Mitchael v. Intracorp, Inc.

• Decision Date: 27 April 1999
• Docket Number: No. 98-3038.,98-3038.
• Citation: 179 F.3d 847
• Parties: Michael D. MITCHAEL, D.C.; Craig A. Farney, D.C.; Mark E. Reno, D.C.; Daniel H. Kelly, D.C.; Douglas J. Schoenhofer, D.C.; Curtis A. Wheeler, D.C.; Nathan E. Holman, D.C.; Timothy D. Bolz, D.C.; Jay Carter, D.C.; Robert L. Dopps, D.C.; David Martinez, D.C.; Gary S. Larkin, D.C.; Kerry L. Coulter, D.C.; Kathryn Van Winkle, D.C.; Larry Thompson, D.C., Plaintiffs-Appellants, Mark A. Beck, D.C., doing business as Beck Chiropractic Clinics; Fred Dopps, D.C.; Benjamin Bowers, D.C.; Daniel Dopps, D.C.; Todd Farney, D.C.; Joel Johnson, D.C.; Brad Dopps, D.C.; John Dopps, D.C.; Terry L. Farney, D.C., individually and on behalf of all others similarly situated, Plaintiffs/Counter-Defendants/Appellants, v. INTRACORP, INC., Defendant-Appellee, Farm Bureau Mutual Insurance Company, Inc.; KFB Insurance Company, Inc.; Farmers Insurance Company, Inc.; Mid Century Insurance Company; Shelter Mutual Insurance Company; Shelter General Insurance Company; State Farm Automobile Insurance Company; State Farm Fire and Casualty Company; Trinity Universal Insurance Company of Kansas, Inc., Defendants/Counter-Claimants/Appellees.
• Court: U.S. Court of Appeals — Tenth Circuit

179 F.3d 847

Michael D. MITCHAEL, D.C.; Craig A. Farney, D.C.; Mark E. Reno, D.C.; Daniel H. Kelly, D.C.; Douglas J. Schoenhofer, D.C.; Curtis A. Wheeler, D.C.; Nathan E. Holman, D.C.; Timothy D. Bolz, D.C.; Jay Carter, D.C.; Robert L. Dopps, D.C.; David Martinez, D.C.; Gary S. Larkin, D.C.; Kerry L. Coulter, D.C.; Kathryn Van Winkle, D.C.; Larry Thompson, D.C., Plaintiffs-Appellants Mark A. Beck, D.C., doing business as Beck Chiropractic Clinics; Fred Dopps, D.C.; Benjamin Bowers, D.C.; Daniel Dopps, D.C.; Todd Farney, D.C.; Joel Johnson, D.C.; Brad Dopps, D.C.; John Dopps, D.C.; Terry L. Farney, D.C., individually and on behalf of all others similarly situated, Plaintiffs/Counter-Defendants/Appellants, v. INTRACORP, INC., Defendant-Appellee Farm Bureau Mutual Insurance Company, Inc.; KFB Insurance Company, Inc.; Farmers Insurance Company, Inc.; Mid Century Insurance Company; Shelter Mutual Insurance Company; Shelter General Insurance Company; State Farm Automobile Insurance Company; State Farm Fire and Casualty Company; Trinity Universal Insurance Company of Kansas, Inc., Defendants/Counter-Claimants/Appellees.

No. 98-3038.

United States Court of Appeals, Tenth Circuit.

April 27, 1999.

COPYRIGHT MATERIAL OMITTED

Susan R. Schrag, Morris, Laing, Evans, Brock & Kennedy, Wichita, Kansas (Robert W. Coykendall, Morris, Laing, Evans, Brock & Kennedy, Wichita, Kansas; Ryan Hodge, Ray Hodge & Associates, Wichita, Kansas; Windell G. Snow and Carolyn Sue Edwards, Wichita, Kansas, with her on the briefs), for appellants.

James D. Oliver (Jay F. Fowler and Mark A. Biberstein with him on the brief), Foulston & Siefkin, L.L.P., Wichita, Kansas, for appellee, Intracorp, Inc.

Heidi Dalenberg, Schiff Hardin & Waite, Chicago, Illinois (Richard L. Honeyman and Donald N. Peterson II, Kahrs, Nelson, Fanning, Hite & Kellog, Wichita, Kansas; David A. Morris, Stanford J. Smith, Jr., and Kenneth P. Leyba, Curfman, Harris, Rose & Smith, L.L.P., Wichita, Kansas; Nicholas S. Daily, Depew & Gillen, Wichita, Kansas; J. Stan Sexton, Hampton, Royce, Engleman & Nelson, Salina, Kansas; Marci A. Eisenstein, Schiff Hardin & Waite, Chicago, Illinois; and H. Lee Turner, Turner & Boisseau, Great Bend, Kansas, with her on the brief), for appellees, Insurance Companies.

Before: ANDERSON and McWILLIAMS, Circuit Judges, and COOK,^* District Judge.

STEPHEN H. ANDERSON, Circuit Judge.

Plaintiffs, nineteen chiropractors led by Dr. Mark A. Beck d/b/a Beck Chiropractic Clinics, appeal the district court's grant of summary judgment to defendants, as well as several other adverse rulings, in this antitrust case.¹ Defendants are a group of insurance companies: Farm Bureau Mutual Insurance Company, KFB Insurance Company, Farmers Insurance Company, Mid Century Insurance Company, Shelter Mutual Insurance Company, Shelter General Insurance Company, State Farm Automobile Insurance Company, State Farm Fire & Casualty Company, and Trinity Universal Insurance Company of Kansas ("Insurers"). An additional defendant is Intracorp, a "utilization review company," to which various insurance companies, including the Insurers, submit insurance claims for review.

