NEW YORK CITY – Calling it a “historic settlement,” counsel representing a putative class of approximately 900,000 physicians, as well as the medical societies of numerous states and other medical societies across the country, today announced that they have settled a national class action lawsuit with the vast majority of the Blue Cross and Blue Shield health plans in the country and the Blue Cross and Blue Shield Association. When combined with prior settlements with other Blues, this settlement means that more than 90% of all Blues plans in the country – covering approximately 77 million patient lives – have now settled this class action with physicians. The settling plans have agreed to implement what counsel said are “important and valuable business practice changes,” and to streamline the way companies interface with doctors, resulting in major savings to the system. According to counsel, these business changes and savings, combined with a guaranteed cash payment of over $128 million to class members, bring the estimated value of the settlement to an amount in the range of settlements previously agreed to with other managed care companies. 

The class action – Love et al. v. Blue Cross Blue Shield Association, et al. – was filed in 2003, and has been pending before U.S. District Judge Federico Moreno in federal court for the Southern District of Florida in Miami. The complaint identified numerous Blue Cross and Blue Shield plans as defendants in an alleged scheme to defraud doctors in violation of the federal Racketeer Influenced and Corrupt Organizations Act (RICO).

Counsel said that this latest settlement was yet another major development in their ongoing fight against insurers’ alleged wrongful practices relating to medical necessity determinations and reimbursement for services provided to patients. Physicians and medical societies have previously settled very similar claims against almost every other managed care insurer in the nation in a prior class action, resulting in major reforms in the health insurance landscape in this country. “The commitments contained in this agreement and prior agreements bring the settling Blues into compliance with what has become the standard for the industry, which is premised on achieving the highest quality delivery of health care,” said Edith Kallas, co-lead counsel for plaintiffs and a partner at Whatley Drake & Kallas. “That is truly in the best interest of physicians and their patients.”

The practice changes the Blues plans have agreed to include commitments to do the following:

• Implement a definition of medical necessity that ensures that patients are entitled to receive medically necessary care as determined by a physician exercising clinically prudent judgment in accordance with generally accepted standards of medical practice;

• Use clinical guidelines that are based on credible scientific evidence published in peer-reviewed medical literature (taking into account Physician Specialty Society recommendations, the views of physicians practicing in the relevant clinical areas, and other relevant factors) when making medical necessity determinations; 

• Provide physicians with access to an independent medical necessity external review process;

• Establish an independent external review board for resolving disputes with physicians concerning many common billing disputes;

• Pay for the cost of recommended vaccines and injectibles and for the administration of such vaccines and injectibles;

• Not automatically reduce the intensity coding of evaluation and management codes billed for covered services;

• Ensure the payment of valid clean claims within fifteen (15) days for electronically-submitted claims and thirty (30) days for paper claims;

• Provide fee schedules to physicians; 

• Establish a compliance dispute mechanism to address disputes regarding the Blues’ compliance with the agreement;

• Establish and/or maintain physician advisory committees; and 

• Provide ninety (90) days’ notice of changes in practices and policies and annual changes to fee schedules. These practice changes are expected to result in hundreds of millions of dollars in real savings to physician practices throughout the country. The end result will leave doctors “more time for patient care instead of dealing with what was a complex, cumbersome, costly and frustrating system put in place by Blue Cross and Blue Shield plans,” said Archie Lamb, plaintiffs’ co-lead counsel. He added, “The primary achievement of this agreement for physicians is found in the fundamental recognition by these companies of the importance of America's physicians in the healthcare equation.”

William W. Hinchey, M.D., President of the Texas Medical Association, stated, “Given the Blues’ size and clout nationwide, this settlement should have an immediate, substantial, and positive impact on our patients and our practices. It will help us return our focus to where it should be: on managing patient care." The agreement follows similar settlements with virtually every other managed care company in the nation, with the exception of UnitedHealthcare, who continues to litigate against physicians rather than making the kinds of positive practice changes other insurers have agreed to make. Counsel stated that United Healthcare has repeatedly refused to address the significant concerns raised by representatives of the more than 400,000 physicians nationwide who care for United’s health plan members. Bob Seligson, Executive Vice President/CEO of the North Carolina Medical Society and President of the national Physicians Advocacy Institute, Inc., said, "The Blues plans have demonstrated that they are serious about improving their relationship with the nation's physicians. We call upon UnitedHealthcare to follow the Blues plans example, along with every large for-profit health insurer in the country, and implement the terms of these settlements voluntarily. Doing so would go a long way in repairing the divisions that exist between UnitedHealthcare and America's physicians.”

The case is being heard in the United States District Court, Southern District of Florida, Miami Division: 03-21296-CIV-Moreno. Additional background information on the case can be found online at www.hmocrisis.com and www.hmosettlements.com. Those sites include complete copies of the Settlement Agreement. For more information regarding HMO litigation please visit the HMO Crisis Newsroom.

