Federal judge rejects RICO charges in HMO lawsuits.

After seven years, dozens of lawsuits, and untold piles of paper, a movement of doctors and patients who sought to use the courts to reform managed care has come to a crashing halt, as a federal judge in Miami ruled that plaintiffs couldn't make their case against two HMOs. In his ruling, Judge Federico Moreno criticized the HMOs' actions but found that "there is simply insufficient evidence of the wrongdoing claimed." (In re Managed Care Litig., 430 F. Supp. 2d 1336 (S.D. Fla. 2006).)

The groundbreaking litigation began in 1999, when 11 law firms joined forces to file lawsuits against some of the largest health insurance companies on racketeering and conspiracy grounds. The suits were filed on behalf of a group of doctors--who said the HMOs conspired to defraud them by violating their contracts, changing billing codes, and deliberately holding up their checks--and patients, who said the companies restricted their access to health care.

Moreno consolidated the more than 600,000 doctor plaintiffs into a class action but denied class status to the 100 million-plus patients. (See Sara Hoffman Jurand, Doctors' Suit Against HMOs Certified as Class Action; Patients' Class Denied, TRIAL, Dec. 2002, at 62.)

The lawsuit's intent--to effectively change the way HMOs work--was as ambitious as its scope. The racketeering allegations, brought under the RICO law, were based on the fact that most of the insurers used the same computer and billing system to process doctors' claims. Because of this, the lawsuit claimed, they could work together to defraud doctors of their money, while giving their own executives lavish compensation.

After several years of ongoing litigation, most of the insurance companies--including CIGNA, Humana, and Aetna--chose to settle the lawsuits. Part of the settlement in each case included changes to the insurer's business practices. There were two holdouts: United-HealthCare, a huge national insurer based in Minneapolis, and Coventry Health, a small company in Bethesda, Maryland. The case went to trial, and Moreno granted summary judgment to the defendants.

Regarding the claims-processing software, Moreno held that "the plaintiffs have failed to create a triable issue of fact regarding parallel behavior related to claim processing."

He found that there was no evidence that any racketeering or conspiracy had occurred--and that the evidence available tended to support the defendants. "Even assuming that the plaintiffs could show that the defendants engaged in parallel claims processing, they have presented insufficient evidence tending to exclude the possibility of independent conduct," Moreno wrote.

The judge made it clear that he did not approve of the HMOs' practices.

"The court is not giving its imprimatur to the defendants' actions, or to the tremendous amounts of compensation received by their executives, described by some as exorbitant," Moreno wrote. "But any reform related to executive compensation or individual practices by the health maintenance organizations is beyond the power of this court. Those desiring changes in the way health care is provided in America must either look for remedies before Congress or allow the free market to dictate the results."