Blues added to class-action suit
The Blue Cross and Blue Shield Association and its member plans became the latest defendants in a massive federal class-action lawsuit accusing the nation's largest health insurers of bilking physicians out of millions of dollars. U.S. District Court Judge Federico Moreno in Miami agreed to add to the original case 58 racketeering lawsuits first filed in May by the Connecticut State Medical Society, which alleges that the Chicago-based Blues association and its 41 independent affiliates forced doctors into unfavorable contracts, used computer programs to routinely deny or delay payments and interfered with patient care. A spokesman for the Blues association declined to comment. Since late 1999, Moreno has presided over a class-action lawsuit filed on behalf of 700,000 physicians against the nation's 10 largest for-profit health plans. Aetna and Cigna Corp. have since settled out of court for $470 million and $540 million, respectively. The remaining defendants have asked a federal appeals court in Atlanta to overturn Moreno's decision giving the case class-action status.
Bankruptcy judge OKs DVI loan
DVI, Jamison, Pa., said it won interim bankruptcy court approval of a debtor-in-possession loan that will allow it to continue financing healthcare providers until its portfolio is sold. U.S. Bankruptcy Chief Judge Mary Walrath in Wilmington, Del., scheduled an Oct. 3 hearing to grant final approval of the $148 million loan from Goldman Sachs Credit Partners and Ableco Finance. It replaces an existing loan of about $149 million from a bank syndicate, which agreed to accept $100 million of proceeds from the new financing package and concede their claim on the remainder. Some $20 million of the new financing will be made available to fund loans to DVI's healthcare provider clients.
Insurer drops malpractice line
Farmers Insurance Group, Los Angeles, said it would scrap its medical malpractice insurance line, which represents less than 1% of its business, to focus on providing auto insurance and homeowner coverage. The move comes after losses of more than $100 million last year on medical liability premiums. Farmers has stopped writing new medical malpractice policies and on Jan. 1 will begin the process of ending its existing policies, currently in 18 states. Farmers' 1,300 medical malpractice insurance policies account for $94.5 million of the group's $13.5 billion insurance business.
HealthSouth exec pleads guilty
Catherine Fowler became the 15th former HealthSouth Corp. executive to agree to plead guilty in connection with an alleged massive accounting fraud at the Birmingham, Ala.-based rehabilitation provider, the U.S. attorney in Birmingham said. Fowler, a former vice president of treasury and cash manager, agreed to plead guilty to conspiring to deceive auditors and to maintaining false books and records. Fowler, 46, worked at HealthSouth from May 1994 to March 19, 2003-the date the Securities and Exchange Commission charged the company and founder Richard Scrushy in a civil lawsuit with inflating profits by at least $2.5 billion. Scrushy has not been charged criminally.