Court Sends United Healthcare and Physicians to Mediation

January 24, 2014

A federal appeals court in New York City this week directed United Healthcare and 2 county medical societies in Connecticut to try settling a lawsuit filed by the societies after the insurer dropped thousands of physicians there from its Medicare Advantage network last year.

The ultimate resolution of the case could affect physicians in other states who have been cut loose by United Healthcare in a cost-cutting move.

In December, a federal district court in Bridgeport, Connecticut, issued a temporary injunction against the pink slip action by the giant insurer, keeping the physicians in the network. United Healthcare appealed the decision.

The appellate court heard oral arguments on January 21 about either maintaining or junking the injunction and then ordered both sides to sit down together in the court's special mediation and settlement program. They were instructed to report back by February 4 with news of any results.

In their lawsuit, the medical societies of Fairfield and Hartford counties in Connecticut said that when UnitedHealthcare dismissed many of its members without cause from its Medicare Advantage network in October 2013, it breached individual contracts with them by, among other things, not providing required due notice. The abrupt termination, cast as a contract "amendment," the societies said, hurt the physicians' reputations and, more important, forced their elderly patients to find new healthcare providers if they wanted to stay within the network.

United Healthcare has maintained that it has a right to "tailor" its Medicare Advantage network as it sees fit, and that it did so legally in Connecticut, "seeking to curb consumer costs and strengthen its healthcare offerings," as it said in one court filing. The insurer explained in October 2013 that its decision came in response to reduced federal funding of the Medicare Advantage program, in which private insurers administer benefits and reimburse providers. The Affordable Care Act called for the cut, which will amount to 6.5% this year.

Shrinking the provider network, the company said, "absorbs the cuts to Medicare Advantage plans in a way that is least harmful to members' pocketbooks. We understand that these changes are disruptive to some providers and members, but they were necessary to ensure that our plans remain sustainable for members not just in 2014 but for the long term."

New York's Medical Society Also Has Sued the Insurer

Roy Breitenbach, an attorney representing the 2 medical societies, told Medscape Medical News that federal appeals courts routinely refer litigants to their mediation and settlement programs in hopes of a quick resolution. If his clients and United Healthcare cannot come to terms this way, then the appellate court in New York City would continue deliberating on the insurer's appeal of the temporary injunction, he said. A decision probably would come a month or two later.

The physicians that United Healthcare tried to drop, said Breitenbach, want to remain in the network while they individually exhaust internal appeals — which include arbitration — of the termination decision under their contract with the insurer. The temporary injunction, he said, allows them to pursue this course of action.

In an email to Medscape Medical News, United Healthcare spokesperson Jessica Pappas said that her company is "pleased that the court recognized the importance of our appeal by expediting its review of the preliminary injunction.

"The changes that we and other Medicare Advantage plans are making will bring better health outcomes and more affordable healthcare coverage to Medicare Advantage members," said Pappas. "While these changes can be difficult for patients and their doctors, they are necessary to meet rising quality standards, slow the increase in health costs and sustain our plans in an era of Medicare Advantage funding cuts."

Meanwhile, United Healthcare is battling a second lawsuit over dropping physicians from its Medicare Advantage network, this one filed by the Medical Society of the State of New York in the federal district court in New York City. At the request of both the society and the insurer, that court has put the case on ice until the federal appeals court in New York City rules on the temporary injunction in force in Connecticut.

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