Two HMOs Win U.S. Ruling on Arbitration
A unanimous U.S. Supreme Court ruled Monday that managed-care companies PacifiCare Health Systems Inc. and UnitedHealth Group Inc. could send disputes with their doctors to arbitration, preventing physicians from taking their racketeering claims directly to the courts.
The justices’ 8-0 vote reversed a federal judge and the 11th Circuit Court of Appeals, which had ruled that the arbitration agreements signed by the HMOs’ doctors were too restrictive because they did not allow punitive or triple damage awards, a key part of federal racketeering laws.
But Justice Antonin Scalia wrote that doctors who signed arbitration agreements with the companies were bound by their contracts to first go through arbitration because it was too early for the court to act and that it wasn’t clear that arbitrators are prevented from awarding triple damages.
The decision was hailed as a major victory for Cypress-based PacifiCare, the biggest operator of Medicare health plans, and Minnetonka, Minn.-based UnitedHealth, the nation’s largest managed-care firm.
“It reaffirms cost-effective arbitration as the best forum to resolve disputes between doctors and managed-care companies,” said Jeffrey Klein, an attorney for UnitedHealth.
“We’re pleased that the Supreme Court voted unanimously for our petition,” added Tyler Mason, a PacifiCare spokesman.
The case stemmed from a lawsuit filed in 2000 by doctors who accused big health insurers of systematically cheating them of fair payments and included the broad, federal anti-racketeering act as part of their suit.
In September a judge in Miami certified as a class action similar lawsuits brought on behalf of as many as 600,000 doctors by the California, Georgia, Texas, Florida and Louisiana medical associations against eight of the nation’s biggest HMOs, including WellPoint Health Networks Inc., based in Thousand Oaks, Health Net Inc. of Los Angeles and PacifiCare.
But in the case before the Supreme Court, the HMOs argued that the appeals court ruling undermined the Federal Arbitration Act, a law designed to encourage alternatives to litigation. Analysts said this was a tactic by the HMOs to try to narrow the size of the class action and to avoid potentially larger settlements.
Archie Lamb, co-lead counsel for the 14 law firms representing doctors in the class-action case, said the Supreme Court ruling was “very narrow” and did not weaken the more powerful claims of a “conspiracy in the managed-care industry” to limit payment to doctors.
Dr. Ronald Bangasser, president of the California Medical Assn., argued that Monday’s ruling probably did not eliminate any doctors from the larger class action, because most physicians work with several HMOs, not just PacifiCare and UnitedHealth.
Wall Street analysts considered the ruling a nonevent, adding that any additional costs from the lawsuits would be passed on to consumers.
PacifiCare’s shares rose 60 cents to $25.36 on Nasdaq, while UnitedHealth’s stock increased 10 cents to $92.43 on the New York Stock Exchange.
