Latest decisions in RICO lawsuits against HMOs offer good and bad news for plaintiffs.

In two recent decisions in consolidated fraud and racketeering lawsuits filed by doctors and insureds against several managed health care companies, plaintiffs have won the right to prosecute their claims in federal court rather than before arbitration panels. Plaintiff lawyers hailed the rulings as victories, but defendants claimed that the decisions--which held that certain claims should be arbitrated or dismissed--bolstered their position that the claims are without merit.

The lawsuits, which name some of the nation's largest HMOs--including Aetna, Inc.; Cigna Corp.; and Humana, Inc.--allege that the defendants secretly conspired to increase their profits by denying medically necessary care to insureds, underpaying or delaying payments to doctors, and providing financial incentives to doctors to keep treatment costs low. Claims include violation of the federal RICO and ERISA statutes, as well as breach of contract, unjust enrichment, and violation of state prompt-pay statutes.

The multidistrict claims have been consolidated and bifurcated under the oversight of Judge Federico Moreno of the U.S. District Court for the Southern District of Florida. The doctors' claims have been bundled together on a "provider track," and those filed by insureds are on a "subscriber track."

In the first decision, Moreno allowed 6 of 16 of the subscribers' racketeering claims to proceed in federal court. He dismissed claims that originated in California, Florida, New Jersey, and Virginia because those states' laws do not allow civil remedies in RICO cases. The judge also ruled that certain ERISA claims could go forward. These are based on allegations that insurers improperly interfered with the physician-patient relationship by imposing "gag orders" barring doctors from discussing all available treatments. (In re Managed Care Litig., No. 00-1334-MD-MORENO (S.D. Fla. Feb. 20, 2002).)

The decision was a"huge victory for plaintiffs," said lead plaintiff counsel Archie Lamb of Montgomery, Alabama. "The industry thought they had this thing dead to rights," Lamb said, referring to the defendants' arguments that the RICO claims should be dismissed outright, "but Judge Moreno sustained six of the plaintiffs' claims. Six claims is huge for the subscribers."

Yet the defendants claimed victory, too. In a statement released after the ruling, Aetna said it was "pleased" with the decision because it represented a "significant ... narrowing of the plaintiffs' claims." And a week later, the defendants were praising Moreno's decision to allow the Eleventh Circuit to consider whether a managed care subscriber who has not actually been denied coverage can bring a RICO claim.

In the second ruling, the Eleventh Circuit upheld an earlier decision by Moreno: Physician plaintiffs who had signed contracts with HMOs that contained arbitration clauses would have to settle their disputes with those defendants by arbitration, but the plaintiffs' RICO and conspiracy claims could proceed in federal court. (In re Humana, Inc. Managed Care Litig., 285 F.3d 971 (11th Cir. 2002).)

"We were encouraged by this ruling, too," Lamb said. Although he acknowledged that the affirmed lower-court decision contained both gains and losses for his clients, "the vast majority of the case remains intact."

By upholding Moreno's decision, the appellate court left open the possibility that the defendants might have to pay considerable damages. RICO allows assessment of treble damages in successful cases. That's significant, Lamb said, given the number of potential plaintiffs involved in both tracks of the multidistrict litigation.

At press time, Moreno had not yet certified the cases as class actions; a ruling is expected this summer. If the cases are certified, "we're talking about 600,000 putative class members in the provider action, and about 70 million to 80 million members in the subscriber track," Lamb said.

The defendants have asked the Eleventh Circuit to reconsider its decision in the provider track cases, and the plaintiffs have asked the court to lift a stay on discovery that was imposed last summer pending outcome of the appeal.

"We're eager to get back into full-blown discovery," Lamb said. "The evidence is overwhelming that the defendants have been cheating doctors day in and day out, claim by claim, for at least a decade. We think that once the light of day--through the civil justice system--is shed on the bookkeeping policies and procedures of these companies, their behavior will be seen as totally unacceptable."