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Voting 2-1, a federal appeals court has ruled that the Pennsylvania Psychiatric Society might have legal standing to sue a group of HMOs on behalf of its member psychiatrists and their patients to challenge what it claims are unfair refusals to pay for psychiatric services. In Pennsylvania Psychiatric Society v. Green Spring Health Services Inc., the 3rd U.S. Circuit Court of Appeals held that PPS may be able to prove its case with only limited involvement of its members and, therefore, would have “associational standing” to press its members’ claims. And if PPS clears that hurdle, the court found that it would also have third-party standing to press the claims of the patients due to the close relationship they have with their doctors and the obstacles they face in pursuing the litigation on their own. “The stigma associated with receiving mental health services presents a considerable deterrent to litigation,” 3rd Circuit Judge Anthony J. Scirica wrote in an opinion joined by Judge Maryanne Trump Barry. But in a spirited dissent, Judge Richard L. Nygaard said the court was extending associational and third-party standing too far. Nygaard said PPS was asking for two exceptions to the standing rule — to litigate on behalf of its member psychiatrists and to assert third-party standing for the members to litigate on behalf of their patients. He also said PPS was arguing that “these exceptions can be ‘stacked’ to concoct a new exception to the standing rule” that would allow PPS to litigate on behalf of its members’ patients. Nygaard said that while he agreed with his colleagues on the associational standing question, he disagreed with the decision to allow PPS to press the claims of the patients. “PPS cannot piggyback two discrete exceptions, to swallow up the longstanding rule that litigants must assert their own rights and interests. I cannot find, nor does PPS cite, any authority for stacking or piggybacking these relationships into an attenuated concatenation of exceptions to the standing rule so as to confer standing on PPS,” Nygaard wrote. “I would hold that PPS cannot seek relief based on the rights and interests of remote third parties,” Nygaard concluded. In the suit, PPS claims that the HMOs impaired the quality of health care provided by psychiatrists to their patients by refusing to authorize necessary psychiatric treatment, excessively burdening the reimbursement process and impeding other vital care. The suit alleges that the HMOs refused to authorize and provide reimbursement for medically necessary mental health treatment, interfered with patients’ care by permitting non-psychiatrists to make psychiatric treatment decisions, violated provider agreements by improperly terminating relationships with certain psychiatrists, and breached the contractual duties of good faith and fair dealing by failing to timely pay psychiatrists and by referring patients to inconvenient treatment locations, thereby depriving some patients access to treatment. PPS claims the HMOs tortiously interfered with the psychiatrists’ livelihood as well as the psychiatrist-patient relationship. The suit also alleges that the HMOs fraudulently misrepresented the quality of care their plans would provide to subscribers and the benefits psychiatrists would receive for providing their services. And in a claim brought on behalf of the patients, PPS alleges the HMOs made false representations to their subscribers in violation of the Pennsylvania Unfair Trade Practices and Consumer Protection Law. U.S. District Judge Gary L. Lancaster of the Western District of Pennsylvania dismissed the suit after finding that PPS lacked standing. Lancaster found that since the case would require extensive participation by the individual psychiatrists, PPS had failed to meet the test for associational standing. But Scirica found that Lancaster acted too quickly in dismissing the suit since PPS might be able to show that it could prove its claims with only limited involvement from the individual members. Scirica found it significant that PPS had not appealed the dismissal of its claims for monetary damages. “This is noteworthy because damages claims usually require significant individual participation, which fatally undercuts a request for associational standing,” Scirica wrote. Lawyers for the HMOs argued that medical coverage decisions on psychiatric care and substance abuse services are fact-intensive inquiries and that, as a result, the case would demand significant individual participation. But PPS argued that the heart of its complaint involves systemic policy violations that would make extensive individual participation unnecessary. Attorney Philip H. Lebowitz of Pepper Hamilton in Philadelphia argued that the methods the HMOs employ for making decisions — authorizing or denying mental health services, credentialing physicians, and reimbursement — represent breaches of contract as well as tortious conduct. Scirica agreed, saying, “If [PPS] can establish these claims with limited individual participation, it would satisfy the requirements for associational standing. … For this reason, we believe [PPS'] suit should not be dismissed before it is given the opportunity to establish the alleged violations without significant individual participation.”

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