In re Managed Care Litigation

• Decision Date: 19 June 2006
• Docket Number: No. MDL 1334.,No. 00-1334-MD.,MDL 1334.,00-1334-MD.
• Citation: 430 F.Supp.2d 1336
• Parties: In re: MANAGED CARE LITIGATION This Document Relates to Provider Track Cases
• Court: U.S. District Court — Southern District of Florida

430 F.Supp.2d 1336

In re: MANAGED CARE LITIGATION This Document Relates to Provider Track Cases

No. MDL 1334.

No. 00-1334-MD.

United States District Court, S.D. Florida, Miami Division.

June 19, 2006.

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ORDER GRANTING SUMMARY JUDGMENT IN FAVOR OF REMAINING DEFENDANTS UNITED AND COVENTRY ON ALL CLAIMS

MORE, District Judge.

I. INTRODUCTION

Presently before the Court is the Omnibus Motion for Summary Judgment (D.E. No. 3922)¹ filed by Defendants United Healthcare, Inc., United Health Group Inc., (collectively, "United") and Coventry Health Care, Inc. Since the Defendants filed their motion for summary judgment, the Court has provided the Plaintiffs with multiple opportunities to demonstrate a triable issue of fact regarding whether the Defendants conspired to defraud doctors by manipulating their claims processing systems. The Plaintiffs and Defendants have filed numerous briefs regarding conspiracy, and the Court has heard oral argument several times, most recently on March 14, 2006. As explained below, because no reasonable juror could return a verdict in thee Plaintiffs' favor, the Defendants' motion for summary judgment is GRANTED as to all remaining claims.

In granting judgment in favor of the remaining defendants, this court is reminded of the Eleventh Circuit's opinion affirming class certification in this very case. See Klay v. Humana, Inc., 382 F.3d 1241 (11th Cir.2004). The appellate court indicated that "[i]t would be unjust to allow corporations to engage in rampant and systematic wrongdoing, and then allow them to avoid a class action because the consequences of being held accountable for their misdeeds would be financially ruinous." Klay, 382 F.3d at 1274. As such, based on the allegations of conspiracy with each other to program their computer systems to systematically underpay the physicians for their services, the class was certified. After reviewing thousands of documents, there simply is insufficient evidence of the wrongdoing claimed i.e. agreeing with their competitors to defraud the doctors. The evidence submitted here falls short of that needed to trigger the Racketeer Influenced and Corrupt Organizations Act's remedial scheme described as "the litigation equivalent of a thermonuclear device." See Miranda v. Ponce Federal Bank, 948 F.2d 41, 44 (1st Cir. 1991). In so holding, the Court is not giving its imprimatur to the Defendants' actions or to the tremendous amounts of compensation received by their executives, described by some as exorbitant. But any reform related to executive compensation or individual practices by the health maintenance organizations is beyond the power of this Court. Those desiring changes in the way health care is provided in America must either look for remedies before Congress or allow the free market to dictate the results.²

II. BACKGROUND³

The individual Plaintiffs represent a class of physicians who submitted fee-for-service claims to at least one of the Defendants or the alleged co-conspirator health maintenance organizations. See Third Amended Consolidated Class Action Complaint (D.E. No. 4661) at ¶¶ 54 [hereinafter TAC]. The individual physician Plaintiffs bring conspiracy and aiding and abetting claims, alleging that the Defendants have participated in a scheme to defraud doctors through the use of the Defendants' automated claims processing systems. Id. at ¶¶ 126-36. Additionally, the medical association Plaintiffs seek declaratory and injunctive relief on their own behalf and on behalf of their members. Id. at ¶¶ 2, 22.

To claim reimbursement for services, doctors complete a standardized form incorporating a "current procedural terminology" ("CPT") coding system through which medical procedures are identified by standardized designations. Id. at ¶ 59. These standardized designations consist of a base code identifying the procedure and modifiers indicating the degree of difficulty, complexity, and multiplicity. Id. at ¶¶ 59, 69. The doctors submit these forms containing CPT coded procedures to the insurers for payment. Id. at ¶ 58. The parties agree that CPT was originally intended to be a guide for reporting services, but they disagree over whether CPT is also the standard on which providers are reimbursed. While the Defendants maintain that CPT is only a guide for reporting, the Plaintiffs claim that "CPT is the standard on which providers are reimbursed, and the fees associated with CPT codes are supposed to take this into account." Plaintiffs' Response to Defendants' Omnibus Motion for Summary Judgment (D.E. No. 4076) at 6 [hereinafter Plaintiffs' Omnibus Response[(emphasis in original and internal quotations omitted).

