SUPERIOR COURT OF THE STATE OF WASHINGTON FOR KING COUNTY NO. COME NOW Plaintiffs by and through their attorneys of record J.

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1 SUPERIOR COURT OF THE STATE OF WASHINGTON FOR KING COUNTY WASHINGTON STATE MEDICAL ASSOCIATION, a Washington corporation, JOSEPH O. GEHRETT, JR. M.D., BARBARA K. GEHRETT, M.D., MICHAEL J. KELLY, M.D., ROBERT E. COX, M.D., MICHAEL SCHIESSER, M.D. and ROBERT BETHEL, D.O., v. Plaintiffs, REGENCE BLUESHIELD, a Washington corporation, NO. COMPLAINT FOR INJUNCTIVE RELIEF AND MONEY DAMAGES FOR UNFAIR AND DECEPTIVE BUISNESS PRACTICES Defendant. COME NOW Plaintiffs by and through their attorneys of record J. Richard Creatura, John C. Guadnola, and James W. Beck of Gordon, Thomas, Honeywell, Malanca, Peterson, & Daheim, LLP, and through this Complaint and by way of claim allege: I. JURISDICTION AND PARTIES 1.1 Plaintiff Washington State Medical Association ( WSMA ) is a Washington corporation whose mission is, in part, to represent the professional interests of all member COMPLAINT - 1 of () FACSIMILE () -

2 physicians in the State of Washington and is bringing this action in its representative capacity. 1. Plaintiffs Joseph O. Gehrett, Jr. M.D., Barbra K. Gehrett, M.D., Michael J. Kelly, M.D., Robert E. Cox, M.D., Michael Schiesser, M.D., Robert Bethel, D.O. (hereinafter referred to collectively as individual Plaintiff physicians ) are Washington physicians and Washington residents. 1. Defendant Regence BlueShield ( Regence ) is a Washington corporation. 1. Jurisdiction and venue are proper in this Court because the facts giving rise to this action affected physicians doing business in King County and Defendant was transacting business and making representations in King County, Washington. II. BACKGROUND FACTS.1 During all relevant times, the individual Plaintiff physicians, as well as many other physicians who are also members of WSMA, have maintained a doctor-patient relationship with Boeing employees. These same physicians have standard form contracts with Regence in which Regence agreed to pay physicians for the health care services provided to Regence s members, which included Boeing employees. Many of these Boeing employees are members of the Society of Professional Engineering Employees in Aerospace ( SPEEA ).. By letters dated on or about May, 0, Regence notified nearly 00 Washington physicians who had previously been approved as Regence providers that Regence was creating a new Select Network, including only those physicians who deliver high quality, efficient care, and that as a result of Regence s performance-based analysis, these physicians were not included in that Select Network. These letters also informed the physicians that Regence would contact the physician s current patients and inform them that COMPLAINT - of () FACSIMILE () -

3 their physician failed to meet the quality and efficiency standards set by Regence and, therefore, would not be included in this Select Network.. Shortly thereafter, Regence sent letters to patients stating that the patient s current physician did not meet Regence s quality and efficiency standards and as a result, the patient would need to find a new physician. These letters stated that: Effective July 1, 0, the Select Network Plan (formerly the Selections coordinated care plan) will feature a new performance-based provider network called Regence Select Network SM. Performance-based networks are designed to effectively measure the relative quality and efficiency of health care providers. This change, part of SPEEA s collective bargaining agreement with the Boeing Company, supports the commitment that SPEEA and Boeing have made to help raise the bar on health care quality and efficiency. The new Regence Select Network includes health care providers who deliver high quality, efficient care as determined by an assessment of the medical practice patterns and treatment costs, as compared to their peers. As a result of this evaluation, [your current physician] will not be a network provider under the Select Network Plan.... [Your current physician] has been notified he/she will not be a Regence Select Network provider. Regence will review the network annually, and providers will have the opportunity to improve the quality and efficiency of their practices, and become part of the network in the future.. Regence s decisions were based on statistically flawed data and methodology that mischaracterized physicians practices as not meeting quality and efficiency standards, when in fact, they had provided consistently high quality, efficient health care to their patients. COMPLAINT - of () FACSIMILE () -

