HPN - Regal Complaint 5-3-2012

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Plaintiff Greggory R. DeVore, M.D., a medial corporation, hereby asserts the following

2 claims and causes of action, and seeks the following relief, against Defendants Heritage Provider

3 Network, Inc.; Regal Medical Group, Inc. dba Regal Lakeside and Affiliates; Lakeside Medical

4 Group, Inc. dba Regal Lakeside and Affiliates; Eastland Medical Group, Inc. and Community

5 Medical Group of the West Valley, Inc.:

6

GENERAL ALLEGATIONS

7

The Parties

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1. Plaintiff Greggory R. DeVore, M.D., a Medical Corporation ("Dr. DeVore") is, and

9 at all relevant times was, a California professional medical corporation engaged in the practice of

10 fetal & maternal medicine and obstetrics & gynecology in the County of Los Angeles, California.

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2. Dr. DeVore is informed and believes, and thereon alleges, that Defendant Lakeside

12 Medical Group, Inc. ("LAKESIDE") was incorporated in the State of California on April 4, 1986,

13 and is a professional medical corporation operating in the County of Los Angeles, California.

14

3. Dr. DeVore is informed and believes, and thereon alleges, that Defendant Eastland

15 Medical Group, Inc. ("EASTLAND") was incorporated in the State of California on February 18,

16 1992, and is a professional medical corporation operating in the County of Los Angeles, California.

17

4. Dr. DeVore is informed and believes, and thereon alleges, that Defendant Regal

18 Medical Group, Inc. ("REGAL") was incorporated in the State of California on September 8, 1994,

19 and is a professional medical corporation operating in the County of Los Angeles, California.

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5. Dr. DeVore is informed and believes, and thereon alleges, that Defendant Heritage

21 Provider Network, Inc. ("HPN") was incorporated in the State of California on May 20, 1996, and is

22 doing business in the County of Los Angeles, California. Dr. DeVore is further informed and

23 believes, and thereon alleges, that HPN: (a) is a Health Care Service Plan as defined in the Knox-

24 Keen Health Care Service Plan Act of 1975, as amended; (b) received its "limited" Knox-Keene

25 license on February 7, 1997; and (c) is licensed to provide services within the counties of Kern, Los

26 Angeles, Orange, Riverside, San Luis Obispo, San Bernardino, Tulare, and Ventura.

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6. Dr. DeVore is informed and believes, and thereon alleges, that Defendant Community

28 Medical Group of the West Valley, Inc. ("COMMUNITY") was incorporated in the State of

-2COMPLAINT BY GREGGORY R. DEVORE, M.D., A MEDICAL CORPORATION

1 California on July 25, 2001, and is a professional medical corporation operating in the County of

2 Los Angeles, California.

3 The Relationship Between HPN, REGAL, LAKESIDE, EASTLAND and COMMUNITY

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7. Dr. DeVore is informed and believes, and thereon alleges, that in or around the time

5 of its incorporation on September 8, 1994, REGAL became a member of an unincorporated network

6 of medical groups and independent practice associations in Southern California commonly known as

7 the Heritage Provider Network. Dr. DeVore is further informed and believes, and thereon alleges,

8 that upon the incorporation of HPN on May 20, 1996, REGAL became a wholly owned affiliated

9 division of HPN, but continued to exist, and presently exists, as a separate California medical

10 corporation.

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8. Dr. DeVore is informed and believes, and thereon alleges, that on or about November

12 17, 2006, EASTLAND was purchased by LAKESIDE, with EASTLAND becoming a wholly owed

13 affiliate of LAKESIDE, but continuing exist, and presently existing, as a separate California medical

14 corporation.

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9. Dr. DeVore is informed and believes, and thereon alleges, that on or about September

16 30, 2007, COMMUNITY merged with LAKESIDE, with COMMUNITY becoming a wholly owned

17 affiliate of LAKESIDE, but continuing to exist, and presently existing, as a separate California

18 medical corporation.

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10. Dr. DeVore is informed and believes, and thereon alleges, that in or about November

20 2009, LAKESIDE (including its affiliates EASTLAND and COMMUNITY) was purchased by

21 HPN, with LAKESIDE becoming a wholly owned affiliated division of HPN, and with LAKESIDE,

22 EASTLAND and COMMUNITY continuing to exist, and presently existing, as separate California

23 medical corporations.

