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Acupuncture Today – June, 2004, Vol. 05, Issue 06

AOMNC Files Class-Action Suit

Complaint Accuses Managed Care Groups of RICO Violations

By Editorial Staff

Richard A. Freiberg and the Acupuncture and Oriental Medicine National Coalition (AOMNC), as "class representatives" acting on behalf of acupuncturists and other "non-doctor health care providers" across the country, has filed a class-action lawsuit against 10 of the nation's leading managed care organizations (MCOs) in a Florida district court.

The suit alleges that the organizations have committed several illegal acts in violation of the RICO Act, which have resulted in significant losses to the AOM profession and its practitioners, and asks for declaratory and injunctive relief to end these actions and prevent further loss.

Named in the suit as defendants are 10 of the nation's largest managed care organizations: Aetna, Anthem, CIGNA, Coventry Health Care, Health Net, Humana, PacifiCare Health Systems, Prudential, United Health Group, WellPoint Health Networks. Collectively, these groups offer managed care services to more than 160 million Americans through networks that contain thousands of health care providers.

"This law suit can be amended to include additional defendants if sufficient documentation is supplied by practitioners from around the United States in which they or their patients may have suffered damages," noted Dr. Freiberg.

According to the complaint, the defendants, "on their own and as part of a common scheme, systematically deny, delay and diminish the payments due to non-doctor providers so that they are not paid in a timely manner, or at all, for the covered, medically necessary services they render." The AOMNC's complaint further alleges that "defendants' automated scheme to deny, reduce and delay payments to providers who treat their insureds on a fee-for-services basis, and their use of the same automated programs as well as other manipulative devices to reduce capitation payments due providers working under capitation agreements, are ongoing problems that will continue to cause plaintiffs and members of the class economic losses and threaten their ability to practice and serve the public health."

The suit has been filed on behalf of "all non-doctor health care providers who, from January 1, 1992, to the date of certification, provided services to any patient insured by any defendant." This class of providers seeks "certification of claims for declaratory and injunctive relief," and for damages related to numerous violations, including aiding and abetting, breach of contract, and unjust enrichment.

The suit charges the managed care groups with five specific counts:

  • Violation of the Racketeer Influenced and Corrupt Organizations (RICO) Act in the form of conspiracy. The AOMNC claims that the defendants have violated sections 18 U.S.C., subsections 1962(a) and (c) of the RICO act by "using and investing income received from a pattern of racketeering, directly or indirectly, to establish and operate the MCE," an organization known as the managed care enterprise, that engages in interstate commerce, and by "conducting, or participating directly or indirectly in the conduct of, the affairs of the MCE through a pattern of racketeering."
    As a result of these violations, the AOMNC provider class alleges that they have suffered business and property injuries "by the denial of payments for covered, medically necessary services that they have rendered to defendants' insureds, by reduction in such payments when made, by late payments, by having their capitation payments reduced by false patient rolls, false prescription drug costs and other manipulations of the capitation process, and by the loss of interest on both late and withheld payments."
  • Violation of the RICO Act in the form of aiding and abetting. The suit alleges that the defendants "knowingly, and with shared intent, sought to, and have, aided and abetted each of the other defendants in the commission of predicate acts, in engaging in a pattern of racketeering activity," which have caused business and property-related injuries to the plaintiffs.
  • Declaratory and injunctive relief. This claim was made under Title 18, Section 1964 of the U.S. Code, which authorizes district courts to enjoin violations of the RICO Act, and Title 28, Section 2201, which authorizes declaratory relief. "Enjoining the defendants from committing these RICO violations in the future and/or declaring their invalidity is appropriate, as the plaintiffs and the class have no adequate remedy at law, and will suffer irreparable harm in the absence of the court's declaratory injunctive relief," the suit claims.
  • Breach of contract. In this claim, the managed care organizations are accused of breaching their contractual obligations by "using automated processing schemes and other tactics" that delay, deny or reduce payments for covered services. The claim further alleges that the defendants have breached their capitation agreements by "withholding capitation payments for enrolled insured until they actually seek medical treatment, charging pharmacy risk pools with inflated rather than actual costs for prescription drugs, falsely manipulating year-end statements to avoid paying contract incentives, and using automated processing schemes" as part of a plan to reduce capitation payments.
  • Constructive contract/unjust enrichment. By treating the MCOs' patients, acupuncturists and other non-doctor health care providers confer a benefit to the MCOs. While the defendants acknowledge and accept this benefit, they still retain a portion of such benefits by denying, diminishing and delaying payment for services, and they continue to do so. The AOMNC claims that "it would be inequitable to allow defendants to retain these benefits under the circumstances, and they are unjustly enriched thereby."

Dr. Freiberg and AOMNC, as class representatives, are represented in the case by the law firm of James, Hoyer, Newcomer and Smiljanich. The suit's case number is #04-CV-20443, and has been assigned to Judge Federico A. Moreno. Judge Moreno is also presiding over a similar lawsuit filed earlier by a group of medical doctors.

"Immediately after filing the case on February 24, 2004 it was referred to Judge Moreno for consolidation with the medical doctor's lawsuit #1:00md01334," added Dr. Freiberg.

"The AOMNC is asking all qualified acupuncturists for assistance in marshalling evidence to support the claims of the lawsuit. Providing instances in which practitioners or their patients may have suffered damage as a result of an insurer's wrongful actions will assist in the prosecution of the suit and the likelihood of eventually obtaining relief for all acupuncturists and other 'non-doctor health care providers.'"

"The bottom line is that if this lawsuit results in changes in the way healthcare carriers reimburse acupuncturists, it will benefit all acupuncturists and not just AOMNC professional members. The whole point of a class action suit is that the 'class representatives' benefit everyone by benefiting themselves."

For more information on the suit, visit or call (954) 494-2903.

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