Suit Targets HMOs’ Drug Monitoring
A consumer advocacy organization has mounted a legal challenge to the managed-care industry’s practice of monitoring doctors’ prescription patterns, charging that the practice pressures physicians to hold down costs.
Consumers for Quality Care has joined a lawsuit in Orange County in which a physician says he was illegally ousted from a large Newport Beach medical network after prescribing more expensive medications for his elderly patients.
The advocacy group also added PacifiCare Health Systems Inc.’s California health plan as a defendant, saying it provided data on the ousted physician’s prescribing patterns.
In a move that attempts to discourage the managed-care industry from the controversial practice of monitoring prescriptions, the consumers group seeks an injunction that would ban such efforts by health maintenance organizations, or HMOs.
“We are challenging a pernicious practice that every HMO in the state and most likely in the nation relies on to squeeze patients,” said the group’s Jamie Court. Santa Monica-based Consumers for Quality Care contends that the physicians group and PacifiCare broke a state law requiring that medical decisions be made without regard to costs.
In the original lawsuit, Dr. Donald E. Rickabaugh says he was removed from Greater Newport Physicians Medical Group Inc., a network of about 200 Orange County physicians under contract with managed-care plans, for authorizing too many costly prescriptions.
Peter Rich, a lawyer for the medical group, said Rickabaugh’s termination had nothing to do with his prescribing patterns and the lawsuit is unfounded. “He was terminated because his office was run in a grossly substandard manner,” Rich said.
“We gave him an opportunity to fix the problems and he didn’t do it,” he said.
Rich said the consumers group has picked the wrong case for challenging the managed-care industry. The group is trying to “blow this up into something that it’s not,” he added.
A PacifiCare representative wouldn’t comment on the allegations, saying the company hasn’t seen the lawsuit yet.
Managed care experts say health insurers have tracked pharmacy costs for a long time, but have stepped up the monitoring in recent years as drug costs increased faster than overall health care costs.
PacifiCare tracks pharmacy costs for all the medical groups that serve its members, said Susan Whyte-Simon, a company spokeswoman. If a medical group seeks data on its individual doctors, the HMO will supply it, as it did for Greater Newport, she said.
Among other things, PacifiCare monitors expenditures on drugs that aren’t on its approved list, or “formulary,” because the HMO often splits the costs of covering those expenditures with medical groups.
Rich, the attorney for Greater Newport, defended the monitoring. “Medical groups in managed care have a job to provide medical services within a fixed budget and to do so in a way that’s quality care,” he said.
Last March, Greater Newport cut off Rickabaugh from serving individuals with at least 10 health plans, including PacifiCare, said Rickabaugh’s lawyer, Theresa J. Barta. She said she intends to add other health plans as defendants in the lawsuit.
Rickabaugh, 75, is on staff at Hoag Memorial Hospital Presbyterian in Newport Beach. As a result of his termination, Rickabaugh has cut what was a full-time practice back to two mornings a week, she said.
In the original lawsuit, filed June 30 in Orange County Superior Court, Rickabaugh said the medical group repeatedly pressured him to change his prescribing patterns.
The lawsuit said the group sent him a memo that warned: “Those physicians who do not modify their behavior to be more consistent with their peers will bear some financial risk rather than penalizing all doctors with reduced compensation.”
Rickabaugh seeks at least $1 million in damages.
