California doctors, angry with Blue Cross of California for reducing reimbursement retroactively, received a go-ahead to proceed with a class action lawsuit.
The 9th U.S. Circuit Court of Appeals upheld lower courts' rulings that the case belonged in state court, not federal court as Blue Cross had contended.
The California Medical Association filed suit against Blue Cross in May 1997 for lowering fees in 1993, 1994 and 1995 for services that already had been performed by as many as 30,000 doctors. The doctors contend Blue Cross breached its contract. The CMA says the dollar amount could reach into the millions.
In November 1997 and April 1998, federal courts remanded the case to state court, and each time Blue Cross appealed.
The 9th Circuit ruling, which was issued Aug. 27, didn't decide any substantive issues but gave the doctors the right to sue collectively, rather than individually as Blue Cross had wanted.
"It's another step in a long legal process," says John Cygul, vice president of investor relations and corporate communications for WellPoint, the parent company of Blue Cross of California. He declined to comment further.
The CMA's attorney didn't return phone calls seeking comment.
"It's a nice procedural victory for the CMA," says Kevin Outterson, a partner with Baker, Donelson, Bearman & Caldwell, a healthcare law firm in Nashville, Tenn. His firm is not involved in the suit.
Blue Cross tried to use the Employment Retirement Income Security Act of 1974 exemptions to have the case heard at the federal level.
Remanding the case "raises the stakes tremendously," Outterson says. "It goes back to state court where Blue Cross has already lost."
Blue Cross also had wanted the physicians to sue individually, and Outterson says the ruling is much more dangerous for Blue Cross.
Most health plans include an arbitration clause in their contracts with providers, and, like other large corporations, prefer to litigate one case at a time, Outterson says.
"They can wear down hundreds of groups of attorneys," Outterson says. Individually, doctors generally don't have the resources comparable to those of large corporations, he says. But "when you get 10,000 doctors together, you're talking real money. It enables the lawyers for the doctors to share documents and use the best arguments. It's a more compelling attack."
Cases such as this one are becoming increasingly common and could open the door for other suits around the country, Outterson says. "If the California doctors are able to get $100 million out of Blue Cross, that would be interesting."