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11. Dr. DeVore is informed and believes, and thereon alleges, that on or about October

25 27, 2011, REGAL and LAKESIDE issued an "open enrollment" press release stating that the two

26 had "joined forces under the Heritage Provider network," and that "they are proud to re-introduce

27 themselves as the new and improved Regal, Lakeside and Affiliates." Dr. DeVore is further

28 informed and believes, that in or about October 2011, REGAL and LAKESIDE commenced doing

-3COMPLAINT BY GREGGORY R. DEVORE, M.D., A MEDICAL CORPORATION

1 business as, and are currently doing business under the fictitious business name, "Regal, Lakeside

2 and Affiliates."

3

12. In August 2009, prior to HPN's purchase of LAKESIDE, the California Department

4 of Managed Health Care ("DMHC") conducted a routine medical survey of HPN, and on January

5 25, 2010, publically issued its final report of that survey ("the August 2009 DMHC Survey").

6 According to the August 2009 DMHC Survey, HPN: (a) develops, organizes, and manages medical

7 groups and independent practice associations, which it integrates with hospitals and ancillary care

8 providers to form integrated health care systems, and (b) operates as an "intermediary" between nine

9 full service health plans and seven provider medical groups.

10

a. The August 2009 DMHC Survey further identified the nine full service plans

11 as Blue Cross of California; Blue Shield of California; Health Net of California, Inc.; Aetna Health

12 of California; SCAN Health Plan; PacifiCare of California; Cigna HealthCare of California, Inc.;

13 Universal Care; and Inter Valley Health Plan. However, HPN's Internet web-page currently

14 identifies that since August 2009, HPN has brought three additional full service plans within its

15 network, namely, Easy Choice Health Plan, Molina Healthcare and Secure Horizons.

16

b. The August 2009 DMHC Survey further identified REGAL as one of the

17 seven medical groups within the HPN provider network as of August 2009. However, HPN's

18 Internet web-page currently identifies that since August 2009, it acquired two additional medical

19 groups, bringing the total to nine medical groups within the HPN provider network, namely,

20 Affiliated Doctors of Orange County; Bakersfield Family Medical Center; Coastal Physician

21 Network; Desert Oasis Healthcare; High Desert Medical Group; Heritage Victor Valley Medical

22 Group; Sierra Medical Group, REGAL, and LAKESIDE (which includes EASTLAND and

23 COMMUNITY).

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c. The August 2009 DMHC Survey described the relationship between HPN, the

25 full service plans, and HPN's provider medical groups as follows:

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Each of the ... full service health plans delegate the administration of Utilization

Management, Quality Management, and Credentialing to Heritage for enrollees

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assigned to its contracted medical groups. [HPN], in turn, delegates these Utilization

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Management, Quality Management, and Credentialing functions to its contracted medical groups. [HPN] then oversees the medical group's administration.

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COMPLAINT BY GREGGORY R. DEVORE, M.D., A MEDICAL CORPORATION

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All of the enrollees managed by [HPN] have benefit and coverage contracts with, and

access health care benefits through, one of the nine full-service plans to which they

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belong; therefore, [HPN] has no actual enrollees of its own.

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13. As of May 2012, HPN's Internet web-site stated that "[f]rom 1995 onwards, as

4 [HPN's] network has expanded to include Southern and Central California, [HPN has] grown from

5 120,000 members to nearly 500,000 members," and that HPN has "positioned [itself] to become one

6 of the largest in-state health care providers." Further, according to HPN's Quarterly Financial

7 Report filed with the DMHC, for the quarter ended December 31, 2011, HPN managed the care of

8 459,439 enrollees. And, based on the number of enrollees in managed health care plans in the State

9 of California as of March 1, 2012, HPN was ranked by industry consultant Cattaneo & Stroud, Inc.

10 as the fourth largest managed care organization in California. Further, as of May 2012, the web-

11 page on HPN's web-site devoted to REGAL touted that "(w)ith a network spanning more than 5,000

12 square miles and thousands of health care providers, Regal Medical Group is part of one of Southern

13 California's largest managed health networks." Moreover, HPN's web-site has a link to REGAL's

14 internet web-site which describes how an individual may become a member of REGAL, and thus a

15 member of the HPN network, as follows:

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How to Enroll with Regal Medical Group

The process for enrolling with Regal Medical Group is easy!

