Bumgarner v. Blue Cross & Blue Shield of Kansas
| Decision Date | 16 February 1988 |
| Docket Number | No. 86-4069.,86-4069. |
| Citation | 716 F. Supp. 493 |
| Parties | Dr. Clarke BUMGARNER, Plaintiff, v. BLUE CROSS AND BLUE SHIELD OF KANSAS, INC., Defendant. |
| Court | U.S. District Court — District of Kansas |
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Steven M. Dickson, Dickson & Pope, P.A., Topeka, Kan., for plaintiff.
B. Jane Chandler Holt, Staff Counsel, Blue Cross & Blue Shield of Kansas, Topeka, Kan., Alan L. Rupe and Lawrence M. Gurney, Kahrs, Nelson, Fanning, Hite & Kellogg, Wichita, Kan., and Alleen Castellani, Asst. U.S. Atty., Topeka, Kan., for defendant.
This matter is before the court on the motion for summary judgment of defendant Blue Cross and Blue Shield of Kansas, Inc. (hereinafter "Blue Cross"). Plaintiff Clarke Bumgarner (hereinafter "Bumgarner") brought an action against Blue Cross, asserting claims based on the Racketeering Influenced and Corrupt Organizations Act (hereinafter "RICO"), fraud, breach of contract, negligence, tortious interference with contractual rights, tortious interference with business relationships, and defamation.
The pertinent facts are as follows: Bumgarner is a doctor of chiropractic medicine who is licensed to practice in Kansas. He currently lives and practices in Coffeyville, Kansas.
Blue Cross is a nonprofit medical and hospital service corporation which provides health insurance to Kansas residents. Its principal place of business is Topeka, Kansas. Blue Cross receives income from subscriber premiums and from interest earned on premium reserves. The income is used for operating expenses, claims payment, accumulation of reserves, and subscriber refunds. Blue Cross is extensively regulated by Kansas statutes; one requirement is that Blue Cross "devote a reasonable effort to control costs, including both its administrative costs and costs charged to it by participating hospitals and physicians." K.S.A. 40-19c10(c).
Beginning January 1, 1984, Blue Cross initiated the Competitive Allowance Program (hereinafter "CAP") in response to growing concern about the increasing costs of health care. CAP is a program whereby health care providers, including hospitals, physicians, and chiropractic doctors, may contract with Blue Cross to receive direct payment for covered services. The provider may thereby avoid the uncertain and often difficult process of collecting from the patient. Thus the incentives and benefits associated with CAP participation are high.
CAP provides reimbursement limits for participating health care providers. A distinctive feature of CAP is the Maximum Allowable Payments (hereinafter "MAPs") program, whereby predetermined maximum payments are made to providers rendering specified services. MAPs were developed based on the billing practices of hospitals and professional providers. They are adjusted each year to reflect a variety of factors, including inflation, changes in technology, or geographic influences. A CAP-participating provider is allowed its actual charges for covered services, but payment will not exceed the applicable MAP. Thus providers are encouraged to control costs, thereby benefitting Blue Cross, its subscribers, and Kansans in general.
Participation in CAP is widespread, with participants including hospitals (both non-profit and for-profit), medical doctors, osteopaths, optometrists, podiatrists, certified registered nurse anesthetists, dentists, occupational therapists, psychologists, social workers, and chiropractors. The participation rates for all health care providers in 1984-1987 were 86.1 percent, 88.7 percent, 88.5 percent, and 89.0 percent.
Participants in CAP sign a "contracting provider agreement." Under the agreement, a provider agrees to submit to Blue Cross claims for covered services rendered to subscribing patients, and to look to Blue Cross for payment except for co-insurance, deductibles, and amounts exceeding the applicable MAP. The provider agrees not to bill Blue Cross in excess of the MAP.
Blue Cross periodically reviews claims submitted by health care providers under a process called "utilization review." Utilization review consists of various elements, including data analysis, prepayment review, and post-payment review. Consultants from various provider specialties, including chiropractors, assist Blue Cross in the review and give their professional opinion whether services provided are medically necessary and covered by the contracting provider agreement.
