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HMOs Win Round In Federal Court

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A federal judge in Miami has thrown out some of the claims in a group of lawsuits accusing managed care companies of fraud.

U.S. District Judge Federico Moreno dismissed charges that the companies had violated the federal Employee Retirement Income Security Act, and he also dismissed most charges accusing the managed care company defendants of violating the federal Racketeer Influenced and Corrupt Organizations Act.

Defendants that lose RICO cases may be required to pay the plaintiffs damages equal to three times the actual damages.

But Moreno gave the plaintiffs until June 29 to try to persuade him to reinstate the RICO charges, and he let plaintiffs continue with RICO allegations against Humana Inc., Louisville, Ky.

Moreno said he would hear arguments on July 24 about whether to let the plaintiffs continue their suits as class actions.

The HMO companies must respond to the amended complaints by July 27.

The defendants in the cases are Humana; Aetna Inc., Hartford; Foundation Health Systems, Los Angeles; PacifiCare Health Systems Inc., Santa Ana, Calif.; Prudential HealthCare, Roseland, N.J.; and United Healthcare, Minneapolis.

The court tilted the balance slightly in favor of the managed care companies, by agreeing with them that the plaintiffs had failed to show that they had exhausted all administrative means to solve the disputes, or that seeking such solutions would be futile, analysts said.

But, because Moreno is permitting the plaintiffs to replead portions of their cases, the ruling is a mixed bag for the managed care companies, according to Robert Mains, an analyst with Advest Inc., New York.

“This [the ruling] will be a short-lived, partial victory for the HMO industry,” says Mains. “The ruling will lead the plaintiffs to reframe their cases.”

“We continue to believe the plaintiffs cases are without merit,” Humana spokeswoman Pam Gadinsky says. “The class-act status hearing scheduled for July 24 is key to this case.”

“The ruling was a small step in the process,” she adds. “There is much more to be heard by the judge.”

Gadinsky criticizes the plaintiffs attempts at grouping dozens of lawsuits together as a class action.

Neither the managed care industrys hundreds of thousands of affiliated plan physicians nor the millions of plan members meet the legal definition of a “class,” Gadinsky says.

Representatives for the plaintiffs and the defendants were not immediately available for comment.

The current lawsuits, filed in 1999, were consolidated and transferred to Judge Moreno in November 2000.

The HMO industry has been worrying for years about the possibility of trial lawyers gaining class-action status for a RICO patient suit.

A federal appeals court in Philadelphia dismissed one RICO class-action suit in August 2000, on the grounds that the plaintiff had failed to present a convincing case.

Reproduced from National Underwriter Edition, June 22, 2001. Copyright 2001 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.

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