Office of the Attorney General News Release Archive


Monday, February 11, 2002

ATTORNEY GENERAL JOHN CORNYN SUES TEXAS HMO

Cornyn: "Physicians and providers have been left with many millions of dollars of unpaid claims; care for PacifiCare's members has been disrupted; and many complaints have gone unaddressed."

AUSTIN - Texas Attorney General John Cornyn today filed suit against PacifiCare of Texas, Inc., for violations of state laws that have resulted in millions of dollars in unpaid claims, disrupted patient care and unresolved complaints.

"PacifiCare's violations of the law have had an adverse effect on patient care, violating both the spirit and the letter of the Texas HMO Act and the Deceptive Trade Practices Act," Attorney General Cornyn said.

The State contends that PacifiCare has failed to properly monitor its "delegated networks," including physician-led organizations often referred to as Independent Physician Associations and Approved Non-Profit Health Corporations. These delegated networks contract with PacifiCare to provide care to its members.

However, the HMO must promptly pay providers, have an effective complaint procedure, and ensure that the delegated networks abide by the same laws to which HMOs are held in Texas.

The State's lawsuit alleges: "PacifiCare often delegates these functions to its delegated networks, but is statutorily prohibited from contractually relieving itself of regulatory responsibility and accountability for these delegated functions."

Three of PacifiCare's delegated networks in Texas --- Heritage Southwest Medical Group in Dallas, Quantum Southwest Medical Management in San Antonio, and Medical Select Management in Fort Worth --- have recently filed for bankruptcy.

Although these failures resulted from PacifiCare's own failure to monitor and manage the delegated networks, PacifiCare is refusing to pay physicians and hospitals in those delegated networks for covered services already rendered.

As of January 2000, the most recent year for which statistics are available, about 300,000 Texans were members of PacifiCare's health maintenance organization. Although the Attorney General has been unable to obtain specific information from the company, it is anticipated that the value of unpaid claims is in the tens of millions of dollars.

"When doctors and hospitals don't get paid as they should -- or when they should -- and as a result terminate their relationship with a health plan, patients suffer the consequences," Attorney General Cornyn said. "This problem particularly affects those chronically and acutely ill patients whose long term relationship with their doctor is crucial to their health."

"HMOs are obligated to ensure that covered health care services are provided to members and that doctors and hospitals are paid for those services," he said.

PacifiCare repeatedly has promised state insurance officials it would improve its oversight of delegated networks' performance, including a commitment to comply with all state regulatory standards. However, earlier this month, the Texas Department of Insurance referred the matter to the Office of the Attorney General to file suit.

In addition to asking for an injunction requiring PacifiCare to comply with state laws, Attorney General Cornyn is also asking the court to hold PacifiCare liable for actual damages; civil penalties; and restitution to those harmed by its violations of state law and its failure to comply with Texas' prompt pay law.

"PacifiCare has repeatedly promised to clean up its act. It has not done so. We are now asking the court to order PacifiCare to do business the way it should under Texas law and to make it pay for its violations," Attorney General Cornyn said.

Today's lawsuit stems from an investigation that Attorney General Cornyn launched into nine health maintenance organizations last September, and from problems the Texas Department of Insurance has found.

Instead of cooperating and producing documents in response to the investigation, PacifiCare filed a lawsuit against the Attorney General last October challenging his authority to investigate suspected violations of State laws. Despite repeated efforts to resolve that dispute, PacifiCare has refused to respond to the Attorney General's investigation.

The investigation announced in September otherwise is ongoing, and the Attorney General expects that the other eight HMOs will fully cooperate.


View Plaintiffs' Original Petition

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