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Claiming they are the victims of a “two-front attack” on the country’s managed care system, lawyers for eight of the United States’ largest HMOs will argue before the 11th U.S. Circuit Court of Appeals in Miami today that their protracted legal battle with doctors over payments doesn’t belong in court. They contend that the doctors are contractually obligated to resolve their disputes through arbitration. Four state medical associations, including the Florida Medical Association, along with doctors from seven states, allege that they are the victims of an industrywide conspiracy in which the health insurers engaged in “a pattern of racketeering activity” to deny medically necessary health care to patients. They also allege that eight health maintenance organizations have been enriching themselves at the expense of doctors and patients by, among other things, denying treatment or delaying payments. The plaintiffs have several high-profile attorneys representing them, including Richard Scruggs of Mississippi, noted for successfully taking on the tobacco industry, and David Boies of New York, who led the government’s case in the Microsoft antitrust trial. The HMO industry contends that the lawsuits are little more than an effort to “dismantle” a system that was created to make health care costs more affordable. The doctors are seeking class action status for suits filed nationally and consolidated in Miami. If approved, as many as 600,000 doctors would be included nationwide. A second series of suits, filed on behalf of patients, is pending before U.S. District Judge Federico Moreno of the Southern District of Florida but is not the subject of today’s appeal. All of the suits were consolidated by the Judicial Panel on Multidistrict Litigation last year and sent to Moreno, who divided the cases into two tracks — one on behalf of patients and the other on behalf of doctors. The health plans being sued are: Humana Inc., PacifiCare Health Systems, Foundation Health Systems, Aetna Inc., Cigna, United Healthcare, Prudential Insurance Company of America and WellPoint. However, neither Aetna nor Humana had arbitration clauses in their contracts with doctors, so they would not be affected by the ruling in this hearing. During a hearing before Moreno in October 2000, lawyers representing the HMOs asked that the doctors’ lawsuits be transferred to arbitration and that all charges against them be dismissed. They argued that their contractual agreements required the doctors to settle any disputes they have through arbitration and not through litigation. On Dec. 13, 2000, Moreno issued a two-prong ruling: He agreed with the HMOs that doctors must arbitrate their financial disputes with HMOs if they had contracts with arbitration clauses. However, he also agreed that the doctors’ claims under the Racketeer Influenced and Corrupt Organizations Act and of conspiracy and aiding and abetting against the insurance companies should be played out in federal court. After the ruling, the 11th Circuit granted the HMOs’ motion to stay further proceedings until it heard and ruled on the managed care industry’s appeal. Industry watchers greeted the 11th Circuit’s ruling positively, saying that, at the very least, the HMOs wouldn’t have to worry about defending themselves in court while appealing the ruling. HMO attorneys have expressed concern that if Moreno’s ruling is upheld, allowing the case to be heard both in federal court and by an arbiter “invites — indeed, almost guarantees — inconsistent results.” They reason that should Moreno’s order be allowed to stand, an HMO could conceivably be held liable for aiding and abetting or conspiring with another HMO while an arbiter might find that the company did not engage in wrongdoing. Not only that, but they suggest that having the case heard both by an arbiter and in federal court will “lead to the costly litigation in [a] court of disputes meant to be resolved in arbitration, and hence will frustrate the federal policy favoring arbitration,” wrote lawyers for PacifiCare in their appellate brief. The HMOs claim that should the ruling be allowed to stand, “it would give future plaintiffs license to engage in manipulative pleading maneuvers in an effort to bypass arbitration agreements,” lawyers for Foundation Health Systems wrote in their brief. In their appeal to the 11th Circuit, lawyers for the HMO industry contend that Moreno erred on several counts. They claim that the arbitration agreements signed by the doctors prohibit them from seeking punitive damages. By allowing the RICO and conspiracy charges to go forward, the ruling in essence would allow the plaintiffs to seek punitive damages. Although not every doctor who sued has a contract with each of the HMOs, lawyers for the industry claim that doctors still should be required to arbitrate their claims of conspiracy and aiding and abetting against the HMOs they didn’t contract with. The HMO lawyers assert in their briefs that the physicians’ allegations against those HMOs with which they have a contract are “grounded upon and inseparable from the very same contracts that contain the arbitration clauses.” Lawyers for Foundation Health Systems argue in their briefs that the aiding and abetting claims are “intimately founded in and intertwined with the underlying contract obligations of the [HMO] defendants.” As a result, they argue that Moreno should have, at the very least, stayed all proceedings pending the completion of arbitration. The doctors, meanwhile, have made numerous arguments against arbitration. Among them: that an arbitration clause that precludes an award of punitive damages is not legally enforceable and that by limiting damages, the plaintiffs would be denied a chance to pursue substantive damages. They have already said that if they can’t get their case heard as a class action then it’s not worth the doctors’ time or expense to arbitrate the claims individually.

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