In Brief

A three-judge panel of the District of Columbia Court of Appeals, D.C.'s highest court, heard oral arguments on June 22 as the case of Virginia Academy of Clinical Psychologists (VACP) v. CareFirst proceeded on appeal.

The lawsuit dates back to 1998 when VACP, along with individual psychologists and consumers--and with support from APA--filed suit against Blue Cross Blue Shield of the National Capital Area (now CareFirst) and its mental health carve-out company, HMS/Value Options. The lawsuit alleged various wrongful acts, including a more than 30 percent cut in psychologists' payment rates that drove more than 100 mental health professionals off the HMO's panel and left more than 360 patients without a provider.

The recent oral arguments followed a successful March 2003 settlement for the plaintiffs in trial court. That settlement included an unusual concession permitting the plaintiffs to appeal claims that had been dismissed previously, says Shirley Ann Higuchi, JD, assistant executive director for legal and regulatory affairs in APA's Practice Directorate.

Specifically, at the appellate level, the plaintiffs are challenging the trial court's dismissal of consumer fraud and punitive damage claims against CareFirst and HMS/Value Options. Broader remedies, such as emotional distress and punitive damages, are available to plaintiffs in a fraud action.

The court subjected both sides to tough questioning in the oral arguments, making it difficult to predict how the panel of judges will rule in this complicated case, says Higuchi. In particular, one of the judges repeatedly asked whether CareFirst's denial of mental health treatment sessions should be viewed as a fraud, or simply as a breach of contract that has already been resolved through the settlement. The plaintiffs' attorney, Dwight Bostwick, JD, argued that the action was both a fraud and a breach of contract. He cited cases demonstrating that it was possible for an action to constitute both circumstances.

The legal case challenges a past tendency by the courts to see managed-care arrangements purely in contractual terms without regard to quality of patient care, says APA Executive Director for Professional Practice Russ Newman, PhD, JD. That view leaves managed-care companies unaccountable for policies and practices that harm patients, he argues. If the court cannot be swayed from this bias, Newman says, it could ultimately conclude that the consumer plaintiffs already have been adequately compensated by their full recovery in trial court on the breach of alleged contract claims.

"We are, of course, cautiously optimistic that the appellate court will be receptive to our alternate view that the vastly unequal bargaining power between managed-care companies and mental health patients means that broader remedies are necessary to address abusive practices that intentionally put profits ahead of patient care," says Newman. "As many APA members have commented to us over the life of this lawsuit, it is critical for psychology to fight back against managed-care practices that disserve our patients and our profession."

The timing of a court ruling is uncertain. It could take as long as two years due to the backlog of cases facing the court, or a ruling may be announced in the next few months.


Alan Nessman, JD, is special counsel in the legal and regulatory affairs department of APA's Practice Directorate.