Nevada health insurer in litigation with management firm

Grace Leong

Monday, Nov. 20, 2000 | 11:57 a.m.

A medical management company sued PacifiCare Health Systems Inc. to stop PacifiCare from terminating its contract, a move the management company said could result in 100 Las Vegas workers being laid off.

In a Clark County District Court lawsuit, North American Medical Management-Desert Region Inc. (NAMM) said it has a contract with Santa Ana, Calif.-based PacifiCare to provide medical management services through Dec. 31, 2001. NAMM alleged PacifiCare threatened to terminate the contract next month because NAMM allegedly failed to correct several alleged breaches of the contract within 30 days of being notified on Sep. 29.

NAMM provides medical management services to more than 54,000 Las Vegas members covered by the health plans PacifiCare HMO and PacifiCare's Secure Horizons. It also provides services to 450 doctors, 10 hospitals, skilled nursing and hospice care facilities and home health care providers. These services include processing and paying medical bills and approving referrals to various specialists.

PacifiCare, in a Sept. 29 letter, accused NAMM of several alleged breaches of the contract including failing to pay claims for medical services rendered to PacifiCare's commercial and Secure Horizons members in a timely and accurate manner and to provide complete claims data.

But NAMM said the letter "didn't provide adequate notice of what it was that PacifiCare claimed was a breach of the agreement, but instead made overly broad and global statements, making it difficult to respond to, not to mention cure, the alleged breaches."

NAMM, which said it has since improved its performance and allegedly cured some of the alleged breaches, filed a demand for arbitration and seeks an injunction to stop PacifiCare from terminating the contract pending a ruling by the American Arbitration Association.

But Kayla Arnesen, PacifiCare of Nevada's director of public affairs, said: "There is nothing in the contract that requires us to go to arbitration first before a contract termination notice can be issued. The contract termination is effective Jan. 1, 2001. There remains the possibility that these operational issues could be resolved before Jan. 1, 2001."

"PacifiCare intends to file a counterclaim to resolve all issues between Pacificare and NAMM," she said. "Providing continued and uninterrupted health care services to our Nevada members remains our top priority. We are confident this issue will not disrupt patient care in any way."

NAMM said PacifiCare, which sustained losses as a result of converting from fixed payment contracts with hospitals and doctors nationwide into shared risk contracts, allegedly adopted a business plan to terminate such contracts in the past few months after PacifiCare suffered significant losses with a NAMM entity in Dallas.

Under the capitated or fixed rate contracts, PacifiCare paid health providers a set amount of money to care for its members. If the actual costs were higher, the providers would accept the financial risk. With the shared risk contracts, PacifiCare pays higher fees when health costs increase to care for its members.

PacifiCare disagreed. "This is a commercial contract dispute. It has nothing to do with capitation arrangements. PacifiCare did not terminate its contract with NAMM in Texas. Rather, NAMM went out of business and simply shut its doors causing financial harm to PacifiCare of Texas and to contracted physicians. PacifiCare of Nevada is determined to prevent such a problem in our state," Arnesen said.

NAMM reiterated "the loss of business in Nevada would impact not only the business of NAMM-Desert Region, but would also have a ripple effect on the other NAMM related entities across the nation."

NAMM also said it was "in danger of losing its employees" because PacifiCare has allegedly approached several NAMM employees and suggested NAMM may be terminated to encourage them to leave.

But PacifiCare denied NAMM's charges. "PacifiCare has never communicated directly with NAMM employees regarding future employment with PacifiCare. If PacifiCare has job openings, we will post those positions internally, on the pacificare.com website and in local classified advertisements," Arnesen said.