MADISON - ST. CLAIR RECORD

A putative class action lawsuit has been filed against an insurance company that allegedly benefited from preferred provider discounts without referring patients to doctors.

Lead class plaintiff Kathleen Roche, D.C., claims defendant Zenith Insurance Company would repeatedly reduce bills based on the application of a First Health preferred provider organization discount, but did not refer its covered claimants to providers.

According to the complaint filed Aug. 27 in St. Clair County Circuit Court, Roche entered into a contract with First Health Group Corp., which is an organization that oversees the preferred provider organization of which Zenith is a member.

Under the terms of the contract, Roche agreed to provide participating insurance companies with either a 20 percent discount below the amount allowed by the Illinois worker compensation fee schedule or a 15 percent discount on all other bills, the suit states.

In return, the insurance companies were to direct their covered beneficiaries to doctors providing the discounted services, thus increasing the doctors' patient flow, the complaint says.

"The provider is the intended beneficiary of the Payor Agreement (through steerage of patients by the Payor to the provider) and the Payor is the intended beneficiary of the Provider Agreement (through reduced charges for patients sent to the provider by the Payor)," the suit states.

However, Roche and the putative class claim Zenith is operating a silent PPO, which means the insurance company reaps the benefits of discounts without steering patients to participating doctors.

"Defendant has in fact admitted that it does not direct or refer it covered beneficiaries to network providers 99% of the time," the suit states. "Rather, the Payors, like Zenith merely reduce reimbursement to every network provider merely because the provider is in the network and not because the Payor utilized the Provider," the suit states.

Under the silent PPO scheme, Roche and the class receive nothing in return for the discounts they offer Zenith, according to the complaint.

Zenith regularly submitted explanation of payment forms to doctors in First Health's PPO network, which would explain why they were entitled to discounts. In the forms, Zenith would claim it was entitled to discounts either because it was a member of the First Health network or because it was a contracted payor, the complaint says.

"By operating a silent PPO in Illinois, Zenith illegally reaped huge savings while not utilizing First Health providers in exchange for taking PPO network discounts," the suit states.

Roche claims she was a victim of Zenith's silent PPO when a Zenith beneficiary came to her office for treatment in 2006.

Roche billed Zenith a reasonable charge for the services she provided to its beneficiary, but the insurance company turned around and knocked $160.63 off the bill, alleging it was entitled to a PPO discount, according to the complaint.

"Plaintiff and the Class did not authorize Zenith, through First Health or otherwise, to take PPO network discounts from medical charges for services provided to covered claimants who were not directed to Plaintiff and the Class," the suit states.

In the three-count suit, Roche and the putative class are asking the court to certify their breach of contract count or, in the alternative, to certify an unjust enrichment count, to certify a statutory fraud count, to certify Roche as representative of the class and to enter a judgment of less than $75,000 for each individual claim and not more than $5 million for the aggregate claim. They are also seeking other relief the court deems just.

Roche and the putative class will be represented by Kevin T. Hoerner of Becker, Paulson, Hoerner and Thompson in Belleville, by Richard J. Burke of St. Louis and by Paul M. Weiss of Freed and Weiss in Chicago.

Roche has also moved to intervene in a nearly identical Madison County suit brought by chiropractors Lawrence Shipley and Richard Coy against First Health Insurance Co. Roche, a class member, contends that suit will scuttle a suit in St. Clair County against First Health that is similar to the Zenith filing. Madison County Circuit Judge Daniel Stack recently heard the final arguments over that settlement's fairness. He has not entered a ruling as yet.

St. Clair County Circuit Court case number: 09-L-452.