Judge to HMO: Stop Fining Doctors Who Exceed Pharmacy Budgets


A judge in Fort Worth last month ordered Harris Methodist Health Plan to stop fining physicians who exceed pharmacy budgets. District Judge Bonnie Sudderth ruled that Harris Methodist Health Plan's risk-sharing mechanism violates a state law that bars HMOs from paying physicians or other providers in ways that even indirectly create incentives to limit medically necessary care.

Harris Methodist pays physicians a percentage of premiums to provide care, and budgets a separate portion of premiums for prescription drugs. Physicians exceeding their pharmacy budgets must repay 35 percent of the excess, while physicians who are under budget get some of the surplus back as a bonus.

Harris Methodist faces a class-action lawsuit filed by 400 physicians who contend that its physician-payment system is illegal. The case is scheduled to go to trial in January. On the other side of the fence, 180 physicians have said through affidavits they support the Harris compensation system.

Primary care physicians who contract with Harris Methodist exceeded their pharmacy budgets by $3.2 million in 1995–96, and paid $1.1 million in fines. In 1996–97, doctors were $4.5 million over budget and paid $1.5 million. Nearly three of four Harris Methodist doctors exceeded their pharmacy budgets in 1996–97.

The pharmacy provisions of the Arlington-based health plan's contracts "have resulted, and will continue to result, in the denial of medically necessary care to Harris HMO members," Sudderth wrote in her decision.

"These denials include circumstances of cherry-picking, patient-dumping, practice consolidation and outright denials of treatment, referrals and prescriptions."

In April, the Texas Department of Insurance recommended that Harris pay an $800,000 fine and repay physicians who were penalized for going over budget. The plan has requested a public hearing to explain its practices before Insurance Commissioner Elton Bomer decides whether to accept the recommendation and impose the fine.

The HMO contends that it knows of no case in which its compensation system led to care being denied. It plans to appeal the pharmacy decision to the Texas Court of Appeals, which could rule by July.

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