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Choose Regal during new enrollment, or open enrollment periods

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If you're joining a new insurance plan, or participating in your employer's annual

open enrollment period, you only need to list, or select, Regal Medical Group as your

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preferred medical group on the enrollment form. You'll also need to put down the

name of your chosen Primary Care Physician at this time.

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Make the switch to Regal at any other time

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You don't have to wait for special enrollment periods to join the Regal Medical

Family. You can do it at any time. To change your preferred medical group, just call

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the customer service number listed on the back of your insurance card. Your health

plan's customer service department can help you to select Regal as your medical

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group, and they can help you find a Regal affiliated Primary Care Physician if you

haven't already selected one.

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14. Based on the foregoing, HPN yields significant power in the overall California health

26 care market, and through its affiliated companies such as REGAL and LAKESIDE (including

27 EASTLAND and COMMUNITY), HPN controls the administration of the health care needs of

28 nearly 500,000 individuals. As noted in the August 2009 DMHC Survey, the health plans within the

-5COMPLAINT BY GREGGORY R. DEVORE, M.D., A MEDICAL CORPORATION

1 HPN network delegate to HPN, the administration of Utilization Management, Quality Management,

2 and Credentialing for enrollees assigned to the medical groups within the HPN network. In turn,

3 HPN delegates those functions to its member medical groups, including REGAL and LAKESIDE,

4 which have now joined forces under the HPN network as "Regal, Lakeside and Affiliates." Thus, as

5 affiliated divisions of HPN, and members of the HPN network, REGAL and LAKESIDE (including

6 EASTLAND and COMMUNITY) also have significant power in the California health care market,

7 including the Los Angeles County region where Dr. DeVore engages in the practice of fetal &

8 maternal medicine and obstetrics & gynecology.

9

The Relationship Between Dr. DeVore and

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REGAL, LAKESIDE, EASTLAND and COMMUNITY

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15. Like almost all doctors in this age of managed health care, Dr. DeVore has found that

12 most of his patients have medical benefits coverage that requires them to receive medical care and

13 treatment only from physicians who are contracted with the patient's insurance company, health care

14 service plan, or healthcare service organization, and that he therefore cannot treat or obtain referrals

15 of such patients unless he is contracted as a participating physician or participating provider with

16 such healthcare entities. Indeed, once an enrollee in any of the full service plans contracted with

17 HPN selects one of the medical groups within the HPN network as their preferred medical group,

18 only physicians under contract with the HPN-affiliated medical group may provide covered services

19 to the enrollee.

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16. At all relevant times herein, Dr. DeVore, as well as many other physicians, have

21 entered into standard form provider contracts for the provision of medical services to the enrollees

22 administered by HPN through its affiliated companies REGAL and LAKESIDE (including

23 EASTLAND and COMMUNITY). More specifically:

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a. On March 6, 2000, Dr. DeVore and REGAL entered into a Provider

25 Agreement with a back-dated initial 5-year term commencing on July 1, 1998, and which was

26 automatically renewed thereafter for successive terms through June 30, 2012 ("the REGAL

27 Contract");

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-6COMPLAINT BY GREGGORY R. DEVORE, M.D., A MEDICAL CORPORATION

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b. On October 1, 2003, Dr. Devore and EASTLAND entered into a Specialist

2 Provider Agreement which was automatically renewed for successive terms through October 1, 2013

3 ("the EASTLAND Contract");

4

c. On January 30, 2007, Dr. DeVore and COMMUNITY entered into a Fee-For-

5 Service Specialist Agreement which was automatically renewed for successive terms through

6 January 30, 2013 ("the COMMUNITY Contract"); and

7

d. On February 1, 2008, Dr. DeVore and LAKESIDE entered into a Specialty

8 Care Group Agreement which was automatically renewed for successive terms through February 1,

9 2013 ("the LAKESIDE Contract").

