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From Antitrust Law Daily, June 18, 2014

Settlement agreement released medical providers’ antitrust and RICO claims against insurance companies

By Linda O’Brien, J.D., LL.M.

A federal district court properly determined that a settlement agreement released Sherman Act and RICO claims brought by medical providers against healthcare insurance companies, the U.S. Court of Appeals in Atlanta has held (In re Managed Care, June 18, 2014, Per Curiam). The district court did not abuse its discretion in holding the medical providers in contempt and imposing sanctions for their refusal to withdraw similar claims in a subsequent class action, according to the appeals court.

In 2000, several physicians and physician associations filed a class action against a group of healthcare insurance companies, including Wellpoint, alleging that the companies engaged in a conspiracy to underpay medical providers in violation of the antitrust laws and RICO. The physicians alleged that the companies used mail and wire fraud to inflate profits by reducing payments to them and that the conspiracy was conducted by the utilization of an automated claims processing system generated by the company, Ingenix. In 2005, Wellpoint settled the claims, agreeing to pay $198 million to the class and to make changes to its business practices. In exchange, the class agreed to release all claims related to the allegations. The district court order approving the settlement agreement enjoined the class members from participating in lawsuits arising out of the released claims.

In 2009, three physicians and three medical associations who had been members of the settlement class joined other plaintiffs in a class action against Wellpoint regarding the alleged underpayment for the provision of medical services. The district court granted Wellpoint’s motion to enforce the injunction and ordered the plaintiffs to withdraw their claims. After the plaintiffs refused to withdraw their claims, the court found the plaintiffs in contempt and imposed sanctions. The plaintiffs appealed.

The district court properly determined that the settlement agreement released the plaintiffs’ antitrust and RICO claims in the subsequent litigation, according to the appellate court. The claims echo the claims in the earlier action that Wellpoint engaged in a scheme to underpay healthcare providers for medical reimbursement claims processed through the Ingenix database. Moreover, the record demonstrated that the claims could have been asserted before the settlement agreement took effect. Because the claims constituted a continuation of the alleged conspiracy, Wellpoint’s purported acts were new acts within an ongoing conspiracy rather than new claims, the court noted.

Finally, the plaintiffs’ decision to release claims stemming from the alleged conspiracy did not interfere with their ability to obtain relief from ongoing violations of the settlement agreement. Although they were barred from asserting new claims premised on violations of the settlement agreement, the plaintiffs could have moved to enforce the settlement agreement and approval order. Since the settlement agreement released the antitrust and RICO claims, the district court did not abuse its discretion by ordering the plaintiffs to withdraw their claims and holding them in contempt when they refused to comply with that order, the court concluded.

The case is No. 12-14013.

Attorneys: Robert J. Axelrod (Axelrod & Dean, LLP), Raymond P. Boucher (Kiesel Boucher Larson LLP), and William Tucker Brown (Whatley Drake & Kallas, LLC) for Connecticut State Medical Society, Medical Association of Georgia, and California Medical Association. Peter R. Bisio (Hogan Lovells U.S. LLP) for Wellpoint, Inc.

Companies: Connecticut State Medical Society; Medical Association of Georgia; California Medical Association; Wellpoint, Inc.

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