July 15, 2002 Legal News

Managed Care
Fraud and Abuse


Managed Care

Physicians v Health Plan of Redwoods
Bankruptcy Ct.

A federal bankruptcy judge has denied the attempt by the specialists of the bankrupt HMO to get out of their contracts.  These were being paid fee for service and not paid for many a moon.  The capitated primary physicians are continuing to be paid.  Stupid me! I thought slavery was ended over a hundred years ago.  The HMO and the creditor committee is attempting to decide whether or not to go Chapter 7 or 11.  The HMO told the hospitals and other creditors they would need to accept a 15% fee reduction.  That led to the firing of the CEO of the HMO and the new kinder gentler temporary CEO stating only that renegotiations will be needed.        

Acad. of Med. of Cincinnati v Insurers
Local Courts

The under paid physicians of Cincinnati finally decided to fight back. They have filed suit in court against all the local insurers for conspiracy to hold down payments.  The insurers trotted out the old mantra that the suit will only increase further the cost of care for the residents of the area.  Maybe it should!!

Pybus v Cigna
Texas Superior Ct.

In the first case against a HMO under the state bill of rights law, Cigna lost $13 million including $10 million in punitive damages for forcing a 83 year old male out of a nursing home to lower costs. The treating physician stated the patient should remain in the facility over a weekend but Cigna said "no".  The HMO promised home health and home oxygen.  Neither were forthcoming on the weekend and the patient was hospitalized the next day and died soon after.  The attorney for Pybus got to tell the jury the evidence of how an HMO works and that they never reviewed his records prior to forcing him out of the facility. This is only the second case to get to a jury under this law and the first won by a plaintiff.

Flower v Humana
Fla. Circuit Ct.

Flower has MS and has been treated by several physicians at the University of Miami since 1992.  She states that Humana via their insurance agent falsely told her that with their plan she could continue to see her physicians.  They did not live up to the promise. Humana states that the agent did not tell Flower that she could see her physicians.  Flowers stated that the agent showed her the physician's name in the referral book.  She took a turn for the worse and asked for a referral.  She was told he was not in the network.  Flowers appealed and lost.  Five months after the worsening of the symptoms she called the doctor who asked her to come to Miami and hospitalized her for 10 days .  Humana paid the bill.  She responded well to an old drug for MS, ACTH.  After her release she continued to battle the HMO who only allowed 2 visits a year with the physicians and denied all the newer MS meds.  It turns out the physician is in the Miami and not the Palm Beach network of Humana.  flowers lives in Palm Beach.  Humana is not responding to discovery and is to be hit with legal fees and costs.  A case of she said, he said but with the book in the she said column.  

LA. Med Society v Insurers
Orleans Civil Ct.

The physicians in Louisiana are suing the insurers Cigna, United Healthcare, Aetna and Blue Cross/Shield in Louisiana for improperly denying claims to increase their own profits.  They are also joining the medical societies of other states in the Florida class-action law suit against the insurers.  The industry responded with the same tired response that this will not solve anything and drive up costs.  What the HMOs don't state is they have stonewalled all attempts at resolution of the problem in all states and have left the physicians no alternative but to use the courts.  The physicians claim the HMO's violate the law by not paying on time and refusing to pay interest on the late fees, refusing to give physicians a fee schedule so they would know how much to expect, bundling of procedures and changing of codes to pay less.    

    Solomon v Aetna
Pa. Super Ct.

Solomon and his group brought a class action suit against Aetna for failing to pay claims promptly and not paying interest on the late claims.  This was filed under the Pennsylvania laws.  Aetna won on all under summary judgment.  The Superior Court agreed.  Also the contract never stated the claim would be paid in a reasonable time and since there had been a long relationship between the parties and they had never complained before.  This the court said was a waiver as to reasonable time.  Also the law, according to the court, gave no private right of action if claims were not paid.  This was solely in the province of the state.   Let this be a lesson to all the physician and physician groups in Pennsylvania.  You should start to complain in writing to the insurance companies if you are not being paid within a reasonable time (45 days).   

Hofler v Aetna
CA Ct. App.

