A Harris County jury Thursday determined that Molina Healthcare of Texas grossly underpaid for out-of-network emergency care provided by TeamHealth-affiliated ACS Primary Care Physicians Southwest and Emergency Services of Texas and ordered Molina to pay the plaintiffs $19.1 million as a result.
In an 11-1 verdict, the jury ruled that Molina failed to pay the ER doctors the usual and customary rate for the geographic area, that the insurer engaged in unfair or deceptive acts or practices with the plaintiffs, and that Molina did so knowingly.
The amount includes both actual and punitive damages, but Molina’s lawyers pointed out that the verdict is a fraction of the $117 million TeamHealth sought from the jurors, and that it will be reduced even more when the court implements what’s actually allowed to be recovered under Texas law.
Still, TeamHealth said in a statement that it is pleased that the jury held Molina accountable for its “abusive reimbursement practices” and sent a message that those practices “would not be tolerated.”
The trial was the first in the nation over ER doctors’ out-of-network pay from private insurance companies under the Affordable Care Act. The dispute is also one of numerous similar suits brought by Tennessee-based TeamHealth, a staffing firm for thousands of doctors and nurses across the country owned by private equity behemoth Blackstone.
During the two-week trial, which took place in Harris County’s 113th District Court, the plaintiffs argued that Molina, one of the main health insurance providers on the ACA marketplace, shortchanged the ER physicians because the Texas healthcare insurer paid the doctors only $151 per claim — a far cry from what’s deemed the “usual and customary rate” for the geographic area. By comparison, other private insurers pay the doctors $1,050 per claim, TeamHealth’s lawyers told jurors.
“The evidence showed that Molina, like many insurance companies across the United States, refused to negotiate fair reimbursement with emergency medicine physicians, coercively underpaid physicians and exposed its members to its underpaid balances,” the TeamHealth company statement reads. “Molina’s practices have directly hurt patients. In the Houston metropolitan area only two emergency departments are in Molina’s network and many of their members across Texas are hours from the closest in-network emergency physicians.
“In light of the hundreds of millions of dollars that Molina made annually on its Texas Marketplace product through government subsidy of the premiums Molina collects,” the statement continues, “the jury awarded the physicians punitive damages of $17.5 million, sending a message to Molina and the insurance industry that such abusive payment practices will not be tolerated.”
Craig Smyser, one of Molina’s lawyers at trial, said that the verdict, which also includes $1.59 in actual damages, will be significantly reduced at final judgment.
“Since Texas law caps plaintiffs’ damages recovery at three times the actual damage award, plaintiffs’ judgment for actual and additional damages will be limited to $4.76 million plus any interest and fees the court may award,” said Smyser, a partner at Smyser Kaplan & Veselka.
Smyser said that a juror told the lawyers after the verdict that the actual damages figure reflects a reimbursement rate to TeamHealth of 175% of the Medicare rate, which is close to the 150% rate a Molina witness proposed to TeamHealth lawyer John Zavitsanos when Zavitsanos tried to negotiate a rate with the witness during cross-examination — and far from the 900% rate that TeamHealth asked for at trial.
At that rate, Smyser told jurors during Wednesday’s closing arguments, “TeamHealth would force Molina off the ACA Marketplace exchange.”
Chris LaVigne, one of Molina’s other lawyers at trial, said he thinks the verdict “in a lot of ways will have broader implications in the [healthcare] market as a whole.
“In a real, real way, this will allow more insurance companies to contract more doctors at reasonable rates to lower the cost of healthcare for all Texans,” said LaVigne, a shareholder at Greenberg Traurig.
The seven-woman, five-man, racially-diverse jury got the case at around 2:30 p.m. Wednesday and delivered its verdict just after 3:45 p.m. Thursday.
Most jurors had health insurance through their employer and one was insured through Medicare, Smyser said.
In addition to Smyser and LaVigne, the Molina trial team included partners Karima Maloney, Justin Waggoner and associates Rick Houghton and Razvan Ungureanu from SKV and Greenberg Traurig associate Brennwyn Romano.
In addition to Zavitsanos, the trial team representing the plaintiffs included partners Sammy Ford and Jane Robinson and associates Louis Liao and Joshua Harris from AZA and Collin Kennedy of Hanshaw Kennedy Hafen.
The finale of TeamHealth’s first of a series of courtroom shakedowns against health insurers was riddled with themes of greed, but the question is precisely who is the greedy one: TeamHealth or Molina Healthcare?
Each side pointed fingers at the other during closing arguments Wednesday, and now the question is in the hands of a jury in Harris County.
The closings followed a multi-week trial in Harris County District Judge Rabeea Sultan Collier’s court during which TeamHealth-affiliated ACS Primary Care Physicians Southwest and Emergency Services of Texas argued that Molina Healthcare of Texas grossly underpaid the plaintiffs’ contract emergency doctors, and as a result breached the Texas Insurance Code as well as contracts between the parties.
The trial marks the first in the nation over ER doctors’ out-of-network pay from private insurance companies under the Affordable Care Act. The dispute is also one of numerous similar suits brought by Tennessee-based TeamHealth, a staffing firm for thousands of doctors and nurses across the country owned by private equity behemoth Blackstone.
