Health Net, Woodland Hills, Calif., and financial-services firm Prudential Financial, Newark, N.J., reached financial settlements that would end their roles in a massive class-action lawsuit filed against the nation's largest managed-care companies on behalf of about 700,000 physicians who claim they were systematically shortchanged for their services. Without admitting wrongdoing, Health Net agreed to pay $40 million to reimburse physicians and $20 million to cover plaintiffs' legal fees. It also agreed to invest $87 million over four years to improve its claims-payment processes and other business practices, creating up to $300 million in additional savings for physicians, lead plaintiffs' attorney Archie Lamb told Modern Healthcare. Prudential Financial, which operated Prudential Health Care until the unit was acquired by Aetna in 1999, agreed to pay $22.2 million to reimburse physicians for unpaid claims and attorneys' fees.
Both settlements must be approved by U.S District Court Judge Federico Moreno in Miami. Health Net and Prudential would be the third and fourth companies to reach settlements in the 5-year-old court battle, following Aetna and Cigna Corp., which settled for $470 million and $540 million, respectively. The remaining defendants are: UnitedHealth Group, PacifiCare Health Systems, Humana, Coventry Health Care, Anthem and WellPoint Health Networks, the latter two of which merged in November 2004. The trial is scheduled to begin in September. Separately, Health Net recorded a pretax charge of $67 million in the first quarter to account for the settlement. For the three months ended March 31, the company's net income rose 42% to $21.3 million, or 19 cents per share, from $15 million, or 13 cents per share, a year earlier. Revenue slipped to $2.91 billion from $2.92 billion, as enrollment fell 11% year over year to 2.5 million members. -- by Laura B. Benko