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Supreme Court Deals Blow Against HMOs

	January 10, 2005 7:42 p.m. EST

WORLD NEWS

HMOs Facing Class Action Lose High-Court Bid By MARK H. ANDERSON DOW JONES NEWSWIRES January 10, 2005 7:42 p.m.; Page A2 WASHINGTON -- Their appeal rejected by the U.S. Supreme Court, six health-maintenance organizations face a class-action lawsuit brought by more than 600,000 doctors who claim the companies systematically underpaid them for medical services. The high court also declined to hear an appeal from California Public Employees' Retirement System, the giant state pension fund that wanted its lawsuits against WorldCom Inc. moved back to state court after a federal bankruptcy court took over the cases. In the HMO case, UnitedHealth Group Inc., of Minnetonka, Minn.; Humana Inc., of Louisville, Ky., and four other companies had challenged the legality of the class of doctors certified by a federal court to sue them. The doctors claim the HMOs used automated claims-processing systems to deny them payments for medical services provided to patients. A related case reached the high court last year in which the justices rejected an effort by some of the involved companies to force the lawsuit into arbitration. The high court's refusal to hear the case clears the lawsuit for a federal trial in Miami, absent a settlement or other development in the case. The doctors filed their lawsuit under civil provisions of the Racketeer Influence and Corrupt Organizations Act. The HMOs asked the high court to look at whether a federal trial judge properly weighed evidence when deciding whether the case deserved class-action status, an issue subject to varying federal court system standards. The HMOs, in a legal brief, said the standard being used by some federal court circuits creates a "grave potential for the filing of weak or frivolous claims" as class actions. Attorneys for the doctors urged the justices to reject the appeal and allow litigation to continue in the case, arguing the class-action lawsuit was allowed "based on a determination that the cases involved common questions of fact." A federal trial judge first approved the doctors' lawsuit in 2002. On appeal, the 11th U.S. Circuit Court of Appeals in Atlanta affirmed that decision in September. Other companies involved in the case are Health Net Inc., of Woodland Hills, Calif.; PacifiCare Health Systems Inc., of Cypress, Calif.; Prudential Insurance Co., a unit of Prudential Financial Inc., of Newark, N.J.; and WellPoint Health Networks Inc., a unit of WellPoint Inc. of Indianapolis. (UnitedHealth Group v. Klay) The California pension fund, known as Calpers, filed numerous state-court lawsuits against former WorldCom executives, including former Chief Executive Bernard Ebbers, and protested when a federal bankruptcy judge took over those lawsuits. Calpers is trying to recover some of the more than $550 million it lost when WorldCom disclosed a multibillion-dollar accounting scandal in 2002. The scandal led to the company's bankruptcy and scores of lawsuits, including those in which former WorldCom board members last week agreed to pay $18 million out of their own pockets in a $54 million settlement of claims against them. The company has re-emerged as MCI Inc. At the request of WorldCom attorneys, a federal bankruptcy judge in New York took over the Calpers state suits as part of WorldCom's bankruptcy proceedings. In May 2004, the 2nd U.S. Circuit Court of Appeals in New York ruled the lawsuits could stay in federal court. Without comment, the Supreme Court declined to hear the Calpers request. (Calpers v. Ebbers) Write to Mark H. Anderson at mark.anderson@dowjones.com1 URL for this article: http://online.wsj.com/article/0,,SB110536993723321603,00.html   Hyperlinks in this Article: (1) mailto:mark.anderson@dowjones.com

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