In 2001, Jim Rohack, MD, then president of the Texas Medical Association, announced TMA would join two national class-action lawsuits accusing 10 of the nation’s major private health plans of racketeering.
The retired cardiologist, who practiced in Temple, says TMA leadership made the decision with careful deliberation, and not without exhausting other options first. These included advocating for patient protections at the state level, creating a Hassle Factor Log (now the Reimbursement Review and Resolution service) to track member physicians’ payment problems, and meeting with major payers in an attempt to resolve these issues directly.
Nevertheless, “it was pretty clear that the carriers were not willing to make changes. And that’s when you go to the courts,” said Dr. Rohack, who went on to serve as the 2009-10 president of the American Medical Association.
TMA and the other plaintiffs – multiple state and county medical associations and physician groups – alleged the nation’s major health plans had conspired to delay and reduce payments to clinicians and hospitals by downcoding claims and using intimidation tactics during contract negotiations, among other means. The lawsuits, brought under the federal Racketeer Influenced and Corrupt Organizations Act (RICO), represented a watershed moment in TMA history.
The association’s advocacy had long been a three-legged stool, propped up by legislative, regulatory, and legal efforts. Although TMA’s previous legal efforts had included filing and supporting lawsuits at the state and federal levels, some against regulators and payers, none involved class-action litigation. With the RICO case, TMA now was a plaintiff, advocating for physicians via the federal court system.
And TMA and organized medicine succeeded. Although the health plans involved admitted to no wrongdoing, between 2003 and 2005, settlements from the suits resulted in more than 100 pages of enforcement provisions, $2 billion in relief for physicians, and wholesale changes in health plans’ business practices. Settlement funds also created what is now The Physicians Foundation and the Physicians Advocacy Institute, which to this day support physicians, with TMA’s close involvement.
Bohn Allen, MD, a retired general surgeon in Arlington and TMA president in 2004-05, says the settlements helped remedy the power imbalance between payers and physicians.
“The real legacy of that whole lawsuit and everything [else] is that it finally established the fact that physicians were independent and independent contractors, and that the insurance companies could not just at will dictate policy to physicians,” he said.
The lawsuits also established TMA as a player on the national level.
“Between the 2003 tort reform and this action against the insurance companies, the RICO lawsuit, TMA received a great deal of credit,” Dr. Allen said. “Those were concrete examples where physicians could see where their TMA [dues] were going.”
Nearly two decades later, TMA still leads in the courts on critical federal issues, most recently in suing federal regulators four times over the flawed implementation of the No Surprises Act. (See “Seeking Balance,” page 12.)
“The experience and the outcome with the RICO suits … certainly gave a roadmap of how you have to attack some of these issues,” Dr. Rohack said. “When you’re talking about federal legislation, the more you can band together with like-minded associations, the stronger you’re going to [be] in the court of public opinion or [of a federal judge].”
“Our Alamo”
Since its passage in 1970, the federal RICO Act has helped convict mafia dons, Ponzi schemers, and oil spillers. The civil components of the law also allow plaintiffs to assert they have been economically damaged through a pattern of misconduct, which provided an opening for TMA and others struggling with abusive health plans.
TMA’s Hassle Factor Log provided scores of pages detailing physician complaints, and Dr. Allen recalls frustration with plans that benchmarked their payments to Medicare rates, regardless of the market value for individual services and antitrust laws.
“That’s sort of the genesis for where people, particularly doctors and certainly us at TMA, said, ‘This is basically a RICO activity,’” he said. “They’re just assuming and taking discounts and forcing people into contracts without negotiating.”
Dr. Rohack went further at a March 2001 news conference announcing that TMA would join the first round of RICO lawsuits against Humana and Cigna Healthcare.
“[B]ecause of loopholes between state and federal law, and the understandably limited resources of our state agencies to enforce the laws already on the books, the plans can and do continue to cut corners, bully doctors, lie to patients, and engage in gangster-style threats to the doctors who stand up to them,” he said at the conference. “This is our Alamo. This is our last chance to halt these [plans’] predatory and destructive business practices that cannot be remedied through the well-worn paths to the [Texas] Legislature, the Congress, and the regulatory agencies.”
TMA – along with 18 other plaintiffs – ultimately prevailed in suits against eight major payers offering managed care plans, including HMOs, not all of which operate in Texas and some of which have since merged: Aetna, Anthem, BlueCross BlueShield Association, Cigna, Health Net, Humana, Prudential, and Wellpoint. UnitedHealthcare and Coventry Health Care were dismissed from the RICO case, but similar, separate actions taken later against United were successful for medicine.
Dr. Rohack stresses that TMA didn’t take issue with the managed care model but rather with certain private plans’ approach to it.
“They were beholden to the investors to create profit as opposed to being in existence to benefit patients and to benefit those who cared for patients,” he told Texas Medicine.
Legal legacy
As new payer hassles evolve – like ubiquitous prior authorization – TMA’s victory in the RICO lawsuits still pays dividends to physicians in Texas and beyond, most notably through The Physicians Foundation and the Physicians Advocacy Institute.
Settlement funds and physician donations of their own lump-sum settlement payments led to the 2003 founding of The Physicians Foundation. Since then, the nonprofit has funded more than $82 million in grants to research, leadership development programs, and physician wellness initiatives, as well as other programs.
Denton gynecologist Joseph Valenti, MD, a board member of both TMA and The Physicians Foundation, says the latter’s founding is a testament to the power of grassroots physician advocacy. Denton physicians were some of the first to seek out the RICO lawsuits, and the Denton County Medical Society, of which Dr. Valenti is former president, was one of the plaintiffs, alongside TMA and others.
“We’re focused on improving health care delivery [across] the country to empower physicians to make these changes for ourselves and for our patients,” he said, adding that the settlements continue to benefit TMA member physicians in various ways.
TMA has received several Physicians Foundation grants, including one that facilitated the 2010 launch of its Leadership College, a free nine-month program that prepares scholars for leadership positions at the county and state levels. Another grant continues to support TMA’s Wellness First program, which offers a series of focused CME courses and a reduced-rate counseling service for physicians and their families.
Nationally, after years of Physicians Foundation-funded research demonstrated the impact of nonmedical drivers of health on care costs and patient outcomes, the Centers for Medicare & Medicaid Services adopted the first-ever set of related quality measures.
“This is what we’re shooting for,” Dr. Valenti said. “We want to do research that is actionable and that will result in meaningful change for physicians and patients.”
The lawsuit settlements also earmarked $22 million for the 2006 creation of the Physicians Advocacy Institute. Its mission is twofold: to guarantee health plans’ compliance with the terms of the settlements and to ensure physician practice viability through legislative and regulatory advocacy.
For instance, the institute has filed comment letters to federal agencies to support Medicare physician payment reform and efforts to reduce physicians’ administrative burden. It also has filed amicus briefs in support of TMA’s lawsuits regarding the federal No Surprises Act. (See “Making the Case,” page 18.)
Like the foundation, the Physicians Advocacy Institute invests in research, including on increasing consolidation in the health care industry and, with it, increasing physician employment.
Both organizations focus on the shared problems of U.S. physicians, albeit through different means. Dr. Rohack says this shared approach is fitting given their origins.
“One of the things this lawsuit reminded us all [of] is: We have to come together as state associations with the American Medical Association on things that need to be done across state lines.”