Hofler sued Aetna for multiple state claims.  Aetna stated that since Hofler was insured by Medicare+Choice the claim should be removed to federal court.  The action was removed and the federal court sent it back to state court plus awarded Hofler $9000 in attorney fees.  Aetna appealed to the state Appeals Court over the small amount and lost.  Now there is precedent for all plaintiffs who go against HMOs on state court claims to get attorney fees from the insurer if the insurer attempts unsuccessfully to remove the case to federal court.  A big thank you to cheap Aetna and their attorneys. Top 

Fraud and Abuse

US v Los Angeles County

The County of Los Angeles and California will pay $73 million to the feds for claims for federal Medicaid funds.  The problem is a true Catch 22.  Under the state rules minors do not have to tell their parents to receive care for certain conditions.  Without the parents financials there is no way to know whether these minors qualify for Medicaid funds.  Since the state can not guarantee these minors meet the needs they are fraudulently receiving federal funds. This is another whistleblower case and an employee of the LA Department of Mental Health will get $1.36 million.  This should give him some mental health.     

US v Multiple Hospitals  

The following hospitals have settled charges of fraud and abuse for the use of unauthorized cardiac devices:  Scripps Memorial Hospital, Scripps Green Hospital, Presbyterian Hospital, Shadyside Hospital, INTEGRIS Baptist Medical Center, Hoag Hospital and St. Joseph's Regional Medical Center.  These hospital have now joined the growing list of hospitals turned in by a former medical device salesman.  To date, the feds have garnered a cool $29 million on this one. 


Doe v American Med Pharmacies
Mich Ct. App.

Doe, a patient with HIV went to the pharmacy to fill a prescription for drugs for his HIV.  A pharmacy employee supposedly yelled an obscenity and then said in a loud voice that the patient had AIDS. There were 35 people in the room at that time.  The employee then made the announcement two more times so all could hear, according to witnesses.  The trial jury awarded $100,000 for the privacy breach against the employer.  The judge then overturned the verdict stating that Doe had not proved his case and the conduct was not so outrageous as to cause Doe's emotional distress claims.  On appeal, the court reversed and reinstated the jury's decision.    

In re Grand Jury Subpoena John Doe
ED Va. 

A grand jury subpoenaed ED and hospital records as part of a criminal investigation.  The hospital moved to quash.  The court compelled the disclosure of the records.  In federal court there is no physician patient privilege but there is a patient privacy per se.  This privacy right is not absolute and is to be balanced against the state's right to the records in certain circumstances.  The court overrode the hospital's HIPAA argument and stated that HIPAA specifically allows patient privacy to be trumped by a grand jury subpoena that is relevant and material to a legitimate law enforcement inquiry.  The court also recognized that some records will need to be redacted but here the grand jury is secret and therefore redaction is not necessary.  

     US v Empire
     Federal Case

Empire Blue Cross and blue Shield of New York has agreed to pay $21.6 million for manipulation of physician fees. Between 1989 and 1995 the insurer reduced payments to physicians making patients pay more.  The ruling by the federal judge was that the insurer arbitrarily cut the usual and customary fees.  I can't believe any company would do that to physicians and patients.   

S.K. v Walgreens and Eli Lilly
Fla. Court

A woman has sued Eli Lilly for providing Walgreen's pharmacy for free samples of Prozac and allowing the pharmacy to send the free samples to patients with a history of use of antidepressants.  The plaintiff's medical records showed no mention of the drug.  The companies are being sued for breach of privacy and improper medical practice.  

Lilley has suspended three people because of the incident.    Top   


Pitcher v State
Wash. Ct. App.

In an important decision for all medical director physicians, the Washington Court of Appeals has upheld a Department of Revenue ruling.  The ruling stated a medical director is to pay the tax on the full amount paid to him by the hospital to provide 24/7 coverage.  The ruling disallowed a pass-thru exemption based on his paying the other ED physicians.  If this holds either a new contract would be needed or the physicians would need to pay back their percentage to the director.

St. Vincent Hosp. v Steele
Ind. Supreme Ct.

Steele had a five year contract to work for St. Vincent.  After several years the hospital unilaterally changed the compensation arrangement due to their interpretation of federal law.  Steele did not agree with the hospital's interpretation and sued the hospital for breach of contract. He won a summary judgment.  The high court agreed with Steele and St. Vincent will need to pay up.      

Eastern Carolina Internal Med. v Faidas
NC Ct. App.

ECIM contracted with Faidas for employment.  the contract had a liquidated damage clause if Faidas left and set up shop within a certain radius.  ECIM then sued Faidas for over $100,000 when this occurred.  Faidas argued unsuccessfully that this was an unenforceable covenant not to compete and a penalty.  She lost. The Court of Appeal agreed that the amount was reasonable and not a penalty. Here, there was a three county area of restriction and it was upheld.

Pensacola Radiology v Weingarten
Fla. Cir. Ct.

