Fate Of HMOs To Be Settled In Court

HMO healthcare medicare legal court gavel, medicine medical doctor

Watching Dr. Joy Maxey care for her infant patients, one would never pick this Atlanta pediatrician as the type to pick a fight: until you ask her about the average HMO.

"I'm being cheated," Maxey says. "The fact of the matter is they are not paying the amount of money they agreed to."

CBS News Correspondent Wyatt Andrews reports so many doctors believe they are being cheated, or at least nicked by managed care, that a half-million physicians today are suing the industry for fraud. Dozens of physician lawsuits have been combined into a single, multi-billion dollar suit in Miami.

The basic fraud charge is this: When doctors like Maxey perform any service - from checkups to surgery - they note it on a chart next to a five-digit code. This signals the insurance company, in theory, how much to pay.

The doctors complain that HMOs routinely change the codes, "down-coding" the bill so the HMO pays for services that are less expensive.

"We believe they have gotten together and methodically have done this in a way to further their bottom line," Maxey says.

Dr. Tom Deas, of Fort Worth, Texas, has studied how the HMOs reimburse doctors. He says the HMO's all use billing software that by design minimizes payments and too often cheats doctors out of valid charges. Deas is not part of the Miami lawsuit.

Deas believes the HMOs are deliberately underpaying doctors.

"They know what they are doing," Deas says. "Each of these little changes and fluctuations in the way they deal with us are games, primarily to avoid payment of appropriate service."

Stephanie Kanwit, the chief lawyer for the HMO lobby, says, "that's simply not accurate."

Kanwit says the HMO's do use software to adjust claims but only to protect against abuse. Too often, she says, doctors submit inaccurate or outright padded claims.

"The software screens claims to ensure they are proper claims, that they are covered claims, that they make sense," Kanwit says. "The doctors need to clean their own house before a few of them bring suits like the lawsuits in Miami."

There are now two massive federal lawsuits in Miami, this one, on behalf of doctors, and another on behalf of patients that could revolutionize or even destroy managed care.

The HMO industry says the lawsuits are being driven mostly by rich doctors upset by the loss of once grand incomes. But the doctors believe that a half million physicians with the same complaint can't be wrong and that managed care brought these lawsuits on itself.

Part One: HMOs Face Racketeering Lawsuits