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In a major victory for HMOs, a federal appeals court has upheld the dismissal of a class-action RICO suit against Aetna-U.S. Healthcare Inc. after finding that the plaintiffs failed to allege a valid RICO injury and therefore lacked standing to sue. In the suit, Maio v. Aetna Inc., a proposed class of consumers alleged that Aetna lured them in with false promises of high-quality care while secretly pressuring doctors to cut costs and provide only minimum care. Last year, Senior U.S. District Judge John P. Fullam tossed the case out, finding that the plaintiffs failed to allege an “injury in fact.” Fullam ruled that “a vague allegation that ‘quality of care’ may suffer in the future is too hypothetical an injury to confer standing.” To establish standing in federal court, Fullam said, a plaintiff must show an “injury in fact” that is “concrete and particularized.” as well as “actual or imminent,” as opposed to “conjectural or hypothetical.” The Maio plaintiffs failed that test, Fullam said, because granting them standing “would require this court to assume that in every case, individual physicians and IPAs [independent physician associations] will be moved to put their own economic interests ahead of their patients’ welfare.” Even if that assumption were correct, Fullam said, Aetna “would not be the proximate cause of the providers’ ethical lapses.” On appeal, the plaintiffs’ lawyers argue that Fullam missed the point, since the injury the plaintiffs suffered occurred as soon as they were induced to pay for a policy with false promises. But the 3rd U.S. Circuit Court of Appeals has now upheld Fullam’s ruling on somewhat different grounds. The court adopted in large part the arguments made by Aetna’s lawyers, Alan J. Davis, Burt M. Rublin, and Raymond A. Quaglia of Ballard Spahr Andrews & Ingersoll, who said the plaintiffs’ theory was fatally flawed since it included no specific allegations of substandard care. Senior U.S. Circuit Judge Morton I. Greenberg said the court needed to address only one issue — whether the plaintiffs alleged “a valid RICO injury to business or property sufficient to afford them standing under RICO to challenge Aetna’s purportedly fraudulent scheme.” The plaintiffs failed, Greenberg found, because their theory focused entirely on a claim that they had paid too much for an “inferior” policy. “If we were to permit appellants to proceed with their RICO claims based on allegations of monetary loss proved solely by reference to what they consider to be the existence of coercive internal policies and practices which inevitably will affect the quality of care they will receive in the future, we would be expanding the concept of RICO injury beyond the boundaries of reason,” Greenberg wrote. While the plaintiffs alleged that they lost money because their health insurance was inferior as a result of Aetna’s policies, Greenberg found that “the only basis for their conclusion is their subjective determination that the policies and practices are so inherently unsound that they inevitably will serve as the impetus for physicians to provide substandard health care to their patients at the point at which the enrollees actually seek treatment.” Greenberg, who was joined by Senior U.S. Circuit Judge Joseph F. Weis Jr. and visiting Senior U.S. District Judge Murray M. Schwartz of the District of Delaware, said the plaintiffs “cannot establish that they suffered a tangible economic harm compensable under RICO unless they allege that health care they received under Aetna’s plan actually was compromised or diminished as a result of Aetna’s management decisions challenged in the complaint.”‘ Unless the plaintiffs could claim that Aetna failed to provide sufficient health insurance coverage to the members of their HMO plan — such that individuals were denied medically necessary benefits, received inadequate, inferior, or delayed medical treatment — or even worse, suffered personal injuries as a result of Aetna’s systemic policies and practices — Greenberg said there was “no factual basis for appellants’ conclusory allegation that they have been injured in their ‘property’ because the health insurance they actually received was inferior and therefore ‘worth less’ than what they paid for it.”‘ And such losses, Greenberg said, “would have to be alleged and proven on an individual basis.” Instead, he said, “the property injury claimed in this case is comprised of two interrelated economic harms flowing from [the] purchase of an allegedly inferior health care product.” First, Greenberg said, the plaintiffs claim that they have been injured in their property in the sense that their tangible property — Aetna’s “health care product” — has a diminished economic value because of Aetna’s managerial policies. Proceeding from that premise, he said, was a “second aspect of this theory of RICO injury” — that as a consequence of the diminution in value caused by Aetna’s conduct, the plaintiffs are paying monthly premiums that are too high, given what they actually are receiving. That theory of economic harm, Greenberg said, suffers from a fundamental flaw that is fatal to the RICO claim. “The damages concept of a ‘diminution in property value’ does not have a proper application to this case. While appellants describe Aetna’s health insurance as an ‘HMO product,’ and claim ‘injury’ to this piece of property by virtue of Aetna’s restrictive and coercive internal policies and practices which allegedly reduce its ‘intrinsic’ value, this characterization ignores the nature of the property interest at issue — that which is conveyed through membership in Aetna’s HMO,” Greenberg wrote. Aetna’s HMO, he said, “is not a tangible property interest, like a plot of land or a diamond necklace, as appellants’ argument necessarily implies.” Instead, he said, “the property at issue is not real or personal property; rather, it is a contract for health insurance. Thus, the nature of appellants’ property interests at stake is their contractual right to receive benefits in the form of covered medical services.” When viewed that way, Greenberg said, “the economic harm to appellants’ actual property interests cannot be characterized in terms of a ‘diminution in product value,’ because the property rights at issue are different from interests in real or personal property.” And since an economic injury to such “property” could not stem from a reduction in its value, given the nature of the property interests at stake, Greenberg found that “the fact that Aetna implemented allegedly ‘restrictive and coercive’ internal policies cannot be considered the determinative factor that caused appellants to suffer an economic loss compensable under RICO.” Because the plaintiffs’ property interests in their memberships in Aetna’s HMO plan take the form of contractual rights to receive a certain level — quantity and quality — of benefits from Aetna through its participating providers, Greenberg found that it “inexorably follows that appellants cannot establish a RICO injury to those property rights … absent proof that Aetna failed to perform under the parties’ contractual arrangement.” Aetna’s failure to perform, he said, would be evidenced by the receipt of inadequate, inferior, or delayed care, personal injuries resulting therefrom, or Aetna’s denial of benefits due under the insurance arrangement. But “absent allegations of such losses,” Greenberg said, the plaintiffs “cannot establish that they have suffered an injury to their property rights encompassed in their HMO memberships — i.e., their right to receive necessary medical services covered under their plan — and cannot prove a consequential financial loss flowing from their property.” Arguing for the plaintiffs on appeal was attorney Edith M. Kallas of Milberg Weiss Bershad Hynes & Lerach in New York. She was joined on the briefs by Milberg attorneys David J. Bershad, Patricia M. Hynes, and Charles S. Hellman; sole practitioner James J. Binns of Philadelphia; Harvey Rosenfield of The Foundation for Taxpayer and Consumer Rights in Santa Monica, Calif.; and Eugene A. Spector, Jeffrey L. Kodroff, and Andrew Abramowitz of Spector & Roseman in Philadelphia.

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