Health Net Settles RICO Case with CMA
and 900,000 Physicians Nationwide
[Posted 05/05/05]

CMA and more than a dozen other state medical associations agreed this week to a settlement with Health Net, one of 6 remaining health plan defendants in the RICO class action lawsuit pending before U.S. District Judge Federico Moreno in federal District Court in Miami. The suit alleges that the for-profit plan defendants violated federal law by using coercive, unfair, and fraudulent means to control physician-patient relationships. Health Net is the third defendant to settle.

The settlement provides improvements to physician-related business practices as well as cash payments to physicians in accordance with specific terms set out in the agreement. The settlement will also enhance communication between physicians and Health Net, reduce administrative complexity in claims payment and improve the quality of the health care delivery system. These changes are expected to result in increased predictability and speed of claims payment, creating significant value for physicians by reducing time-consuming and costly administrative burdens and giving physicians more time to focus on their central mission–providing health care to patients.

Health Net has agreed, among other things, to:

• Redefine medical necessity so physicians can expeditiously get their patients the care they need,
• Abide by fair and transparent payment and contracting rules.
• Use AMA’s CPT codes for patient care and billing, which will end most claim “bundling and downcoding,” a practice used by
  many insurance companies to cut medical costs and underpay
  physicians,
• Pay capitation from day of patient enrollment and provide physicians with periodic reports on projected cost and utilization information,
• Speed up payments to physicians, with electronically submitted claims paid in 15 days and paper claims in 30 days.

The settlement provides major protections both for fee-for-service PPO physician practitioners and for medical group and IPA physicians who contract with Health Net.

“This settlement provides significant gains for physicians and patients,” says CMA CEO Jack Lewin, M.D. “We hope it puts leverage on the other health plan defendants to move ahead and resolve this suit without the need for a protracted trial. Most important, settling the suits means we can spend our time and resources working together on quality of care, patient safety, and expanding access together—and that’s where we need to be.”

The settlement agreement, which will be presented to Judge Moreno Friday, May 6, for his approval, also requires Health Net to pay $40 million to physicians as redress for past grievances and another $20 million for legal fees. Officials estimated the prospective relief through improved claims and payment procedures to be worth $300 million in the next several years.

“CMA began the battle against California’s largest for-profit health plans—Blue Cross/Wellpoint, Health Net, and PacifiCare—five years ago, when it became obvious that insurance companies were promising patients one thing to sell a policy and then doing the opposite when it came time to deliver health care,” says CMA President Michael Sexton, M.D. “This is a victory for physicians and patients. It is a shame that other health plans are still delaying doing what is right for patients.”

Contact: CMA’s legal information line, 415/882-5144 or legalinfo@cmanet.org.