Tuesday, August 23, 2005

Hatch costs Medica $2.5 million

From the Star Tribune:

Medica's defense cost $2.5 million

by David Phelps

Medica paid a steep price for its slam-dunk courtroom victory over Attorney General Mike Hatch last week.

By Medica's own estimate, the Minnetonka-based insurer and HMO spent more than $2.5 million in its three-year battle against allegations that its administration was unresponsive to members, elusive to oversight and on a rogue journey to self-enrichment, charges that Hennepin County District Judge Lloyd Zimmerman flatly dismissed.

Medica also spent harder-to-quantify internal resources on the lawsuit with a four-person legal team led by general counsel Jim Jacobson that spent part of its time on the case and part on other legal issues in the organization, spokesman Larry Bussey said.

Hatch said his office spent about $100,000 on the lawsuit, which resulted in a five-day nonjury trial earlier this month.

It was a case closely watched by the rest of the health care community in Minnesota, most of which has had legal contact with Hatch over the years, some more painful than others, in his role as regulator of nonprofit organizations. There was private glee, but no public reaction, to last week's verdict from most organizations.

"It was a tremendous drain on personnel inside that company," said Julie Brunner, executive director of the Minnesota Council of Health Plans. "It was lost time and lost focus on health care policy."

Brunner called on the attorney general to use his "considerable energy" to work with the state's health care organizations to address "mind stumper" issues to make health care more efficient and accessible.

Hatch, who has fought for wider charity-care policies at the state's hospitals, expressed amazement at the size of Medica's legal bill from its outside counsel, the Minneapolis law firm of Dorsey & Whitney with lead attorney Marianne Short.

"I can't believe they're spending $2.5 million in a case like this. That's incredible," Hatch said in an interview Monday. "That would be 10 percent of our [entire office] budget."

Others looked at the legal fee and viewed it as a lost opportunity for spending on health care.

"That strikes me as a lot of money," said health care consultant David Delahanty of Buck Consultants' Minneapolis office. "Unfortunately, based on the judge's decision, a lot of it probably was wasted. It was a witch hunt that didn't find anything."

Since 2000, Hatch has made headlines by focusing on financial abuses and health care shortcomings among the state's HMOs and providers.

One set of findings forced the breakup of hospital and clinic group Allina and Medica in 2001. The trial earlier this month had to do with whether Hatch still had control over members of the Medica board of directors that he appointed that year to stabilize and rebuild the struggling HMO. Zimmerman ruled Hatch did not.

"Now we can do the jobs we were elected to do," said board member Esther Tomljanovich, one of Hatch's appointees subsequently elected as a consumer member to the board. "It was hard to think at the outset that it would cost this much. What a terrible waste."

Other health care providers also have accumulated considerable legal expenses from disputes with Hatch. Allina spent more than $750,000 during the past 18 months on outside legal fees for a couple of recent legal run-ins with the attorney general, including antitrust allegations about the creation of a heart hospital.

No one was willing to predict Monday that the courtroom defeat would dampen Hatch's enthusiasm for going after the health care industry in the state. However, he is not likely to find too many flagrant abuses of the type that was common five years ago, analysts said.

"I'm not saying he shouldn't go after other health plans, but as a result [of Hatch's previous investigations], he's had a sentinel effect on other plans," Delahanty said. "They've cleaned up their acts. He's made them look internally. It's management by WWHD -- 'What Would Hatch Do?' "

Stephen Parente, a health care professor at the University of Minnesota's Carlson School of Management, said Hatch should pick future targets carefully.

"He's had a win [Allina] and he's had a big loss [Medica]. Another loss and his long-term reputation is clouded," Parente said.
(Source: Star Tribune, August 23, 2005)

I hope Mike Hatch apologizes to all those who have Medica.


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