Griffiths v. Blue Cross and Blue Shield of Alabama

• Decision Date: 15 June 2001
• Docket Number: No. CV 01-BU-0471-S.,CV 01-BU-0471-S.
• Citation: 147 F.Supp.2d 1203
• Parties: Dr. Jonathan GRIFFITHS, et al., Plaintiffs, v. BLUE CROSS AND BLUE SHIELD OF ALABAMA, Defendant.
• Court: U.S. District Court — Northern District of Alabama

147 F.Supp.2d 1203

Dr. Jonathan GRIFFITHS, et al., Plaintiffs, v. BLUE CROSS AND BLUE SHIELD OF ALABAMA, Defendant.

No. CV 01-BU-0471-S.

United States District Court, N.D. Alabama, Southern Division.

June 15, 2001.

COPYRIGHT MATERIAL OMITTED

Augusta S. Dowd, J. Mark White, Linda G. Flippo, William M. Bowen, Jr., White, Dunn & Booker, Birmingham, AL, for Plaintiff.

George G. Lynn, James L. Priester, Sarah Y. Larson, Carl S. Burkhalter, Robert M., Lichenstein, Jr., Maynard, Cooper & Gale, Birmingham, AL, for Defendant.

Memorandum Opinion

BUTTRAM, District Judge.

In the above-styled action, filed February 22, 2001, Plaintiffs, a group of chiropractors and their clinics,¹ seek damages and injunctive relief based on allegations that Defendant Blue Cross and Blue Shield of Alabama ("Blue Cross") has violated §§ 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1, 2; Alabama antitrust law, § 8-10-1, et seq., Ala.Code (2000); Alabama fraud law, and has intentionally and tortiously interfered with business relationships. Now before the Court is Blue Cross's motion, filed March 29, 2001, to dismiss all claims pursuant to Federal Rule of Civil Procedure 12(b)(6). (Doc. 17). The parties have briefed the motion, which is now ripe for decision. After carefully considering the complaint and the arguments of counsel, the Court concludes that Blue Cross's motion to dismiss is due to be GRANTED IN PART AND DENIED IN PART.

I. BACKGROUND²

In their 28-page complaint, Plaintiffs allege the following: Chiropractic is a licensed health care profession in Alabama, as it is in every other state. Id. at ¶ 37. Under Alabama law, chiropractic is defined as "the science and art of locating and removing without the use of drugs or surgery any interference with the transmission and expression of nerve energy in the human body by any means or methods as taught in schools of chiropractic ...." Id. (quoting § 34-24-120(a), Ala.Code 1975). As licensed chiropractors in Alabama, Plaintiffs are permitted to examine, analyze and diagnose the human body and its diseases by the use of any physical, clinical, thermal or radonic method, and the use of X-ray diagnosing, and may use any other general method of examination for diagnosis and analysis taught in recognized schools of chiropractic. Id. (citing § 34-24-120(b)).³

Defendant Blue Cross is a non-profit, special purpose corporation. Complaint at ¶ 25. It is organized under § 10-4-100 et seq. of the Alabama Code to maintain and operate a healthcare service plan for its subscribers. Id.⁴ With subscribers in Alabama numbering in the millions, Blue Cross is reported to provide and/or administer healthcare benefit plans for over 70% of Alabama's insured residents. Id. at ¶ 38.

A. THE PARTICIPATING CHIROPRACTOR PROGRAM

As a component of its business of providing and/or administering medical health benefits plans, Blue Cross contracts with numerous health care providers, including Plaintiffs and other chiropractors, to provide health care services to Blue Cross plan subscribers. Id. at ¶ 38. In particular, Blue Cross has contracted with Plaintiffs in connection with its Participating Chiropractors Program ("PCP"). Complaint at ¶ 43. Blue Cross initially developed the PCP in 1995 for use in connection with the self-funded plan for employees of the State of Alabama, administered by Blue Cross (the "State Employees' Plan"). Id. at ¶ 41. Under the State Employees' Plan subscribers were offered a package of chiropractic benefits that included an 18-visit, medical necessity review point with no annual limits, no deductible, and a specific co-pay provision. Id. In hopes of attracting chiropractors to join the PCP, Blue Cross representatives advised certain chiropractors, including Plaintiffs Drs. Jonathan Griffiths and Jerry Kirby, that if the State Employees Plan actually received a reduction of overall benefits paid to PCP chiropractors after one year, then Blue Cross would aggressively market the benefits package in the State Employees' Plan to other employer groups. Id. Blue Cross representatives further assured Plaintiffs Griffiths and Kirby, among others, that if and when the PCP were extended to other employer groups, Blue Cross would offer the same chiropractic benefits package in those plans as was offered in the State Employees' Plan. Id. Plaintiffs Griffiths and Kirby, believed and repeated these representations to their fellow chiropractors around the state and encouraged them to join the PCP. Id. Ultimately, Plaintiffs claim they were all induced to join the PCP based upon the representations that Blue Cross would attempt to extend the chiropractic benefits package from the State Employees' Plan to other employer groups serviced by Blue Cross if the PCP resulted in a reduction of the amount of overall chiropractic benefits paid. Complaint at ¶ 43.