Prepayment review is conducted either in regard to the provider's entire practice or in regard to specific services. It requires that the provider submit records substantiating services because other utilization review has indicated a need to further investigate services or claims. Payment is made according to the dictates of the reviewed record.
Bumgarner has been a CAP participant since January 1, 1984. In October 1984, his utilization review statistics were analyzed, showing his utilization rate to be about two times the average rate. In the third quarter of 1984, Bumgarner ranked ninth among 366 chiropractors for occurrences per 100 patients; in the second quarter of 1984, he ranked third among 357 chiropractors. As a result of these statistics, Duane Miller (hereinafter "Miller"), a chiropractic consultant, reviewed the patient history and claims submissions for ten of Bumgarner's patients. Miller recommended that Bumgarner be placed on prepayment review, and the recommendation was approved on July 8, 1985. On September 19, 1985, a Blue Cross field representative visited Bumgarner's office, notified him of his placement on prepayment review, and explained the review process. This information was reiterated to Bumgarner in a December 17, 1985, letter.
Bumgarner continued to submit claims to Blue Cross following his placement on prepayment review. Most of these claims were reviewed by Miller, who denied some claims and allowed payment on others. From September 19, 1985, until January 1986, about 56 percent of Bumgarner's claims were denied. Bumgarner appealed some of these denials through Blue Cross' intraorganizational appeals process, and he eventually received payment on 62 percent of the amount appealed.
Bumgarner asserts that most or all of Blue Cross' denials of his claims were wrongful, and that they give rise to causes of action under RICO and Kansas common law. Blue Cross moves for summary judgment on the RICO claim, asserting that Bumgarner has failed to establish that Blue Cross (1) committed predicate acts, (2) engaged in a pattern of racketeering activities, (3) used racketeering funds to invest in, acquire, or maintain an enterprise, or (4) caused injury to Bumgarner by investing in, acquiring, or maintaining an enterprise. Blue Cross further asserts that because no federal issue exists, the court should decline to exercise pendent jurisdiction.
When considering a motion for summary judgment, we must examine all evidence in the light most favorable to the opposing party. Prochaska v. Marcoux, 632 F.2d 848, 850 (10th Cir.1980), cert. denied, 451 U.S. 984, 101 S.Ct. 2316, 68 L.Ed.2d 841 (1981). If the moving party bears the burden of proof at trial, he must show, through pleadings, depositions, answers to interrogatories, admissions on file, and affidavits, that there is no genuine issue of material fact and that he is entitled to judgment as a matter of law. See Fed.R. Civ.P. 56(c). If the moving party does not bear the burden of proof, he must show "that there is an absence of evidence to support the nonmoving party's case." Celotex Corp. v. Catrett, 477 U.S. 317, 325, 106 S.Ct. 2548, 2554, 91 L.Ed.2d 265, 275 (1986). This burden is met when the moving party identifies those portions of the record demonstrating an absence of a genuine issue of material fact. Id., 477 U.S. at 324, 106 S.Ct. at 2553, 91 L.Ed.2d at 274.
If the moving party meets his requirement, the burden shifts to the nonmoving party, who "must set forth specific facts showing that there is a genuine issue for trial." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202, 212 (1986) (emphasis added). The trial judge then determines whether a trial is needed—"whether, in other words, there are any genuine factual issues that properly can be resolved only by a finder of fact because they may reasonably be resolved in favor of either party." Id., 477 U.S. at 250, 106 S.Ct. at 2511, 91 L.Ed.2d at 213.
RICO was enacted to combat "racketeering activity," a broad range of acts including mail fraud, wire fraud, and fraud in transactions affecting interstate commerce. See 18 U.S.C. § 1961(1). RICO must be read broadly, Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 497, 105 S.Ct. 3275, 3285, 87 L.Ed.2d 346 (1985); Congress intended that RICO apply to "legitimate," respected enterprises as well as to "illegitimate" enterprises controlled by organized crime. See id. at 499, 105 S.Ct. at 3286.
RICO provides for criminal sanctions as well as civil liability. See 18 U.S.C. §§ 1963, 1964. Section 1964(c) affords a private cause of action to any person injured by a violation of section 1962. Section 1962 provides, in pertinent part:
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