Doctors sue HMSA over reimbursement practices
By Andrew Gomes
Advertiser Staff Writer
The Hawai'i Medical Association and two member physicians plan to file lawsuits today against the state's largest medical insurer, alleging that the nonprofit insurer has used unfair and anti-competitive reimbursement practices to harm them and hundreds of other doctors in the state.
The lawsuits against the Hawai'i Medical Service Association are expected to be filed in state circuit court, said Edith Kallas, lead attorney for the plaintiffs and a partner in the New York firm of Milberg Weiss Bershad Hynes & Lerach LLP.
In its suit, the Hawai'i Medical Association, which represents 900 practicing physicians in the state, charges that HMSA routinely reduces and denies physician claims, sometimes using computer profiling programs, to achieve internal financial goals regardless of patient needs.
The association's complaint, which asks the court to halt the reimbursement practices, says the practices have cost local physicians millions of dollars since August 1996 and threaten continuity of patient care. It also says that because HMSA is the largest health plan in the Islands, insuring two-thirds of the population, physicians have been forced to accept HMSA practices at the risk of losing patients.
Cliff Cisco, an HMSA senior vice president, said yesterday that the company was unaware of the planned lawsuits but said the procedures HMSA uses to review and pay claims are appropriate.
"HMSA's objective is to finance healthcare to our members within the budgets our members can pay for, and part of that is making sure that some physicians do not defraud our members," he said.
"So we have to put in mechanisms to watch the way physicians make their claims. We're not doing anything that is not done across the country."
Cisco noted that HMSA, a mutual benefit society owned by premium payers, lost money in each of the past three years while it paid more to reimburse physicians. The company reported operating revenue of $1.22 billion last year, offset by benefit payments and expenses of nearly $1.24 billion.
HMSA reported a net profit of $6.5 million last year, up from $4.7 million in 2000 because of investment gains. Excluding investment gains, HMSA posted an operating loss of $19 million, down from an operating loss of $49.4 million in 2000. The company reported $483.2 million in financial reserves, down $19.3 million from the previous year.
Cisco said that the lawsuits are attempting to litigate the cost of healthcare and that, if successful, the suits would raise the price of services for patients.
"No one gains from this," he said.
HMSA has come under increased scrutiny recently from state regulators, consumer advocates and legislators who question its maintaining a reserve fund of more than $400 million while raising health insurance premiums.
Earlier this year, the governor signed legislation that takes effect Jan. 1 requiring health insurers to seek state approval before raising healthcare premiums.
The lawsuits expected to be filed in Hawai'i today are part of a trend of similar suits filed in the last year on the Mainland by doctors seeking relief from what they say are reduced fees dictated by market-dominating health insurance companies.
Robert Miller, a former antitrust lawyer for the state who is assisting plaintiffs in the lawsuits, noted that patient premiums are rising while fees paid to physicians are being cut by as much as 50 percent, sometimes reducing reimbursement below cost.
Gerald McKenna, a Kaua'i psychiatrist and president of the Hawai'i Medical Association, said yesterday that physician committees have unsuccessfully tried to negotiate their concerns with HMSA for the past five years.
"(Physicians) really have no bargaining power," said Paula Arcena, association executive director. "HMSA dominates the market, and they really can present positions to doctors in a take-it-or-leave-it fashion."
Both of the complaints expected to be filed today specifically allege that HMSA often modifies contracts that doctors feel they have to sign for fear of losing their business with patients. "If we don't have a contract with HMSA, we can go fishing — we certainly can't do any medical practice," McKenna said.
Cisco said yesterday that changes to contracts, which are the same for the same types of physicians, receive input from physician committees in most cases.
"There are very few complaints about the contracts," he said.
"A few people have chosen to make an issue out of it."
The physicians' lawsuit, on behalf of neurosurgeon Michon Morita and plastic and reconstructive surgeon Maxwell Cooper, makes allegations similar to the association's but seeks unspecified monetary damages and class-action status.
If such status is approved by a judge, it would allow other physicians to join as plaintiffs.
Kallas said her firm has been involved in similar cases in Connecticut, New York, New Jersey, South Carolina and Tennessee.
"There is a serious problem in this country with doctors not being paid to cover the cost of care rendered to patients," she said. "This is a very real issue for organized medicine. (Doctors) feel they have no choice. They have to take a stand."
In addition to Miller, former state attorney general Warren Price is representing plaintiffs of both suits.
McKenna said the American Medical Association, of which the Hawai'i Medical Association is an affiliate, plans to file a supporting brief in the case.
Kallas said the plaintiffs do not plan to sue other health plan providers in Hawai'i.
HMSA is the leading provider of fee-for-service medical insurance in the state, with more than 90 percent of the market. The company is also the No. 2 provider of HMO coverage, behind Kaiser Permanente.
Reach Andrew Gomes at agomes@honoluluadvertiser.com or 525-8065.
