Opinion ID: 6491398
Heading Depth: 2
Heading Rank: 1

Heading: The HMA Appeal

Text: HMA is a Hawaii non-profit corporation organized and existing under the laws of Hawai'i and .is “dedicated to the health of Hawai'i and representing] over 1,600 physician members in Hawai'i.”
On August 8, 2002, HMA filed a three-count complaint, essentially alleging that HMSA engaged in an unfair and deceptive scheme to avoid making timely and complete payments owed to its physician members, who rendered medically necessary healthcare services to HMSA’s members. HMA alleged that: 4. [HMSA] has employed a variety of means to effect its improper, unfair and deceptive scheme, including, but not limited to, one or more of the following practices: [a.] [The] systematic ] deni[al of] reimbursement to HMA members for medically necessary services by, inter alia [:] (i) routinely and unjustifiably refusing to pay for, or reducing payment for, more than one healthcare service per visit or incident, referred to as “bundling”; (ii) routinely and unjustifiably reducing retroactively the amount of reimbursement remitted to HMA members, referred to as “downcod-ing”; (iii) routinely and unjustifiably denying increased levels of reimbursement for-complicated medical cases which require HMA members to expend extra time and resources on the treatment of the patient referred to as “modifiers”; and (iv) systematically reducing reimbursement rates to HMA members below reasonable levels; [b.] [The] systematic ] deni[al of] payment to HMA members for medically necessary claims to achieve internal financial targets without regard to individual patients[’] medical needs by, inter alia[:] (i) improperly employing software programs to “profile” physicians and then automatically downcoding procedures and/or denying payment to those physicians identified as pui-portedly providing “excessive procedures” without any clinical review, oversight or justification; and[ ] (ii) engaging in physician profiling for the purpose of penalizing physicians who provide seivices in excess of HMSA’s arbitrary “targets”!;] [c.] [The] fail[ure] to provide adequate staffing to handle HMA. members[’] inquiries. In this regard, HMSA has created and maintains an inefficient administrative system designed to frustrate payment to HMA members by requiring physicians to make excessive telephone inquiries'to obtain proper reimbursement of elaimsf;] [d.] [R]outine[] and unjustified] failure] to make payments and interest on past-due claims to HMA members in violation of HRS § 431:13-108 [ (2005) 5 ;] [e.] [The] fail[ure] to provide sufficient explanation for its payment denials and reductions[;] [f.] [The] failure] to properly reimburse HMA members by requiring physicians to submit excessive documentation justifying their claims submissions^] and [g.] [The] requirement] [that] physicians [ ] enter into one-sided [PAR Agreements] in order for them to provide medical care to patients who receive healthcare through [HMSA’s] managed care plans. Consequently, HMA alleged that HMSA’s improper, unfair, and deceptive scheme (1) “has deprived [its] members of millions of dollars of lawful reimbursement for healthcare services” rendered to HMSA’s members and (2) directly injured HMA because “[it] has been, and continues to be, frustrated by [HMSA’s] practice in its efforts to achieve its purpose ... of supporting Hawai'i physicians in providing high quality medical care for all citizens of the State.” HMA further asserted that it “has been required to devote substantial time and resources to dealing with the issues concerning [HMSA’s] practices.” HMA sought injunctive and declaratory relief for violations of HRS chapter 480 6 and tor-tious interference with prospective economic advantage. Thereafter, on October 3, 2002, HMSA answered the complaint, contending, inter alia, that: (1) HMA lacked standing to pursue claims for its members; (2) HMA lacked standing to pursue claims on its own behalf for the injuries alleged; and, (3) even if HMA had standing, all of the claims in the complaint are subject to binding arbitration pursuant to the dispute resolution provision in the PAR Agreement.