10

17. As affiliated divisions of HPN, the fourth largest private health care service plan in

11 California, REGAL and LAKESIDE (including EASTLAND and COMMUNITY) yield substantial

12 power over the ability of individual physicians, such as Dr. DeVore, to pursue the practice of

13 medicine in Southern California, in that the denial of access to the enrollees controlled by HPN

14 through REGAL, LAKESIDE, EASTLAND and COMMUNITY would significantly impair the

15 ability of such physicians to practice medicine or a medical specialty in Southern California.

16 Therefore, like HPN, at all relevant times herein mentioned, REGAL, LAKESIDE, EASTLAND

17 and COMMUNITY also controlled important economic interests of Dr. DeVore, and had obtained

18 quasi-public significance, in that it was economically necessary for Dr. DeVore to contract as a

19 participating provider with REGAL, LAKESIDE, EASTLAND and COMMUNITY to gain access

20 to the enrollees controlled by HPN through those HPN-network medical groups.

21 The Termination of the REGAL, LAKESIDE, EASTLAND and COMMUNITY Contracts

22

18. Despite the fact that Dr. DeVore met all of REGAL's eligibility criteria and had

23 previously been a participating provider for REGAL for over thirteen years, in a January 5, 2012

24 letter from Regal, Lakeside and Affiliates (the dba of REGAL and LAKESIDE), Dr. DeVore was

25 advised that the REGAL Contract was being terminated effective May 4, 2012, pursuant to the

26 "Termination Without Cause" provision of that contract. A true and correct copy of the January 5,

27 2012 termination letter is attached hereto as Exhibit 1.

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-7COMPLAINT BY GREGGORY R. DEVORE, M.D., A MEDICAL CORPORATION

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19. In response to the January 5, 2012 termination letter, Dr. DeVore contacted Regal,

2 Lakeside and Affiliates' James Ingaglio in an attempt to determine the basis for the termination, if

3 any, and to discuss the reinstatement of Dr. DeVore's contract and his status as participating

4 provider for REGAL. In response, Dr. Ingaglio confided to Dr. DeVore that Regal, Lakeside and

5 Affiliates was decreasing its number of approved medical specialists providing Obstetrics care to its

6 enrollees, such as Dr. DeVore, and consolidating that care under a lesser number of medical

7 specialists. Dr. Ingaglio further confided to Dr. DeVore that the motive for taking such action was

8 to discourage enrollees from utilizing such medical specialty services by increasing the patient wait

9 time to receive such services. Dr. DeVore responded to Dr. Ingaglio by indicating his belief that the

10 termination of his contract was improper, and that he contested the termination. In response, Dr.

11 Ingaglio suggested to Dr. DeVore that perhaps the matter could be resolved informally, and

12 requested Dr. DeVore to have his legal counsel contact Jonathan Gluck (legal counsel for HPN,

13 REGAL and LAKESIDE). However, on January 24, 2012, Mr. Gluck stated to Dr. DeVore's legal

14 counsel, in no uncertain terms, that no reason was required for the termination of Dr. DeVore's

15 contract, and that the termination decision would not be reconsidered.

16

20. The January 4, 2012 termination letter made reference only to the termination of the

17 REGAL Contract. However, because the January 4, 2012 termination letter was mailed on the

18 letterhead of "Regal, Lakeside and Affiliates," on March 5, 2012, Dr. DeVore had a member of his

19 staff contact Dr. Ingaglio to determine whether the letter intended to terminate the LAKESIDE and

20 EASTLAND Contracts as well. Dr. Ingaglio responded "I believe so," but that he would get back to

21 Dr. DeVore's staff member or send a revised termination letter.

22

21. Thereafter, Dr. DeVore received three additional letters dated March 23, 2012 on the

23 letterhead of Regal, Lakeside and Affiliates, giving notice of: (1) the termination without cause of

24 the LAKESIDE Contract effective May 23, 2012; (2) the termination without cause of the

25 EASTLAND Contract effective June 23, 2012; and (3) the termination without cause of the

26 COMMUNITY Contract effective May 23, 2012. True and correct copies of those March 23, 2012

27 termination letters are attached hereto as Exhibit 2, Exhibit 3 and Exhibit 4, respectively.

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-8COMPLAINT BY GREGGORY R. DEVORE, M.D., A MEDICAL CORPORATION

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