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Class-Action Lawsuits Target HMOs

November 24, 1999

LOS ANGELES (AP) _ Five of the nation’s largest HMOs have been hit with lawsuits accusing them of failing to provide the type of care they promised to millions of customers.

The lawsuits accuse Pacificare Health Systems Inc., Foundation Health Systems Inc., Cigna Healthcare, Prudential Health Care and Humana Inc. of violating anti-racketeering laws. Prudential was purchased by Aetna last summer.

The suits seek class-action status on behalf of the 32 million people whose health insurance is provided by the companies. The suits are the latest in a series of lawsuits filed against HMOs since October.

There are now at least nine recent class-action suits alleging violations of federal law by managed health plans.

The latest suits were filed late Monday in federal court in Hattiesburg, Miss., by a group of lawyers led by Richard Scruggs, who led lawsuits filed by states against the tobacco industry that resulted in $246 billion in settlements.

Scruggs said today that companies have been rewarding physicians who restrict patients’ access to expensive procedures, treatments and tests.

``That’s why we’re on the warpath,″ he said. ``When they say quality medical care, we want it to mean something.″

Alan Hoops, head of Pacificare, predicted the suits would result in higher costs for patients.

``This again appears to be one of many lawsuits that will ultimately drive up health care costs for consumers by forcing HMOs through unwarranted, costly and protracted litigation,″ Hoops said.

Analysts say multiple suits are part of a legal strategy by several consortiums of law firms that allows the firms to finance increasingly lengthy and complicated litigation. Such efforts are meant to shake the confidence of investors who will then pressure the industry to settle.

Health plan stock prices have plunged recently as state and federal lawmakers increased regulation of HMOs and public opinion toward the industry soured.

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