In addition to the medical professional staffing, TeamHealth’s arrangement with emergency medicine group practices like ACS and EST is to provide ancillary services — which are essentially all of the non-medical but essential duties of running a medical practice, such as billing insurance companies or obtaining malpractice insurance.
The plaintiffs’ lawyers argued Thursday that Molina, one of the main health insurance providers on the ACA marketplace, shortchanged the ER physicians because the Texas healthcare insurer paid the doctors only $151 per claim — a far cry from what’s deemed the “usual and customary rate” for the geographic area. By comparison, other private insurers pay the doctors $1,050 per claim, TeamHealth’s lawyers told jurors.
As a result, the lawyers asked the jury to award their clients $117 million — $17 million in actual damages and $100 million in exemplary damages ($80 million for ACS and $20 million for EST).
Hanshaw Kennedy Hafen partner Collin Kennedy, one of the plaintiffs’ lawyers, said he thinks all can agree that the emergency health care system is “broken.” He said about 75% of patients who go into an emergency room have Medicare, Medicaid or no insurance, meaning 75% of the time ER doctors provide care, “they are upside-down.
“If huge commercial insurance companies like Molina that make hundreds of millions of dollars of profits don’t pay … a fair rate to these doctors, then, on the other 25% of the patients who come in, the ER as we know it is not sustainable, Kennedy said.
AZA partner John Zavitsanos, another lawyer for the plaintiffs’ lawyers, told jurors that they are deciding the fate of the “single most important case in the courthouse” and a testament to the importance was that insurance companies from all over the country were watching the case on the court’s livestream. At least 136 people were virtually watching Thursday’s closing arguments.
“Molina goes out and hires two of the most powerful law firms in the State of Texas,” said Zavitsanos, referring to Molina counsel Greenberg Traurig and Smyser Kaplan & Veselka. “They’ve thrown everything at you because their business model rests on your verdict.”
Zavitsanos challenged arguments made by Molina’s lawyers during trial that the insurance company’s profits are slim and that it cannot survive as a business if it is forced to pay the ER doctors the rates that TeamHealth is requesting in the case. He showed jurors a slide that reflected Molina had made $3.3 billion in marketplace premiums in 2018 and $2.8 billion in 2017.
“They made more money on the marketplace than anything else,” Zavitsanos said. “Molina says their profits are slim, but they never tell you the value.
“Instead of paying these superheroes,” Zavitsanos said of TeamHealth’s ER doctors, “they went and bought $500 million of their own stock. Why? To drive up the share price.”
But Craig Smyser, one of Molina’s lawyers, said it’s his client’s courtroom opponent who is the greedy one.
“If there are any questions in this case about greed, I heard the quaver in Mr. Zavitsanos’ voice when he asked you to award $80 million,” Smyser, a partner at litigation boutique SKV, told jurors. “That’s what this case is about. TeamHealth thinks it’s better not to be paid and get $80 million [in the courtroom] than to have Texans insured by Molina and able to pay.”
Smyser’s co-counsel, Greenberg Traurig shareholder Chris LaVigne, elaborated, arguing that the evidence also proves that Molina did nothing wrong.
“What the evidence establishes is that Molina pays the most usual and most customary rate,” LaVigne said. “What the plaintiffs are after is something unusual. TeamHealth [is a] company that if you allow it, will suck the lifeblood out of the Medicaid and Medicare system and will leave more people uninsured.”
The biggest proof of TeamHealth’s greed, LaVigne said, is what the company actually pays its ER doctors compared to how much total TeamHealth bills for the doctor’s work. He argued that the only reason the parties are in the courtroom is because TeamHealth wants more profits, but that the profits would overwhelmingly go back in the TeamHealth executives’ pockets, not to their ER doctors.
LaVigne refreshed the jurors’ memory on the testimony of TeamHealth Regional Medical Director Dr. Jose Crespo, who, based on TeamHealth’s model and the average $242 hourly rate of its doctors and 22.5 average patients per shift, would only make enough money per patient for one Nike basketball shoe — $107.56. By contrast, a TeamHealth executive would pocket enough for six pairs of basketball shoes per patient — nearly $1,300 — based on what TeamHealth bills overall.
“He went to medical school. He worked the graveyard shift,” LaVigne said of Dr. Crespo. “He sees the patients, [and] they pay him one Nike, not even both!” LaVigne exclaimed while showing jurors a demonstrative slide of sneakers. “He can’t play basketball. He needs to see two patients before he can play.”
One of the parties’ disputes, per Question 1 of the jury charge, is over whether the medical care at issue in the case qualifies as emergency care. Molina argues it does not. AZA partner Sammy Ford, who handled the plaintiffs’ rebuttal argument, refuted that argument when he told jurors that the only reason Molina paid anything on the claims is because they were for emergency services — otherwise Molina would have paid nothing.
“I think you know by now that Molina is not in the business of doing more than it has to do,” Ford said. “Why are they telling you now that these are not emergency claims?”