Preventive law for the managed care industry: curing the class action disease; class actions bashing managed care organizations will not resolve whatever problems that exist. It's time to take more sensible steps.

• Author: Noah, Belinda G.

IN THE new millennium it is important that preventive law, preventive medicine and managed care take center stage as mechanisms to reduce the disease of litigation and the cost of health care, as well as improving the quality of that care. By combining these three goals, it is possible to reach a level of wellness at a reduced cost previously unachievable.

Preventive law seeks to find ways to avoid the need for formal dispute resolution. A lawyer is not just a litigator but a counselor of law as well. In that role, the lawyer, by routinely analyzing a client's over-all legal condition, rather than responding to acute symptoms, such as a lawsuit, may be able to forestall the disease of litigation by taking appropriate action. If litigation is not forestalled, the pretrial process enables the litigator to plan and coordinate the discovery process, schedule the trial date and clarify issues before trial commences.

A wide variety of purported class actions have been filed against managed care companies since the fall of 1999, and a number of these against eight MCOs have been transferred and consolidated for pretrial purposes by the Judicial Panel on Multidistrict Litigation to a federal court in Miami under the title In re Managed Care Litigation, No. MDL 1334. The suits, which allege that the defendants violated federal employee benefits and racketeering laws with respect to enrollees and providers, appear to be misguided. The purpose of a class action is to aggregate and resolve individual claims in one action. (1) For example, class actions against the tobacco industry by many of the same lawyers representing plaintiffs in the class actions against the managed care industry, have received widespread attention in the media during the past several years. For the most part, the tobacco companies have been successful in opposing class certification. Federal courts have refused to certify class actions, and only Florida has allowed class certification for one smoker and one nonsmoker case. (2)

The class action bar is attempting to rewrite the purpose of class actions and replace it with a national policy debate, so that they may invoke the authority of the courts to rewrite the contracts the managed care companies have with each member of the putative class. The questions judges face with a class certification motion, in accordance with the federal rules, are: Is the class based on common facts? Do common issues predominate over individual issues? Does proof of the sample prove the class? The class action bar would like to replace the proper issues with: Do some members of the American public despise managed care? (3)

HISTORY OF MANAGED CARE

A managed care organization is a reimbursement framework combined with a health care delivery system. (4) The ultimate goal is to decrease health care expenditures while at the same time maintaining quality of care. The expression, "managed care" came into widespread use only in the past decade. (5) However, the health maintenance organization, which is a type of managed care organization, is not new. The first, La Societe de Bienfaisance Mutuelle, was organized in the last century by a group of French families in San Francisco. The families banded together to finance, by prepayment, their own health care. La Societe financed and built a full-service hospital called the French hospital. (6)

Today, managed care plans typically reduce hospital utilization by emphasizing preventive care and outpatient services. They cut service costs by negotiating volume-based price discounts from providers and manufacturers, including pharmaceutical companies. In addition, managed care plans frequently provide care in specific locations, achieving economies of scale, as well as controlling referrals to specialist. They use capitated fees and bonuses to create financial incentives for providers to control costs.

The issue of health care delivery involves the funding and allocation of increasingly sophisticated and expensive health care services. "Managed care" refers to how health care is organized and delivered to individuals enrolled in health plans so that cost-effective, high quality care can be delivered. Health care litigation in the new millennium stands on the shoulders of economic and political developments over the last century. In that time, health care payment arrangements for the majority of Americans have shifted from self-paid, fee-for-service to third-party payer to prepaid managed care. The vast majority of Americans now receive their health care through prepaid managed care provided by employment or governmental plans. (7)

FEDERAL RULE 23

The class action mania against managed care must conform to the legal requirements of Rule 23 of the Federal Rules of Civil Procedure, no matter how much the industry is liked or disliked. A class action may be maintained only when it satisfies all the requirements of Rule 23(a) and at least one of the alternative requirements of Rule 23(b). (8) Rule 23 gained its current shape in a 1966 revision. Individual states have their own procedural rules for maintaining class actions, many of which mirror Rule 23.

1. Rule 23(a) Requirements

   Rule 23(a) states these prerequisites:

   One or more members of a class may sue or be sued as representative parties on behalf of all only if (1) the class is so numerous that joinder of all members is impracticable, (2) there are questions of law or fact common to the class, (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class, and (4) the representative parties will fairly and adequately protect the interests of the class. As the U.S. Supreme Court has asserted, the Rules Enabling Act, 28 U.S.C. [section] 2072(b), forbids any construction of Rule 23 that would "abridge, enlarge or modify any substantive right." (9) Moreover, the class action device is an exception to the usual rule that cases should be litigated on a case-by-case basis. (10) Plaintiffs may prosecute a class action only if they establish that they will "necessarily prove all the proposed class members' claims" in the course of trying their own cases. (11)

2. Rule 23(b) Requirements

   Plaintiffs in a class action suit also must demonstrate that the action qualifies for class treatment under one of the subdivisions of Rule 23(b), which states:

   An action may be maintained as a class...