The managed care industry is getting no respite from the spate of legal challenges being thrown its way by disgruntled doctors and patients.

The latest battleground is in New York, where the state’s largest physicians’ organization is turning to the courts in an effort to put an end to managed care practices it maintains are illegal and harmful to patients who depend on the companies for their medical care.

The Medical Society of the State of New York (MSSNY) announced in August that it had filed suit against Aetna U.S. Healthcare, Cigna, Empire Blue Cross/Blue Shield, Excellus, Oxford, and United HealthCare. These six managed care firms account for almost half of the managed care contracts controlling patient care in New York.

The suits, which were filed in New York State Supreme Court in Manhattan (unlike most state supreme courts, the one in New York is not the state’s highest court), charges the companies with multiple legal transgressions including "continual arbitrary denial of medically necessary care, capricious reductions in reimbursement claims, subjective downcoding and bundling of claims, as well as utilization of computer programs that deny claims based on arbitrary guidelines."

The MSSNY suit also cites "the failure of [insurance] carriers to provide adequate staffing for the volume of claims being submitted and their failure to provide information to physicians about how claims decisions are made."

In a press release explaining why the medical organization filed this legal challenge, MSSNY President Robert Bonvino, M.D., described it as "the culmination of years of intransigence by the managed care insurance carriers and their utter disregard for the rights of the patients and physicians. It is a sad comment on the way these insurance carriers conduct business."

He added that "patients can be assured of continuity of quality medical care only if we address the balance of interests between profit-focused carriers and medically necessary physician decisions."

Donald Moy, J.D., the medical society’s general counsel, told Psychiatric News that the decision to pursue judicial remedies "was a difficult one, but the complaints and evidence showed that despite some successes in the state legislature, legislation was not enough" to reverse the practices that physicians said were interfering with delivering quality care and getting reimbursed fairly.

Even after lawmakers passed legislation forcing managed care companies to alter some of their practices, "the abuse complaints seemed to increase along with evidence and documentation of downcoding, service bundling, and the use of actuarial guidelines to make medical determinations."

Among the specific complaints alleged in the suit are that the defendants’ "unfair and deceptive practices" have been put in place to "delay, deny, impede, and reduce lawful reimbursement" to MSSNY’s member physicians who have provided medically necessary care to patients whose care is managed by one of the companies.

In addition, the suit says, the extraordinary market domination of the six managed care companies has left physicians no choice but to participate if they want to have a sufficient number of patients. The companies have taken advantage of this state of affairs to force physicians "to enter into one-sided contracts which infringe upon the doctor-patient relationship and threaten the continuity of care physicians provide," MSSNY maintains.

The companies benefit financially, the suit says, through practices such as "bundling" multiple health services; "retroactively reducing" payments to which physicians are eligible under contract terms, commonly referred to as "downcoding"; rejecting increased compensation levels for complex cases; and refusing to pay for specialist care after "falsely claiming that no referral was obtained from the patient’s primary care physician."

The companies also improperly pad their bottom lines, the suit argues, by failing to reimburse MSSNY member physicians within the time frames called for by New York state law and by failing to pay interest on claims that are past due, a provision also required by state statute.

"As a result of their unfair and deceptive scheme," the suit charges, "the defendants have deprived MSSNY physicians of millions of dollars of lawful reimbursement for health care services" delivered to patients insured through one of the plans, money to which these physicians were lawfully entitled according to the terms of their contracts with the managed care firms.

The medical society is asking the court to declare the companies’ practices to be violations of state law and to issue a permanent injunction that would bar the firms from continuing to engage in the challenged practices. It is not asking the court to award specific monetary damages, but it does want the court to order the defendants to reimburse it for attorneys’ and witnesses’ fees and for other expenses related to bringing the suit.

At the request of the MSSNY the New York State Psychiatric Association (NYSPA) is supporting the lawsuit by gathering examples of problems related to mental health care that patients insured by one of the six companies have experienced, according to NYSPA Executive Director Seth Stein, J.D. The information the NYSPA acquires will also be used to assess whether mental health care carveouts create problems in access and treatment that might warrant the suit’s being extended to include those companies in addition to the first-line insurers, said Stein, who is also the NYSPA’s general counsel. He noted that several of the six insurers rely on carveouts to manage their subscribers’ mental health care.

Stein does not anticipate a quick resolution of the charges brought in the MSSNY suit. "It’s going to be a long, drawn-out process," he told Psychiatric News.

Because the court, which is located in lower Manhattan, was closed for more than a week after the World Trade Center catastrophe, the defendants have been given an extension to respond to the charges in the suit, including requests for dismissal. They had not done so by press time in early October. ▪