Supreme Court's RICO ruling raises stakes in Humana, Sunrise lawsuits

Humana Health Insurance of Nevada and Sunrise Hospital and Medical Center could be paying out triple damages in a multimillion-dollar class-action lawsuit, now that the U.S. Supreme Court has ruled that a federal racketeering law can be applied.

The high court ruled Wednesday that the Racketeer Influenced and Corrupt Organizations Act (RICO) can be used against the insurer and the hospital in a 1989 lawsuit alleging that as many as 84,000 Nevada patients were overcharged millions of dollars on their hospital bills.

At the time, Humana owned Sunrise Hospital. The hospital is now owned by Columbia/HCA Healthcare Corp. of Nashville, Tenn.

The lawsuit says that Humana had an agreement with patients entering Sunrise Hospital, where it would pay 80 percent of the bills and the patient would pay the remaining 20 percent. However, the insurance company negotiated a discount agreement with Sunrise and paid lower rates. The savings were never passed on to patients.

"It is ... important to note that Humana has not been found guilty of any wrongdoing," a Humana statement issued Wednesday noted. "Today's ruling simply clarifies whether or not a federal lawsuit pending in Nevada can proceed under the RICO Act.... Humana continues to believe that its business conduct has been both legal and ethical."

The statement also noted that it was not uncommon throughout the insurance industry for patients to pay a percentage of gross hospital bills, rather than discounted charges.

The Nevada Legislature, as a result of the lawsuit, changed the state insurance law so discounts would be passed on to patients.

Will Kemp, one of the attorneys representing the patients, said late Wednesday that his law firm had filed for a June trial date in U.S. District Judge David Hagen's court.

The 9th U.S. Circuit Court of Appeals previously upheld one judgment for plaintiffs who came under the Employment Retirement Income Security Act (ERISA). They were awarded $1.6 million.

Now, with RICO, Kemp said that figure could go to $12 million with triple damages, interest and attorneys' fees.

Kemp said a separate antitrust class-action lawsuit against Sunrise Hospital for $60 million is still pending. That award could balloon to $180 million with RICO.

"Now U.S. attorneys across the country can use RICO to go after health care fraud," Kemp said. "If you are a victim, you can now get triple damages, plus attorneys fees."

Jim Colbert, Humana's lead attorney, said early today that he was disappointed with the Supreme Court decision and that he was unaware of the June filing for trial. He also was concerned that more insurance cases would now be going to federal court under RICO, rather than being handled in state courts.

However, the decision garnered praise from Jim Smith, attorney for the state Insurance Commission, who said that health insurance companies operating in Nevada will now be more careful in how they handle patients' claims.

"This gives claimants a powerful weapon and takes away a powerful weapon of the insurer," Smith said.

Humana had argued successfully in U.S. District Court that it was protected under the federal McCarran-Ferguson Act, which says no federal law can interfere with state insurance laws.

U.S. District Judge Phillip Pro had also ruled that RICO did not apply to insurance because it would impair the state's role in regulating the business.

The 9th Circuit in San Francisco reversed Pro's ruling, and the case was then brought before the U.S. Supreme Court.

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