High court defines when physicians can unite against insurers
■ The U.S. Supreme Court ruled class arbitration can be utilized for doctors' payment disputes with an insurer when the contract is silent on the issue.
By Alicia Gallegos — Posted June 24, 2013
A U.S. Supreme Court decision upholding a potent legal tactic for physicians against insurance companies could lead insurers to use more restrictive provisions in contracts with doctors, legal experts said.
Justices on June 10 ruled unanimously that doctors' payment disputes with insurers can be arbitrated as a group for cases in which contracts are silent on the issue of class arbitration. The decision enables New Jersey pediatrician John I. Sutter, MD, to continue fighting his payment battle against Oxford Health Plans as part of a class of about 20,000 other physicians in the insurer's network.
The ruling highlights that class arbitration is the most ideal and cost-effective dispute resolution for all parties involved, said Melinda Martinson, general counsel for the Medical Society of New Jersey. The society, along with the Litigation Center of the American Medical Association and the State Medical Societies, issued a friend-of-the-court brief to the high court in support of Dr. Sutter. Class arbitration results in fewer transactional costs for insurers and physicians and more uniformity for like claims, Martinson said.
“However — and this is the rain on the parade — if insurers reject this notion and the wisdom in the ruling, they can work around the ruling by changing the dispute mechanism in their contracts,” she said. “For example, they could decide not to include an arbitration mechanism for dispute resolution, or they could attempt to limit the remedy to individual arbitration proceedings. Obviously, that would be a hamper to physicians.”
Dr. Sutter sued Oxford in 2002, alleging that the insurer systematically bundled, downcoded and delayed payments for services provided by him and other physicians in its network. Dr. Sutter sought to represent both himself and a class of similarly situated health professionals. But Oxford argued that his contract prohibited lawsuits and class arbitration, and that payment disputes could be resolved only through individual arbitration.
Arbitrator William L.D. Barrett in 2003 allowed class arbitration to proceed. Because the contract clause sends all disputes arising from the agreement to arbitration, Barrett reasoned that class disputes also must be arbitrated accordingly, court documents showed. Oxford, which UnitedHealth Group acquired in 2004, asked a district court to vacate the decision, saying Barrett exceeded his powers and “manifestly disregarded the law by ordering class arbitration.” That court sided with Dr. Sutter, and the 3rd U.S. Circuit Court of Appeals affirmed the decision. Oxford appealed to the Supreme Court.
In their opinion, the high court justices said the insurer must accept the arbitrator's interpretation of the contract and proceed with group arbitration.
“Oxford chose arbitration, and it must now live with that choice,” the decision stated. “Oxford agreed with Sutter that an arbitrator should determine what their contract meant, including whether its terms approved class arbitration. The arbitrator did what the parties requested: He provided an interpretation of the contract resolving that disputed issue. His interpretation went against Oxford, maybe mistakenly so. But still, Oxford does not get to rerun the matter in a court.”
In a statement, UnitedHealth spokeswoman Lynne High said this method of resolving disputes was not the most time- or cost-effective.
“Class arbitrations like this one make the health care system more cumbersome and expensive for everyone,” she wrote. “Significantly, the court did not decide whether plaintiffs' claims are valid on the merits. Oxford will defend itself vigorously in the arbitration.”
Decision aids disputes over pay rates
Dr. Sutter said he was elated that the high court ruled in his favor. The decision means he finally can move forward with this payment complaint and that he won't be alone in his fight. He hopes the ruling will demonstrate to insurers that physicians have a right to all available legal recourses during payment disputes.
“To hear a ruling of 9-0 just proves that we had a solid case, and that we've done all of the proper [work] to get certified” as a class, he said. “I'm hopeful for a quick and fair settlement to ensure that the predatory practices of certain insurance companies are basically stopped.”
The ruling is a positive one especially for smaller practices and solo physicians who are considering challenging large insurance companies over underpayments, said Larry Downs, the Medical Society of New Jersey's CEO.
“It's definitely difficult for a single physician to have the resources to litigate [such] claims, so this helps balance the power between the parties,” he said. “You have a big insurance company with lots of resources and access to lawyers. They can afford to litigate those claims. But if you can aggregate and make business changes that [impact insurers'] business practices, that's better for doctors and patients.”
In a statement, the American Medical Association said the high court's decision provides a boost to the medical profession's efforts to address unfair corporate policies implemented by some insurance companies.
“This important ruling allows thousands of physicians to use class arbitration against a health insurer that has underpaid them for more than a decade,” said Jeremy A. Lazarus, MD, then AMA president. “Without this broad-scale arbitration, physicians would have no practical means of challenging a health insurer's unfair payment practices.”
Understand your contract
Going forward, the decision probably will prompt payers to be more cautious about consenting to the arbitration forum for resolving similar disputes, said California attorney John A. Meyers, chair of the health care law department at Ervin Cohen & Jessup.
“Payers are advantaged by single-claimant disputes, which discourage all but a few well-situated providers and which tend to atomize claims on factual issues and confine favorable results to a single payer, thus increasing the cost of pursuing a remedy in relation to the gain of winning even the fairest claim,” Meyers said in an email.
Because some insurers may opt to change the wording in their future contracts after the high court decision, physicians should take a particularly hard look at their next round of agreements to ensure they understand the language, Downs said.
“Many physicians don't pay as close attention to their contracts as they should,” he said. “They should be reviewing those contract regulations to make sure they can remedy any problems between them and the insurer going forward.”
Some insurance companies already expressly ban class arbitration in their contracts, noted Edith M. Kallas, a New York health law attorney. She co-wrote the friend-of-the-court brief on behalf of the Litigation Center and the New Jersey medical society. However, doctors can and should argue against such provisions during contract negotiations, she said.
Physicians need “to understand their contractual provisions and the impact these provisions can have on their legal rights,” she said. “If a physician is presented with a contract that contains an arbitration clause with a class arbitration ban, he or she should attempt to negotiate that provision.”
Martinson, with the New Jersey medical society, said she hoped this wouldn't prove to be the trend going forward.
“If insurance companies circumvent the import of the U.S. Supreme Court decision by modifying their contracts to ban class arbitration, then physicians will be deprived of a meaningful dispute resolution mechanism for payment issues,” she wrote in an email. “Physicians have virtually no bargaining power on their fees. That makes it all the more imperative that there be a meaningful dispute mechanism for payment disputes.”