Physician Owners Sue Insurance Companies

Several leaders of physician-owned surgery centers and surgical hospitals think they’ve been mistreated by mainstream hospitals and managed care organizations (MCOs), and some have filed suit. Only one case, however, is scheduled for trial, and that suit may determine whether physician-owners pursue litigation in the future, says Patrick Stueve, a lawyer who is trying the case. 

The outcome may also influence relationships between physician-owners, hospitals and health plans. The trial for Heartland Surgical Specialty Hospital LLC v. Midwest Division, Inc. will begin in the U.S. District Court of Kansas in April 2008. The suit was filed in 2005.

Heartland leaders filed against five hospital systems and six MCOs. The suit alleges that the hospital systems and MCOs conspired to keep doctor-owned specialty hospitals out of in-network contracts, says Stueve, a partner with Stueve Siegel Hanson, LLP, of Kansas City. He specializes in anti-trust suits.

“The point is that there was one other hospital besides ours that is majority owned by physicians and they too were also kept out of all the plans,” Stueve says. “Interestingly enough, there are other physician-owned facilities that are majority-owned by hospitals that have been allowed in. That’s certainly one of the pieces of evidence that the court has focused on and that we’ve been able to discover in the litigation.”

United Healthcare, BlueCross BlueShield Association, Humana, Cigna and Aetna have all settled. The remainder, Coventry Health Care, has not settled. The settlement amounts are confidential, Stueve says. One hospital has settled and the rest have not. Heartland now has in-network contracts with United Healthcare and BlueCross BlueShield Association.

Stueve is confident that there is proof of conspiracy, but due to court order, that information cannot be publicly disclosed prior to trial.

“What I can say is that, prior to commencing the lawsuit, (Heartland) initially received very positive feedback from the various health plans and then after we opened we weren’t able to even negotiate a single contract with any of the six largest managed care associations ... in the Kansas City market,” Stueve says.

“We had also been told by various representatives of some of the health plans that they were being pressured by the large hospital systems not to contract with (Heartland),” he adds. “The detailed evidence of that coercive pressure wasn’t fully uncovered until we got into discovery.”

All defendants either declined comment or were not available, except United Healthcare. Midwest communications representative Greg Thompson says, “Decisions to include facilities in our network, irrespective of their ownership, are made based on what will best serve the needs of our customers.”

A provider can be excluded from a plan’s panel for any number of reasons, says Douglas Ross, an attorney with Davis Wright Tremaine LLP, of Seattle, who specializes in healthcare and anti-trust cases.

“Sometimes providers are excluded because the plan is trying to control cost so it can better compete with its rivals — this is one of the primary reasons plans are cutting back on the number of diagnostic imaging centers with whom they’ll do business, for example,” Ross says. “Sometimes, though probably far less often, the exclusion is undertaken for anticompetitive reasons. Providers who are excluded have every incentive to file a treble damage lawsuit and hope for the best.”

That means lawsuits by physician owners of specialty hospitals, ambulatory surgical centers (ASCs), outpatient diagnostic imaging centers and similar facilities will probably increase, no matter what happens with the Heartland case, Ross says.

“Heartland has a theory as to why its exclusion was the product of a conspiracy,” he adds. “We don’t know whether this theory will persuade a jury, of course.”

The court has thus far found that there was enough proof to warrant trial, but whether that will be enough remains to be seen.

“Ultimately, a jury is going to have to decide whether or not there’s a preponderance of evidence to establish the existence of a boycott,” Stueve says. “I think there’s been plenty of litigation by excluded providers in the past; they usually lose,” he adds.

Litigation is sometimes necessary but should always be a last resort, says Kathy Bryant, president of the Ambulatory Surgery Center Association (ASC Association).

“It can certainly be a powerful tool to get the result you need but it can also be an extremely costly and troublesome way that doesn’t always turn out the way you expect it to and often only pads the pockets of attorneys,” Bryant says.

Bringing grievances to light in court sometimes offers all sides more information about how to conduct business.

“(Court decisions) give guidance to both physician-owned facilities and to traditional hospital systems as to what one court believes may be sufficient evidence to present to a jury concerning anti-trust liability,” Stueve says.

No one can predict the outcome or the exact impact it will have on the healthcare industry, but one thing is for sure: people are paying attention.

“This case is being followed by anti-trust experts and lawyers who represent hospitals and managed care organizations and they will rely on the district court’s opinion in guiding their clients in the future as to what are the appropriate ways to compete with physician-owned hospitals and what actions are not appropriate,” Stueve says.

Bryant agrees that court-decided parameters would show industry players how far they can go in competition.

“The interesting thing about anti-trust laws is most everyone would rather not have competition,” Bryant says. “Left to their natural devices people might do things to stifle competition. The real message that sometimes comes from these cases is, ‘Okay, you can compete, but here’s the limit.’ I don’t think in the long run lawsuits alone are going to get ASCs to where they need to be to meet America’s surgical needs — it’s just one of the tools.”

The Heartland case is almost three years old, but there is still a long way to go, according to Ross.

“The result in every case has an incremental effect on how people behave; that’s what is supposed to happen,” he says. “But the Heartland case is far from over: All that has happened so far is that a court didn’t dismiss the complaint.” Indeed, the ASC and surgical hospital industry should pay attention, Bryant says.

“Clearly there are different issues that affect surgical hospitals than affect ASCs, but anti-trust issues might be the same,” Bryant says. “What happens in one particular case might be applicable in another — certainly within the same areas — so that the court might be bound by precedent. I think it’s always wiser to know what’s going on and to make sure you’re aware.”