On March 21st the Task Force held a public hearing on these issues. Dr. B. Hoagland Rosania testified at that hearing as follows:

My name is Dr. Hoagland Rosania. I have been practicing orthopedic surgery in Massachusetts in a community setting since 1971. I am a Past President of the Massachusetts Orthopaedic Association (MOA) and currently active on the Executive Board. I am also a member of the Massachusetts Medical Society’s (MMS) Committee on Legislation. Today I have the honor of speaking for both organizations.

The issue of physician ownership of ASC’s and MRI’s is indeed a “hot button” issue, as evidenced by the existence of this commission, the volume of legislation filed each session and the abundance of proposed budget amendments each year.

Let me be clear: Despite claims to the contrary, physician ownership of health care facilities is good for the health care delivery system, physicians, patients and insurers. They are safe, offer high quality services, ease of scheduling, greater personal attention and lower costs.

Physicians invest in ASC’s and MRI’s for many different reasons, but mostly because it allows the physician to provide better care Ownership allows physicians to have more control over their patients surgical and imaging schedules, become more efficient with their own time and better manage the quality of their patients care.

Physicians have played a vital role in the growth and success of ASC’s and in-office imaging. Massachusetts is now questioning whether new restrictions should be imposed on physician ownership of such entities. These questions do not appear to be motivated by any evidence of abuse or conflicts of interest resulting from ownership. Instead, they are derived from interests who feel threatened by the competitive challenges that physician owned entities pose for them. I therefore will address the following issues, which I hope will assist the commission in moving forward with recommendations:

• Why the physician group practice exemption in Massachusetts must be preserved to ensure fair competition, quality of care and cost controls.
   
• Why physician ownership should be encouraged – not discouraged – and what the consequences will be if laws or regulations are changed to further restrict ownership and development.

The physician group practice exemption is a statutory protection for equipment and/or minor surgical procedures that are offered or performed as a direct extension of the physician’s office practice. Elimination of the physician group practice exemption would require any entity seeking to establish, acquire, or transfer a single or multi-specialty ASC, MRI or any other innovative service or new technology to get a DoN and be licensed as a clinic.

The physician practice exemption is the only avenue open to physicians who wish to invest in an ASC or MRI. The DoN process is closed to physician owned facilities as a matter of policy by DPH. So to require that all ASC’s and MRI’s get DoN’s and be licensed as clinics is to say that there will be no DoN’s granted to any entity that is not hospital based or affiliated.

Now the hospitals are saying “what’s wrong with that, sounds good to us.” This is what the concerns are:

• This is a patient access issue. Limiting the availability of outpatient surgical or diagnostic services will create long waiting lists and delay a patient’s access to necessary treatment. Some patients will have to travel long distances to get the services they need.
   
• From an economic perspective, restricting competition by physician owned entities is not the answer to hospitals financial woes, and will have negative consequences, including: limiting patients’ access to care, compromised quality and ultimately increased costs if only hospitals are allowed to provide these services. Giving the hospitals monopoly power over outpatient surgery or diagnostic equipment, will not lower costs, and in fact will have the exact opposite effect. Competition lowers prices and provides an incentive to improve quality.

Physician ownership should be encouraged, especially in Massachusetts.

During the past five years, the Massachusetts Medical Society has studied the adequacy of the existing physician workforce, its impact on the physician labor market, and access to health care services for the residents of Massachusetts. These studies provided data that strongly suggested severe and critical shortages in the Massachusetts physician labor market. . Additionally, the 2006 report demonstrates a steady decline in the physician practice environment over a 12 year period that has negatively impacted physicians’ willingness to continue practicing in Massachusetts.

• Among the 14 specialties analyzed in this study, the following seven have experienced long term (for the past 4-5 years) “critical to severe” labor market conditions: Anesthesiology; Cardiology; Gastroenterology; General Surgery; Neurosurgery; Orthopedics, and Radiology.
   
• Three specialties have emerged as “critical to severe” for the first time – family practice, internal medicine and psychiatry.

The reasons these shortages exist is due to a poor physician practice environment here in the Commonwealth. High malpractice insurance rates, low reimbursement, high cost of living and mounting administrative burdens all contribute to the worsening physician practice environment.

Massachusetts is having a tough time retaining the high caliber students attracted here by the world renowned teaching hospitals. They train here, but then they leave and take their skills with them. Recruiting new physicians to Massachusetts is increasingly difficult. That means that the shortages that exist now will undoubtedly get worse.

These shortages will inevitably affect patients’ access to care. Significant system reforms and collaboration from stakeholders – many of whom are sitting on this commission – are necessary to avert a future health care crisis. How can we improve the physician practice environment?

Increasing reimbursement rates, reducing the cost of malpractice insurance and administrative burdens would obviously be beneficial. But the single most important thing this body could do is a concept well known to physicians – first, do no harm!