The Plaintiffs claim that the Defendants and alleged co-conspirator HMOs represented to physicians that they would pay for any covered, medically necessary services the physicians provided to insured patients in accordance with CPT. Id. at ¶¶ 54-56; Plaintiffs' Omnibus Response at 3. In short, according to the Plaintiffs, "[n]ot only is CPT the acknowledged industry standard for submission and payment for doctors' claims, but the Defendants expressly represent that they will adjudicate physicians' claims in conformity with CPT, require doctors to bill using CPT and abiding by CPT protocols, and even represent to doctors that they use ClaimCheck to make certain that doctors claims are adjudicated in accordance with CPT." Plaintiffs' Omnibus Response at 3.

Once the doctors submit these payment requests, the Defendants and alleged co-conspirators use code editing software to process and edit the claims for payment. Id. An edit is logic that is applied to particular code combinations for purposes of reimbursement. Id. The Plaintiffs allege that the Defendants and other supposed co-conspirator HMOs, both on their own and as part of a common scheme, secretly use cost-based criteria unrelated to medical necessity in processing physician claims for payment, and, thus, contrary to their representations, they do not pay in accordance with CPT. TAC at ¶¶ 5, 63. The Plaintiffs claim that the Defendants and alleged co-conspirators agreed to defraud doctors by using the same or similar code processing systems to systematically underpay the Plaintiffs by denying, downcoding, and bundling the CPT codes the doctors submit and by refusing to recognize modifiers. Id. at ¶¶ 63-71; see also Joint Pretrial Stipulation (D.E. No. 3825) at 2 (Plaintiffs' Statement of the Case). Additionally, the Plaintiffs allege that the explanation of benefits forms the Defendants and alleged co-conspirators send to doctors to explain payment decisions misrepresent or conceal the actual manner in which they process payment requests. TAC at ¶¶ 72-74.

McKesson Corporation is the dominant source for code editing software in the healthcare industry. Plaintiffs' Omnibus Response at 3. McKesson markets several claim auditing products, including ClaimCheck (also referred to as GMIS), CodeReview Medicare CodeReview, and Patterns. Id. at 3-4. The parties agree that the Defendants and other supposed co-conspirator HMOs all licensed or used McKesson's editing products. See, e.g., Plaintiffs' Supplemental Memorandum in Opposition to Summary Judgment (D.E. No. 4807) at 6 [hereinafter Plaintiffs' Supplemental Memorandum]; Tr. of March 14, 2006 Oral Argument at 16. Coventry and the alleged co-conspirator HMOs use ClaimCheck to process physicians' claims. Plaintiffs' Supplemental Memorandum at 6. United denies using ClaimCheck edits, but United did license ClaimCheck in late 1997. In any event, the Plaintiffs assert that even if United did not use ClaimCheck to process claims, it modeled its own editing software on, and used virtually the same edits as, ClaimCheck. Id. at 6-8.

Beyond marketing claim editing software, the Plaintiffs assert that McKesson played a central role in the conspiracy to underpay doctors. See, e.g., Tr. of March 14, 2006 Oral Argument at 16. Not only do Plaintiffs claim that the alleged conspiracy was facilitated by McKesson, but Plaintiffs describe McKesson as a co-conspirator, an agent of the Defendants, an intermediary, and the hub of the conspiracy. See Plaintiffs' Omnibus Response at 10; Tr. of March 14, 2006 Oral Argument at 16, 31, & 102.

According to the Plaintiffs, McKesson facilitated the conspiracy in several ways. The Plaintiffs allege that the Defendants and supposed co-conspirators were McKesson's key customers. Plaintiffs' Omnibus Response at 10. As key customers, the Plaintiffs assert that the Defendants and alleged co-conspirators participated on McKesson advisory committees through which they discussed edits and modifications of ClaimCheck and other McKesson products. Id. at 10-17; Plaintiffs' Supplemental Memorandum at 6. Although the Plaintiffs present evidence that the Defendants and alleged co-conspirators also had opportunities to conspire at various conferences, focus groups, and forums, the Plaintiffs' briefs make clear that the McKesson advisory committees were the principal avenue through which the Defendants and supposed co-conspirators met and allegedly conspired. See, e.g., Plaintiffs' Omnibus Response at 19-23. Given the central importance of McKesson to the alleged scheme, as Plaintiffs acknowledged at the most recent oral argument, much of their evidence of conspiracy comes from McKesson. Tr. of March 14, 2006 Oral Argument at 37.

In response to the alleged conspiracy and wrongful conduct of the Defendants and supposed co-conspirator HMOs, the Plaintiffs have brought this suit against the Defendants. In light of previous rulings regarding the arbitrability of physicians' direct claims against the insurers, the Plaintiffs rely on RICO conspiracy and aiding and abetting claims to impute liability to the remaining two Defendants (United and Coventry) for the conduct of the alleged co-conspirator HMOs.

With regard to these RICO-based claims, the Plaintiffs allege that...