The group sued the physician for the enforcement of a covenant not to compete in the employment contract.  The covenant was for two counties and for two years.  The court stated that the covenants were legally binding and were enforceable by an injunction.  The court did limit the area to one much more local.  Different rules for different states.         Top


Bryant v Adventist West Redbud Hosp.
9th Circ.

The minor child was taken to the ED of West Rosebud and released after an exam. The exam failed to reveal a lung abscess in this disabled child.  The following day he was admitted to the hospital and then transferred to another hospital for surgical intervention.  He died the day following discharge. Bryant sued under EMTALA and lost on summary judgment.  The 9th agreed stating that during the child's three day stay at Rosebud there was no duty to stabilize the child.  EMTALA is not a medical malpractice statute but one that requires a good faith medical screening exam and stabilization which may include hospitalization.  Once hospitalized EMTALA goes away unless the hospitalization is a sham to rid the hospital of it's responsibilities.  

Harry v Marchant
11th Circ.

Lisa Normil came to Aventura Hospital and was examined by Dr. Marchant in the ED.  He attempted to admit the patient to the ICU but the on-call physician refused.  Several hours later the primary care physician admitted the patient to the ICU where she died soon after.  Harry, the estate representative, sued Marchant under EMTALA.  The lower court granted summary judgment to the hospital and Marchant.  The 11th Circuit agreed and stated that there is no duty to stabilize a patient with an emergency medical condition that is not transferred.  The court also stated that there are state tort remedies for redressing the alleged negligence.

Correa Ortiz v Sile

The plaintiffs sued the ED physician for the death of their father under EMTALA.  This one was kicked since the statute is one against the hospital not the physicians.  The plaintiff alleged faulty screening, not a valid claim under the statute.        Top


In Pennsylvania, the Chester County Hospital has sued Blue Cross in federal court for not allowing competition in the marketplace and forcing the hospital to give very discounted rates.  It has asked for $60 million and the split of Independence Blue Cross into smaller companies.  The two have a contract for five years starting in 2000.  It will be an interesting case to watch since it may not come to trial until the end of the contract in 2005.        Top


Yuba City Superior Court

A patient saw his physician for a routine check-up in 1998.  All his tests came back except for the PSA.  The following year he went back and the repeat test was abnormal at 31.9.  The prior years test was found and was 22.4.  A biopsy was performed and showed prostate cancer.  The patient sued due to the delay in a urology referral and the spread of the disease.  Fault was admitted and the settlement was $500,000.  He had a radical prostatectomy followed by radiation therapy for the local spread.  

Charleston Surgeon v St. Paul Insurance
West Virginia    

Surgeons in West Virginia are suing St. Paul Insurance, their old malpractice carrier for fraud.  St. Paul released money being held in reserve for later malpractice cases filed under the purchased tail coverage to stockholders.  The surgeons believe that since the money was released they should be entitled to a refund of their tail payments, about $30 million in the state. The surgeons were promised that their tail coverage was purchased by their long association with St. Paul and St. Paul's predecessor.  St. Paul stated they required a payment of $251,480 plus costs and interest to buy their tail. If true the company will be required to pay the refund plus costs and interest.

The judge has ruled against St. Paul in the summary judgment phase.  The case and discovery continues.   

Doe v S. Texas Regional Med. Ctr.
State Court

A Texas attorney is attempting to make money by trying to get a class action suit against the hospital.  He represents Jane Doe, a patient at the hospital where a HIV+ nurse injected herself with medicine intended for the patients.  The hospital is doing the right thing by paying for all HIV testing including any secondary testing needed.  The attorney states that his client is in fear of AIDS, a reasonable fear.  However, once the test comes back negative the reasonableness goes away.  The patient is entitled to compensation for the period of time from when she found out about the nurse until the test comes back negative and not a penny more.  This is the law of California and should be followed in the plaintiff friendly state of Texas. The nurse worked in the hospital for seven months and so there are probably thousands of patients potentially affected, not infected.   Top


US v H. Richard Winn M.D.
Wash. Superior Ct.

Dr. Winn has been accused of overbilling Medicare while working as a neurosurgeon at University of Washington.  He asked refused to plead the case since the feds want him to plead to a felony and not a misdemeanor.  The deal would give restitution of the money and allow Winn to keep his license.  The whistleblower in the case was miked and has accused Winn and two others of billing for work done by residents when they were not even in town.  This procedure was usual many yeas ago and was investigated under the PATH program.        Top


DISCLAIMER: Although this article is updated periodically, it reflects the author's point of view at the time of publication. Nothing in this article constitutes legal advice. Readers should consult with their own legal counsel before acting on any of the information presented.