In 1996, approximately one year after the PCP with the State Employees' Plan began, Plaintiffs Griffiths and Kirby, among others, met with representatives of both the State Employees' Plan and Blue Cross. Complaint at ¶ 42. It was reported at that time that the State Employees' Plan had enjoyed a 12% to 14% cost reduction in overall chiropractic payments over the one year period since the PCP began. Id. Although Blue Cross had represented that such savings would cause it to aggressively market the State Employees' Plan chiropractic benefits package to other employer groups, Blue Cross failed to do so. Id. at ¶ 43. Instead, Blue Cross began aggressively marketing health benefit plans that offered chiropractic benefits that were dramatically lower. Id. Blue Cross still continues to push upon employer groups plans with severely reduced chiropractic benefits, such as limits with a $200 to $400 annual benefit limit with a $200 deductible, or group benefit plans with no chiropractic benefits at all. Id. Indeed, Blue Cross, Plaintiffs assert, will not expand chiropractic coverage even if asked to do so by an employer group. Id.

Pursuant to the Participating Chiropractor Agreement governing the relationship between Plaintiffs and Blue Cross (the "Agreement"), participating chiropractor are paid on a fee-for-service basis for medically necessary services that are appropriate to the needs of Blue Cross plan members for chiropractic care. Id. at ¶ 39. The Agreement also requires participating chiropractors to accept as reimbursement a fixed amount set by Blue Cross, or a chiropractor's usual charge, whichever is less, as full payment for their services rendered. Id. at ¶ 45. See also Participating Chiropractor Agreement, Part VI. Plaintiffs claim that Blue Cross has exploited this power to impose "predatory and punitively low reimbursements, or no reimbursements at all, for the services of doctors of chiropractic." Id.

B. BLUE CROSS AND HEALTHSOUTH

Plaintiffs also claim that Blue Cross and HealthSouth Corporation ("HealthSouth") have entered into an anti-competitive agreement that operates to the detriment of Plaintiffs. See Complaint at ¶¶ 26, 52. HealthSouth is the leading provider of physical therapy services in Alabama and the country. Id. at ¶¶ 26, 27. Alleging that many of the services provided by chiropractors are allegedly the same or comparable to those offered by physical therapists,⁵ Plaintiffs suggest that HealthSouth is a competitor of theirs in the market to provide health care services in Alabama. See id. at ¶¶ 44, 46. Plaintiffs claim that HealthSouth also happens to be one of Blue Cross's largest single customers, by virtue of Blue Cross's having previously served as the administrator for, and now the insurer of, the benefit plan that HealthSouth has for its own employees in many parts of the country. Id. at ¶ 28. Blue Cross also allegedly receives fees from HealthSouth as a result of having been designated by the Health Care Financing Administration to serve as the nationwide Medicare Fiscal Intermediary for HealthSouth, at HealthSouth's request.⁶ Id. at ¶ 27.

Plaintiffs allege that in return for "substantial payments" that Blue Cross receives from HealthSouth based on the relationships described above, Blue Cross has agreed to use its strength in the health care insurance market in Alabama to direct Blue Cross subscribers' business away from chiropractors and towards other health care providers that offer comparable services, particularly those like HealthSouth who offer hospital-based physical therapy. Complaint at ¶¶ 29, 46. Plaintiffs suggest that Blue Cross has done so by allegedly establishing substantially more restrictive benefit limits, higher deductibles, lower reimbursement rates, and more burdensome pre-certification requirements for chiropractic procedures under its health benefit plans than it does for comparable services offered by physical therapists and other health care providers. See id. at ¶ 1, 44-47, 49-50. Plaintiffs contend that Blue Cross has further disfavored chiropractors by allegedly entirely eliminating coverage for certain services afforded by chiropractors while maintaining coverage for comparable services provided by physical therapists and by allegedly wrongfully refusing to reimburse chiropractors for covered diagnostic testing and services they perform. Id.

C. THE CHIROPRACTIC LIAISON COMMITTEE

Plaintiffs contend that in response to the many complaints raised by chiropractors, Blue Cross formed the Chiropractic Liaison Committee (the "Committee") in approximately 1995, comprising it of representatives from both Blue Cross and practicing chiropractors. Complaint at ¶ 48. Plaintiffs claim that, at the time the Committee was formed and thereafter, Blue Cross representatives made statements indicating that the avowed purpose of the Committee was to improve relations between chiropractors participating in the PCP and Blue Cross and to effectuate change in the conduct of Blue Cross toward chiropractors. Id. Plaintiffs say that in reliance upon these representations, they embraced the Committee as an...