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Virginia Academy of Clinical Psychologists v. Group Hospitalization And Medical Services

July 14, 2005


Appeal from the Superior Court of the District of Columbia (CA-9400-98) (Hon. Geoffrey M. Alprin, Motions Judge).

The opinion of the court was delivered by: Steadman, Senior Judge.

Argued June 22, 2004

Before SCHWELB and WASHINGTON, Associate Judges, and STEADMAN, Senior Judge.*fn1

This lawsuit arose from the marketing and management of mental health care benefits under the Capital Choice Triple Option ("Capital Choice") health insurance plan. The plaintiffs consisted of three groups; namely, two individual subscribers to the Capital Choice Plan, six clinical psychologists who provided services under the plan, and a professional association of clinical psychologists. They sued the appellee insurance companies and insurance benefit administrators for, inter alia, common law fraud based on two alleged misrepresentations about the scope of mental health coverage under the Capital Choice plan.

The principal issues on appeal are whether the trial court erred in (1) granting summary judgment on the common law fraud count; and (2) denying a motion to amend the complaint to include a claim for fraud under the District of Columbia Consumer Protection Procedures Act.*fn2 We affirm.

I. Facts

Marjorie Burdetsky switched jobs in the fall of 1997 and had to choose a health insurance provider for herself and her husband, Joaquin Araya, through her new employer, the Arlington County, Virginia government. At the time, Araya was receiving mental health treatment. Burdetsky's options included three types of plans from Blue Cross Blue Shield of the National Capital Area (Blue Cross)*fn3 a managed care (HMO) option, preferred provider organization (PPO) option, or an indemnity plan.*fn4 Blue Cross also offered a hybrid insurance plan, the Capital Choice Triple Option plan, under which Burdetsky and her husband could choose among the three different types of insurance coverage (HMO, PPO, and indemnity) each time they sought medical care. Burdetsky also had the choice of a plan offered by another insurance company, Kaiser Permanente. Burdetsky chose the Capital Choice Triple Option plan, which had lower co-payments than the Blue Cross PPO or indemnity plans and more mental health benefits than the Kaiser Permanente plan.*fn5 Burdetsky completed an enrollment form on December 1, 1997, and her insurance coverage became effective on January 1, 1998.

Health Management Strategies International, Inc. ("HMS"), as the administrator of mental health benefits for the Capital Choice plan, was charged with creating and maintaining the mental health provider panel for the Capital Choice plan and assessing the needs of subscribers for services under the plan. By contracting to be in HMS' network, providers agreed to see patients with Capital Choice insurance and comply with administrative procedures required by HMS. The providers were then paid according to a contracted-for fee schedule.

In the fall of 1997, while Burdetsky was choosing among her health insurance options, HMS implemented a new fee schedule that reduced the amount providers were paid by the insurance company for their services. On November 24, 1997, HMS mailed a letter to every provider on the mental health panel explaining that there would be a 30-40% cut in their reimbursement rates effective January 1, 1998. Approximately 100 mental health professionals out of a total panel of approximately 1000 providers left the provider network as a result of the rate cut. The six clinical psychologists who are appellants here were among those who had contracted with HMS to provide mental health services to patients covered by the Capital Choice plan and were affected by the rate cut.

Before being covered under the Capital Choice plan, Burdetsky's husband, Joaquin Araya, had already been receiving treatment beginning in July 1997 from Dr. John Gualtieri, a clinical psychologist and a provider appellant, for depression and post-traumatic stress disorder. Dr. Gualtieri was listed as both an HMO and a PPO provider in the Capital Choice plan materials. In January 1998, Dr. Gualtieri's treatment of Araya continued, now under the HMO portion of the new Capital Choice insurance plan. The plan also offered the opportunity to receive services from Dr. Gualtieri under the PPO coverage at a higher rate of co-payment than under the HMO. After February 6, 1998, Araya's treatment with Dr. Gualtieri continued but under the PPO coverage, despite that fact that the insurance benefits booklet relating to the Capital Choice plan stated that mental health treatment was covered in full under the HMO for "up to 52 visits" per calendar year.*fn6

The instant litigation began in December 1998 when a wide-ranging nine-count complaint was filed by all appellants alleging two counts of fraudulent misrepresentation, four counts of breach of contract, two counts of breach of implied contract, and one count of tortious interference with a business relationship. The claims and their resolution in the course of the extended trial court proceedings were as follows:

Count Description of Plaintiff Group Resolution

Cause of Action

One Fraudulent Burdetsky & Araya Summary judgment for Misrepresentation defendants

Two Breach of Contract Burdetsky & Araya Settled Three Breach of Implied Burdetsky & Araya Settled

Contract Four Breach of Contract Psychologists Abandoned

(patient care)

Five Breach of Implied Dr. Gualtieri, Summary judgment for Contract Dr. Chilstrom defendants Six Breach of Contract Dr. Potter Summary judgment ...

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