby doctors continued to treat

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the insured patient and Keystone continued to collect premiums for medical insurance paid by or on behalf of the member, but retained those premiums for itself instead of paying them to the doctor; and 2) delaying capitation payments to providers for newly enrolled members assigned to that doctor's capitation roster."

In addition to these claims, the complaint also alleges violations of Pennsylvania's "prompt pay" statute, which requires insurers to reimburse doctors within forty-five days after receiving a reimbursement claim.

On December 21, 2006, following three years of discovery, the District Court certified a class of providers in the Keystone network who were alleged to have been defrauded by the practices described in the complaint. The class includes:

All medical service providers in connection with medical services rendered to patients insured by Keystone Health Plan Central Inc. who during the period January 1, 1996 through October 5, 2001:

(1) submitted claims for reimbursement on a fee-for-service basis for covered services which claims were denied or reduced through the application of automated edits in the claim processing software used by defendants to process those claims; and/or

(2) received less in capitation payments than the provider was entitled through the use and application of automated systems to "shave" capitation payments in the manner alleged in plaintiffs' Amended Complaint filed October 6, 2001.

Grider v. Keystone Health Plan Cent., Inc., No. 2001-CV-05641, 2007 WL 201011, *2 (E.D. Pa. Jan. 19, 2007). Now that the class is certified, the case appears to be headed towards trial.

B. The Love and Solomon Cases in Florida

The Grider case was just one of many similar cases that were being filed around the country at the time. On May 22, 2003, three doctors from Alabama, one doctor from Puerto Rico, and the medical societies of South Carolina, Louisiana, Northern Virginia, and Puerto Rico, filed a complaint in the United States District Court for the Southern District of Florida against sixty-nine separate Blue Cross and Blue Shield companies throughout the United States ("Blues defendants"), and their national trade association, the Blue Cross and Blue Shield Association ("the Association"). Capital and Highmark are among the specifically named defendants, but Keystone is not.1 The case, which is now known as the Love case (formerly, it was known as Thomas), 03-21296 (S.D. Fla.), was eventually assigned to District Judge Federico Moreno. It alleges a national conspiracy among the Blues defendants, with the Association as the "hub," to bundle and downcode claims and to delay payments to providers under contract with the...

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