HMOs Lose One, Win One

Physician's Money Digest, June15 2003, Volume 10, Issue 11

HMOs that pick which physicians canbe on their provider panels woundup on the wrong end of a recent USSupreme Court decision. The Courtessentially ruled in favor of those statesthat have "any-willing-provider" lawson the books. Currently, 8 states havesuch laws covering doctors, and manyindustry observers believe the Court'sdecision in this case will encouragemore states to pass them.

Any-willing-provider laws wereenacted to give HMO patients a widerchoice of doctors than many managedcare plans afforded. Managed care programsargue, on the other hand, thatthey use restrictive provider panels torein in costs. By contracting only withselected providers, HMOs get more bargainingpower on fees. The suit,brought by 7 HMOs and a KentuckyHMO trade group, was actually aimedat 2 Kentucky laws that mandated thatHMOs must contract with any providerwilling to abide by the HMOs' rules. TheCourt decided that the laws did not conflict with the Employee RetirementIncome Security Act, which preemptsmany state laws regarding employeebenefits. Justice Antonin Scalia saidKentucky's laws regulated insurance,which states are allowed to do.

In a separate action, a US CircuitCourt of Appeals has ruled that HMOscan appeal a lower court decision thatgranted class action status to 600,000doctors who are suing several managedcare plans. The suit, brought by themedical societies of several states,alleges that the accused HMOs conspiredto cut costs by underpaying doctorsor delaying payments.