$150 MILLION CLASS ACTION SETTLEMENT IN FAVOR OF LOUISIANA HEALTHCARE PROVIDERS APPROVED BY LOUISIANA FOURTEENTH JUDICIAL DISTRICT COURT

Following a fairness hearing held on May 27, 2011, the Louisiana Fourteenth Judicial District Court gave final approval of a settlement agreement reached between a class of Louisiana healthcare providers and First Health Group Corp. (and its affiliates) in the case of Gunderson v. F.A. Richard & Associates, et. al, docket number 2004-2417.  The lawsuit involved whether First Health provided appropriate advanced notice required by the Louisiana PPO Act (La. R.S. 40:2203.1) before PPO discounts were applied to bills for medical services rendered by Louisiana healthcare providers to occupationally ill or injured workers pursuant to Louisiana workers’ compensation law. First Health maintains the denial of the Plaintiff Class’s allegations that it caused the Class of healthcare providers to be paid less than the amount required by the Louisiana Workers’ Compensation Act’s reimbursement schedule without providing advanced notice required by the Louisiana PPO Act (La. R.S. 40:2203.1).

The settlement provides the class of Louisiana healthcare providers with benefits including a $150 million Class Settlement Fund established by First Health from which payments to eligible class members, lawyers’ fees, and court costs related to the litigation will be paid. First Health also provided an additional $500,000 to the settlement fund to pay actual costs and expenses incurred in connection with the administration of the settlement.  In addition, First Health has agreed to follow certain procedures for providing notice of PPO discounts to healthcare providers, and has also assigned to the Class its rights to any proceeds that may be available pursuant to First Health’s insurance policies.

This settlement was finalized following nearly seven years of intense litigation in both state and federal court, as well as a ruling from the Louisiana Third Circuit Court of Appeal in favor of the Plaintiff Class of healthcare providers. Gunderson v. F.A. Richard & Associates, 44 So.3d 779 (La. App. 3 Cir. 6/30/10). First Health applied to the Louisiana Supreme Court for review of that decision, and the parties settled the matter prior to a decision from the Louisiana Supreme Court on whether to grant or reject First Health’s application to review the merits or correctness of the lower court decisions.

A PPO (or Preferred Provider Organization) generally refers to the contracts or agreements made between a “group purchaser”, or “group purchasers”, and healthcare providers to provide discounted rates of medical services. The Louisiana PPO Act (La. R.S. 40:2203.1) provides that the discounted rates are not enforceable or binding “unless such organization is clearly identified on the benefit card issued by the group purchaser or other entity accessing a group purchaser's contractual agreement or agreements and presented to the participating provider when medical care is provided.” The statute further states that “when no benefit card is issued or utilized by a group purchaser or other entity, written notification shall be required of any entity accessing an existing group purchaser's contractual agreement or agreements at least thirty days prior to accessing services through a participating provider under such agreement or agreements.” The statute also provides for a specific amount of damages awardable to medical providers in the event of a “group purchaser’s” noncompliance with the statute.

More information regarding the details of the settlement is available at www.gundersonfirsthealthsettlement.com.

by: Lynsay M. Fontenot