Insurer loses $6 million judgment

Blue Cross of Kansas City underpaid doctors, jury finds

? Blue Cross and Blue Shield of Kansas City has been ordered to pay six doctors $6 million, after a jury found that the insurer had systematically underpaid them for treating Medicaid patients.

The physicians treated poor families and participated in a Medicaid pilot program called PreventionPlus, under which state Medicaid funds were to be used to compensate the physicians through set dollar amounts per patient, called capitation rates.

The physicians claimed that during the 13 years of the program, Blue Cross kept their capitation rates artificially low and charged them excessive administrative fees.

The jury agreed Tuesday, awarding the physicians $3 million in compensatory damages and $3.09 million in punitive damages. The physicians had claimed they were collectively underpaid by $2.54 million.

“I think the feeling was that the doctors got taken advantage of,” an attorney for the plaintiffs, Charley German, said after the verdict. “They’re not business guys, and I think the jury felt that Blue Cross took the money for their own corporate purposes instead of what it was intended for.”

The doctors, all primary care physicians, were Frank Vaughters, Warren K. Jackson, Jane Pennington, Granville Clark, Starks Williams and Tasanaporn Pltiyanuvath.

Blue Cross had argued that its agreements with the physicians called for Blue Cross to establish yearly fees based on three factors: inflation, the needs of the physicians and the actuarial success of the program. The insurer said it had complied with the agreements in establishing the capitation rates.

“PreventionPlus promised that it would look at these three factors in adjusting capitation rates, and the evidence is undisputed that it did,” Blue Cross attorney George Leonard told the jury in his closing argument Tuesday.

However, the plaintiffs argued that Blue Cross withheld information to conceal the profits it was making on the program. The doctors claimed that Blue Cross had used the profits to subsidize the start-up costs of a new product line, to increase the pay of its top executives and to improve the insurer’s bottom line when it was planning a public stock offering and a possible merger.

“You can be the conscience of the community; you can tell them this was wrong,” Kirk May, an attorney for the plaintiffs, told the jury during his closing argument. “This is not how business is ethically done. … They should not be allowed to steal this money.”

The jury returned separate compensatory damage awards for each doctor, ranging from $120,000 to $960,000.

PreventionPlus was de-signed to provide preventive medical care for children, most of whose families were on welfare, and to keep Medicaid costs down by paying the doctors set fees for patients rather than fees for services.