3 novembre, 2006 18:34

Judge to Weigh $6.5M Legal Fee in Blue Cross Class Action Settlement

By Henry Gottlieb

New Jersey Law Journal

11-03-2006

An Essex County judge opened debate Tuesday on whether a proposed class action settlement with 50,000 New Jersey doctors is a sweetheart deal for Horizon Blue Cross and whether the doctors' lawyer merits a $6.5 million fee.

Superior Court Judge Stephen Bernstein ruled that the Oct. 16 settlement, which requires reforms by Horizon but no money award, is "sufficiently within the range of reasonableness" to warrant consideration for final approval.

The doctors have been suing the state's largest health insurer for four years, alleging the carrier denied legitimate reimbursement claims, sent payments too slowly and cost medical professionals nightmarish administrative costs.

Horizon and plaintiffs lawyer Eric Katz of Roseland's Nagel Rice & Mazie say the settlement provides for significant improvements that will enhance the quality of health care in New Jersey.

What's more, Horizon would pay Katz's bill and the reforms would save the doctors at least $39 million in the cost of running their businesses, according to the settlement.

Even so, health care lawyers outside the case are questioning the pact. Some say the remedies are already required by state insurance law. Some say the lack of a monetary award is troubling. And one lawyer who represents doctors says Katz's fee is too high, even if Horizon is paying it.

"The health care system in one way, or another, is going to spend $6.5 million for a process which at least on its face isn't going to yield anything," says naysayer Steven Kern of Bridgewater's Kern Augustine Conroy & Schoppmann.

He says some county medical societies and specialists' groups might oppose the pact and seek tougher action against the carrier.

The settlement agreement bars the parties from discussing the provisions pending court consideration. So all Katz would say about the fee is that he has spent thousands of hours on the matter over six years and that his firm has spent $500,000 in disbursements.

The settlement does not say how the parties arrived at the $6.5 million fee, which represents one-sixth of the $39 million estimated minimum value of the deal to doctors, compared with the typical one-third fee in contingency cases.

Fee awards in class actions are based on the amount of difficulty, the risk of the undertaking, the amount of work put in, and whether the class action lawyer's work helped vindicate public policy or refine the law.

On that score, Katz is likely to argue that health law in New Jersey was advanced by Superior Court Judge James Rothschild's threshold ruling in 2003 allowing private rights of action by doctors under two laws requiring fair dealing by insurance companies with physicians.

The suit against Horizon, Sutter v. Horizon Blue Cross, Esx-L-3685-02, is one of several class actions against health carriers around the country by doctors claiming that fraud, abuse and mismanagement by insurers have deprived them of legitimate, timely payments and have added to the cost of running medical offices.

In Horizon's case, the doctors alleged that when they submitted claims seeking reimbursement for multiple services to a patient, Horizon would pay for just one service, would leave claims in limbo and would change reimbursement rates without notification.

Without conceding it did anything wrong, Horizon agreed to increased "transparency" so doctors will be assured the carrier is not violating the law or its own manuals.

Horizon, for example, will make fee schedules available to doctors, provide 90 days' notice of changes in policies and let doctors close their practices to new patients. Fees will not be reduced more than once a year and the carrier will not try to recoup overpayments after more than 18 months of the original payment.

Horizon also will not revoke its determinations of medical necessity absent fraud, material error or material change in the condition of a patient. And the carrier will give doctors detailed monthly reports on capitation -- fixed payments, per member, per month, rather than payments for each service.

The settlement adopted a valuation report by Teresa Waters, a health economist at the University of Tennessee. It says $30.6 million of the $39 million-plus value will come from less staff time needed to reconcile Horizon's payments.

Horizon, like most carriers, periodically "edits" the numeric codes that designate each type of treatment. Doctors have complained that they do not get enough information on the edits as they occur. Under the agreement, Horizon is required to disclose the edits on its Web site once per calendar year, so the doctors can see them easily.

Michael Schaff, who heads the health law section at Woodbridge's Wilentz, Goldman & Spitzer, says the agreement has "plenty of good things in it," but he lists the "edits" agreement among sections that seem problematic.

Disclosing edits once per calendar year, rather than every 12 months, means the disclosures could occur as seldom as every 23 months, he says.

He also wonders about a requirement that Horizon respond within 10 days to 90 percent of the queries about capitation lists. There is no time limit on the other 10 percent and the agreement seems to let Horizon decide which queries end up in the slow-decision pile.

Schaff, Kern and John Fanburg of WolfBlock in Roseland say they are concerned about enforcement mechanisms. There are no monetary sanctions for Horizon noncompliance. The pact does give the doctors the right to return to court rather than resort to a company-sponsored dispute resolution system.

That's an effective enforcement provision that more than adequately protects the rights of the class members, Katz says.

But Schaff says the court would only be able to enforce violations of the settlement, not deal with other issues that result in problems that prompted the suit.

Fanburg says the agreement gives doctors leverage to deal with Horizon, but it looks like many of the provisions already were mandated by the state's Prompt Pay Law, N.J.S.A. 17B:30-2.

"So I don't really think this did anything that significant for physicians that the law didn't otherwise provide for," Fanburg says.

Kern says he is troubled by the lack of monetary award to the doctors, compared with national settlements of such cases in which "money went back to the doctors."

Katz counters: "In cases such as this, the doctors don't benefit by getting a few dollars each. It's changing the way the company does business that makes all the difference in the world."

In fact, the doctors do have a shot at awards from Horizon. The agreement does not bar New Jersey physicians from receiving recoveries in a national class action in Florida against Blue Cross companies around the country, including Horizon. The Medical Society of New Jersey is a plaintiff on behalf of the state's doctors in that case, Love v. Blue Cross Blue Shield Association, CV-03-21296.

Perhaps the staunchest champion of the New Jersey settlement is John Sutter, a Clifton pediatrician and the lead plaintiff. He says the agreement will simplify and improve relations between doctors and Horizon.

"The benefits of infrastructure changes are enormous" and the monetary aspect of the case are being pursued in Love, he says.

He says attacks on the $6.5 million fee proposal may stem from hostility by doctors' lawyers against Katz's firm, which has won multimillion-dollar malpractice verdicts against doctors.

Kern's firm was general counsel to the medical society until three months ago, when the society decided to take its work in house, says general counsel Lawrence Downs.

The medical society said in a note to doctors on its Web site that it is investigating how the settlement will affect New Jersey physicians, but Downs declines to comment further.