Plaintiffs brought this antitrust action against the Insurers and Intracorp, alleging that Intracorp and the Insurers violated § 1 of the Sherman Act, 15 U.S.C. § 1, as well as Kansas antitrust laws, by utilizing Intracorp's insurance review process to fix prices and treatment schedules for chiropractic care provided pursuant to automobile insurance policies issued by the Insurers.² We affirm the district court's entry of summary judgment to defendants, as well as its other orders.

BACKGROUND

Taking the facts as averred by the plaintiffs, and construing all reasonable inferences therefrom in a light most favorable to the plaintiffs, the record reveals the following:

The Insurers write automobile liability insurance policies in Kansas.³ Under Kansas law, those policies must provide minimum no fault personal injury protection ("PIP") benefits for injuries the insured may sustain in an automobile accident. By statute, PIP benefits are "allowances for all reasonable expenses . . . for necessary health care" for injuries covered by the insurance policy. Kan.Stat.Ann. § 40-3103(k) (1993). Kansas law does not define "reasonable" or "necessary," and insurance companies have the right to challenge the reasonableness and necessity of any claimed benefits or care. This case involves the Insurers' determinations of reasonable and necessary expenses and health care for chiropractic treatment provided as PIP benefits.

Typically, when an insured seeks PIP benefits from one of the Insurers for chiropractic care for injuries sustained in a car accident, the chiropractor accepts a partial assignment of those benefits, provides treatment to the insured, and bills the insurance company for the services rendered. If the Insurer decides to review the claim for reasonableness and necessity, it either conducts the review itself in-house, or uses an outside consultant such as Intracorp. Intracorp is a wholly-owned subsidiary of Connecticut General Corporation which, in turn, is a wholly-owned subsidiary of CIGNA. Intracorp is not itself an insurance company, nor is Connecticut General or CIGNA. CIGNA has approximately one hundred subsidiary corporations, however, some of which are insurance companies.

Intracorp is one of several medical utilization review companies in the Wichita area. Intracorp has provided to the Insurers two types of chiropractic claim review: retrospective and concurrent. Retrospective review evaluates the necessity and reasonableness of treatment fees after the services have been provided. Concurrent review evaluates the necessity and reasonableness of fees while treatment is on-going, commencing with the initial diagnosis.⁴ Plaintiffs challenge both Intracorp's retrospective and concurrent review practices, claiming that the Insurers, through Intracorp's review process, arbitrarily limited costs and reduced the number of treatments allowed for chiropractic care.

Plaintiffs do not specifically allege and document the extent to which each Insurer actually used Intracorp's services, although all the Insurers used Intracorp at some point for at least some of their retrospective reviews, and all but one Insurer used Intracorp at some point for at least some of their concurrent reviews. As the district court found, "each Insurer contracted with Intracorp at different points in time and for different durations. The fact remains, however, that for at least three continuous years, 1/1989-1/1992, all Insurers were contracting with Intracorp for some of their retrospective review services." Memorandum and Order at 9 n. 10, Appellants' App.Vol. XIV at 3772.

When retrospectively reviewing the reasonableness of chiropractic claims, Intracorp and State Farm and, beginning in 1992, Farmers, used a fee survey called "Fee Facts."⁵ Fee Facts is an independent publication which contains information on chiropractic fees throughout the nation, broken down by geographical area and individual procedure. It lists the fees at or below which 80% of area chiropractors charge, at or below which 90% of area chiropractors charge, as well as the average charge.

Beginning in January 1992, Intracorp began reviewing chiropractic claims submitted to it under a concurrent review program called Targeted Care Review ("TCR"). TCR was a three-level review providing on-going evaluation of a treatment plan. In implementing TCR, Intracorp utilized a program developed by independent chiropractors and used by Intracorp under license, as well as various of its own internally developed evaluative criteria. Farmers never used Intracorp's TCR service. State Farm's use "was minimal and ceased shortly after Intracorp's concurrent review program began." Id. at 7 n. 8, Appellants' App. Vol. XIV at 3770. Shelter used it from January through August 1992. Trinity and Farm Bureau also utilized TCR to some extent.⁶

Whether conducting its review concurrently or retrospectively, Intracorp reviewed chiropractic services and charges, identified those which it considered unnecessary and/or unreasonable, and recommended to the particular Insurer the amount to be paid and/or the number of treatments to be allowed. While the evidence does not establish that the Insurers were obligated to follow Intracorp's recommendations, the district court concluded that, "drawing all reasonable inferences in favor of plaintiffs, . . . the Insurers almost always followed Intracorp's recommendations." Memorandum and Order at 11, Appellants' App.Vol. XIV at 3774.

With respect to the amounts charged, Intracorp generally recommended that the Insurers not pay chiropractic bills exceeding the eightieth percentile as set forth in Fee Facts. Further, "all defendants considered chiropractic charges at or below the eightieth percentile of Fee Facts to be reasonable." Id. While charges exceeding that eightieth percentile figure were not considered presumptively reasonable, "Insurers frequently paid above the eightieth percentile on claims reviewed in-house . . . while they rarely paid above the eightieth percentile on claims reviewed by Intracorp." Id. at 3774-75. However, as the district court pointed out, plaintiffs have not demonstrated the statistical significance of these cost recommendations in that they present no evidence that the Insurers reduced a statistically significant number of claims.

With respect to Intracorp's recommendations regarding treatment schedules, plaintiffs rely heavily on an affidavit prepared by Kathy Barr, a legal assistant employed by plaintiff Beck. The Barr affidavit describes 749 cases of chiropractic claim review, 287 of which were conducted by Intracorp. Ms. Barr does not identify what proportion of all chiropractic reviews this represents, either in terms of all chiropractic reviews conducted by the Insurers, all PIP benefits claims for...