A federal appeals court today ordered a full hearing on a Montgomery County physician's allegations that payment schedules set by Blue Shield, metropolitan Washington's largest health insurer, violate state and federal price-fixing laws.
The 4th U.S. Circuit Court of Appeals said there were "critical issues of fact" to be resolved in the complaint brought by Dr. John M. Ratino, a plastic surgeon, against Medical Service of the District of Columbia (Blue Shield) and the Montgomery County Medical Society.
Blue Shield insures about 1.4 million, or 80 percent, of the individuals with health insurance in the Washington area and has payment agreements with 93 percent of the area's doctors, according to court papers. Blue Cross, which generally pays medical charges other than doctors' fees, is not involved in the complaint.
Today's appellate ruling reversed the dismissal of the case by a U.S. District Court judge in Baltimore in 1981.
Ratino, who dropped out of Blue Shield's plan in 1974, charged that the firm's use of a review board made up of practicing physicians in Maryland to set "usual, customary and reasonable" fees for participating doctors amounts to an attempt to force him and other doctors to charge the rates set by Blue Shield, according to the opinion.
Ratino's complaint also alleged that the fee system, set and enforced with the cooperation of the Montgomery County Medical Society, unfairly leads patients who are charged higher amounts to believe those rates are unreasonable.
The appeals court, in a decision written by Judge James M. Sprouse, said, "We cannot predict whether Ratino will be able to prove these allegations," but said U.S. District Court Judge Norman P. Ramsey erred when he dismissed the case before it came to trial.
Ramsey had ruled the plan was exempt from federal antitrust laws under a "business of insurance" exception.
The appeals court held, however, that the "complexity, novelty and importance of the issues involved necessitates" that the case be sent back to the lower court for trial.
The court said that while there may be no overt agreement among doctors to establish a maximum fee schedule, this "does not preclude a finding of an agreement to fix prices." If the program merely camouflages an agreement to fix prices, said Sprouse, "it will constitute per se illegal price fixing."
The court said that although proving Ratino's allegations "no doubt will be difficult . . . the scenarios he alleges are not so improbable that he should not have an opportunity to resolve the allegations."
The appellate decision upheld Ramsey's dismissal of a separate allegation by Ratino that several doctors conspired to restrain his access to emergency rooms and prohibit him from requiring emergency patients to sign consent forms promising to pay any bills not covered by insurance.
Daniel S. Orci Jr., Ratino's attorney, said today that if Ratino wins his case, Blue Shield would have to formulate reimbursement payments without the involvement of doctors. Orci, who said he had not read the ruling, declined further comment. Lawyers for the Montgomery County Medical Society and for Blue Shield also said the defendants had not seen the ruling and declined to discuss it.