$3,200,000 RECOVERY - RACIAL DISCRIMINATION BY HEATH MAINTENANCE ORGANIZATION AND MEDICAL SERVICING ORGANIZATION - PRIMARY CARE AGREEMENTS TERMINATED FOR EIGHT MINORITY PHYSICIANS - 5,000 PATIENTS REFERRED TO NEW WHITE PHYSICIANS.

U.S. District Court, Middle district of Florida
The Plaintiffs in this racial discrimination case were eight minority physicians practicing in the state of Florida. The plaintiff's claimed, under U.S.C.A. Section 1981 that the defendant Health Maintenance Organization (HMO) and Maintenance Services Organization (MSOS) terminated the plaintiff's Primary Care Agreements based on race. The defendants denied that the decision was based on the plaintiff's race and argued that the termination was based purely on business considerations. The defendants claimed that the contracts with the plaintiffs were not profitable.

In Medicare/HMO arrangements, the federal government gives medicare dollars for Medicare patients to a qualified HMO. The defendant HMO was paid a set per capita monthly amount for each Medicare member. Prior to calendar year 2000, the defendant HMO directly provided medical services to medical enrollees via fee-for-service contracts with physicians in their network. The plaintiff physicians were in the defendant HMO's network and provided medical services to the Medicare enrollees.

Beginning in January 2000, the defendant HMO decided to alleviate its risk and pass the membership on to an MSO (the servicing company) with which it had contracted to provide services to the HMO Medicare patients. The MSO received a monthly share in the Medicare membership dollars and, under this contract, assumed the risk from all but catastrophic losses. Therefore, the MSO's profit was determined by whether it spent more or less than the fixed Medicare dollars it received from the federal government for each member on a monthly basis.

The defendant MSO contracted with physicians that met HMO criteria for credentialing to provide primary care services to Medicare enrollees for a set monthly amount, instead of the prior fee-for-service contract sued by the defendant HMO. In this case, to obtain the contract at issue from the defendant HMO, the defendant MSO was required to accept every provider that wanted to sign up with it and who was previously an HOM provider. In all there were about 32 primary care providers from the defendant HMO that the MSO contracted with, including the eight plaintiff physicians.

As a condition to providing medical services to the Medicare enrollees, the physicians were required to contract with both the defendant HMO and defendant MSO. The contracts executed by the plaintiff physicians and the defendants were for a term of one year with automatic renewals unless terminated by either party upon proper notice, beginning January 1, 2000. Moreover, as a condition to treating patients, the physicians were required to meet and maintain the defendants' strict credentialing standards, which they did.

Six months into the one-year contract, in late June 2000, the defendant MSO sent notice letters to each of the eight plaintiff physicians that it was terminating its Primary Care Agreement with those plaintiffs, effective October and November 2000. Shortly thereafter, the defendant HMO notified the plaintiffs that they were terminating the plaintiff's affiliated Provider Agreements due to the defendant MSO's contract termination. The termination of plaintiff's contracts was expressly noted to be done without cause.

The plaintiffs argued that the termination was racially motivated and that none of the white primary care physicians were terminated from the program. The plaintiffs alleged that, at the time the plaintiff physicians were terminated, the defendants knew that the eight non-white plaintiffs would be replaced by two newly credentialed white physicians and that the eight plaintiffs' 5,000 patients would be referred to these two new white physicians. After terminating the plaintiffs' contacts, the plaintiff claimed that the defendants transferred, referred and directed the plaintiffs' patients primarily, if not exclusively, to these newly credentialed white primary care physicians.

The case settled with the defendant HMO during the litigation and with the defendant MSO just prior to the start of trail for a total of 3.2 million.