On December 23, 2002, HMSA filed a motion for judgment on the pleadings, seeking to dismiss HMA’s claims based on the failure to timely pursue and exhaust mandatory administrative remedies, as well as binding arbitration, and HMA’s lack of standing to bring suit on its own behalf and on behalf of its physician members. Specifically, HMSA contended: First, as HMA' admits, all “participating physicians” signed [PAR Agreements] with HMSA. In all these Agreements— subject to minor exceptions of no relevance here—these physicians promised to resolve their grievances against HMSA through administrative remedies and binding arbitration. The Agreements cover everything HMA complains about here. Specifically, every physician agreed to arbitrate disputes arising out of, or in any way related to, the Agreement or its performance, “including but not limited to any and all claims, disputes, or causes of action based on contract, tort, statutory law, or actions in equity.” HMA cannot nullify these Agreements .by pursuing its members’ claim in this court, when they are obligated to proceed elsewhere. The physicians cannot nullify their duty to arbitrate by sending [HMA] into [c]ourt as their surrogate. •Second, and independently, HMA is not a proper representative of its physician members and cannot assert any claims on their behalf here or in arbitration.... Third, HMA has no valid legal claims of its own against HMSA.... HMA has no contractual relationship with HMSA and HMSA owes HMA no duties, as a matter of law. Fourth, even if HMA could show it had standing to pursue claims for alleged injuries to itself or its members, HMA has no valid claims under HRS [c]hapter 480. Neither HMA nor its members [is a] “consumer” vis-a-vis HMSA, and thus [it] cannot bring claims [oí] “unfair and deceptive practices.” Moreover, [its allegations] do not involve “competition,” much less “unfair competition,” and there is, in any event, no private right of action for unfair competition for acts occurring prior to July 1, 2002 [sic 7 ], Finally, HMA has failed to allege actionable tortious interference with prospective economic advantagef.] On February 5, 2003, HMA filed its opposition to HMSA’s motion for judgment on the pleadings. HMA argued, inter alia, that it is clear that HMA has standing, both in its own right and on behalf of its members, to pursue its claims to enjoin [HMSA] from engaging in the unlawful conduct challenged in the [e]omplaint. In this regard, HMA alleges that: (i) it has been frustrated in its efforts to satisfy its underlying organizational purpose; and (ii) that [HMSA’s] wrongful practices have required [HMA] “to devote the significant resources” to counteract the effects of [HMSA’s] wrongful practices. As such, HMA has alleged an adequate injury-in-fact. ... In addition, based upon the allegations of the [c]omplaint, and well-established precedent, it is clear that: (i) HMA’s members would otherwise have standing to sue in their own right; (ii) the interest HMA seeks to protect are germane to the organization’s purpose; and (iii) neither the claim asserted, nor the relief requested, requires the participation of individual HMA members in the lawsuit. Further, HMA asserted that it has stated a claim: (1) under HRS § 480-2 by alleging that HMSA has engaged in a number of systemic, unfair and deceptive acts and practices, resulting in harm to both HMA and its physician members, and that such practices constitute unfair methods of competition; and (2) of tortious interference with prospective economic advantage by alleging that HMSA’s conduct was intentional and malicious and that such conduct has disrupted the relationship between HMA’s members and their patients in a manner that h$s imposed financial hardships upon its members. HMA, incorporating the arguments raised in the physician-plaintiffs’ memorandum in opposition to HMSA’s motion to compel arbitration, discussed infra, also contended that (1) whether a duty to exhaust administrative remedies and arbitrate exists is a question of fact that requires discovery and cannot be resolved at this time and (2) the arbitration clause is unconscionable and, thereby, unenforceable. Lastly, HMA contended that, even if the physician members had a duty to exhaust their administrative remedies and arbitrate their claims, HMA would not be precluded from bringing its claims because it was not a signatory to the Agreement. On March 17, 2003, HMSA countered, reasserting the positions set foith in its motion for judgment on the pleadings, i.e., essentially that: HMA has suffered no compensable injury-in-faet[ ] because its claims are wholly derivative from its members physicians. HMA has no contract with HMSA. HMA’s members cannot create new claims by creating a “support group” that allegedly helps them in their own dealings with HMSA. HMA has no representative standing because (1) the physicians’ agreement to arbitrate disputes with HMSA prohibits them from bringing these claims in their own right; and (2) proof of HMSA’s allegations is dependent upon significant participation by, and evidence from, its members. HMA’s claim under HRS chapter 480 fails because it has not pled, and cannot establish, any direct injury to its “business or property,” which is required for “antitrust standing.” HMA has not pled facts sufficient to establish a claim for tortious interference with prospective advantage. It has not alleged that HMSA has wrongfully interfered with any protected relationship. HMA and its physician members have failed to plead exhaustion of non-judicial remedies required under the PAR Agreements. The circuit court heard oral argument on HMSA’s motion on April 10, 2003. At the conclusion of the hearing, the circuit court indicated that it would take these matters under advisement, and I’m going to issue a ruling by way of minute order.... And what I intend to do is, issue a minute order indicating that the [cjourt has either been persuaded or concurred with a particular party based on the points and authorities cited in the argument, and whoever’s the prevailing party is to prepare an order consistent with their pleadings and their positions stated. Having prevailed, HMSA submitted a proposed order granting its motion for judgment on the pleadings, to which HMA filed objections on May 19, 2003. On May 23, 2003, the circuit court filed its order granting HMSA’s motion for judgment on the pleadings, essentially adopting HMSA’s proposed order. Therein, the circuit court ruled that: (1) HMA’s complaint is barred because HMA’s physician members have failed to exhaust their administrative remedies under the PAR Agreement; (2) the PAR Agreement is valid, enforceable, and not unconscionable; (3) an arbitration must occur on an individual basis; (4) HMA lacks standing to assert claims (a) on behalf of its members because those members agreed to forego them own rights to a judicial forum for their disputes under the PAR Agreements and (b) on its own behalf because it failed to show a “distinct and palpable injury” to itself resulting from HMSA’s alleged conduct. In addition, the circuit court dismissed HMA’s claim of unfair methods of competition because: (1) the legislature did not provide a private right of action for such claim until June 28, 2002, see supra note 7; and (2) HMA failed to allege an injury-in-fact for claims occurring after June 28, 2002. 8 The circuit court also dismissed HMA’s claim of tortious inference with prospective economic advantage because: (1) HMA’s reliance upon the relationships of its members with their patients or prospective patients was not sufficient to state a claim; and (2) neither HMA nor its members have existing contractual relationships with any of HMSA’s members inasmuch as such members have the right to seek treatment with another provider for any reason or for no reason. 9 Final judgment in favor of HMSA was entered on June 6, 2003. HMA filed its timely notice of appeal on June 26, 2003.