4 Regence knew or should have known that the methodology and data relied on to determine that these physicians were not meeting quality and efficiency standards were inaccurate.. Regence s program uses flawed methodology and data, including but not limited to, the following problems: a. It fails to take into consideration the population of patients seen by the physician. b. It uses small samplings of questionable statistical validity. c. It is based on Regence s inaccurate records. d. It includes patients that should clearly be excluded because of their personal medical histories.. These problems with methodology and data have led to a number of errors in the analysis. For instance, Regence has characterized physicians as providing low quality or inefficient care because, among other things: a. The physician failed to provide diabetes treatment to individuals who do not have diabetes. b. The physician failed to provide screening for cervical cancer on patients who had already undergone a hysterectomy. c. The physician failed to provide mammographies to patients who had already undergone bilateral mastectomies. d. The physician failed to provide treatment to individuals who were not even their patients.. By letters dated on or about June, 0, Regence recognized its error and apologized for its previous statements. These letters state, in relevant part, that: COMPLAINT - of () FACSIMILE () -

5 Last month, Regence sent you a letter regarding the Regence Select Network SM. Since that time, we have heard from members and providers that our letter may have implied that health care professional(s) who were not invited to participate in the Regence Select Network SM do not provide quality care. That was neither our intent, nor our perspective and we regret any misunderstanding it may have caused.. Nevertheless, Regence refused to retract its planned Select Network program and, instead deferred it for one year: The implementation of the Regence Select Network SM has been deferred until July 1, 0, due to errors discovered in communication to some members.... Regence never retracted its characterization of certain physicians as not meeting Regence s quality and efficiency standards. Instead, Regence implied that the only reason it was deferring the program was because it had not communicated its decision properly to members.. WSMA members, including the individual Plaintiff physicians, have suffered loss of good will, other economic losses, and emotional distress as a result of Regence s unlawful actions described above. III. FIRST CAUSE OF ACTION VIOLATION OF THE CONSUMER PROTECTION ACT.1 By sending letters to a physician s patients stating that the physician is not providing quality care at an efficient cost based on flawed methodology and data, Regence has engaged in unfair and deceptive acts or practices in the conduct of trade or commerce that affect the public interest.. By threatening to institute a program that arbitrary and capriciously characterizes the individual Plaintiff physicians as not meeting certain quality and efficiency COMPLAINT - of () FACSIMILE () -

6 standards, Regence has engaged in unfair and deceptive acts or practices in the conduct of trade or commerce that affect the public interest.. Regence s unfair and deceptive acts or practices caused injury to individual Plaintiff physicians in their business or property.. Regence s actions, therefore, violate RCW., for which the individual Plaintiff physicians are entitled to damages and punitive damages in an amount up to three times the actual damages for each violation, plus attorneys fees and costs. IV. SECOND CAUSE OF ACTION DEFAMATION/LIBEL PER SE.1 Regence made defamatory and unprivileged statements to the patients of the individual Plaintiff physicians.. Regence made these defamatory statements in writing. These statements, therefore, constitute libel.. Regence was at fault by making these statements based upon flawed methodology and data.. Regence s statements constituted libel per se because they falsely defamed the individual Plaintiff physicians business, occupation and profession and, therefore, are actionable without evidence of special loss.. Nevertheless, Regence s statements were the proximate cause of damages to the individual Plaintiff physicians and resulted in damages including loss of income, loss of good will, emotional distress and other damages as may be proven at trial. COMPLAINT - of () FACSIMILE () -

7 V. THIRD CAUSE OF ACTION INTENTIONAL INTERFERENCE WITH CONTRACT.1 There existed a valid contractual relationship or business expectancy between the individual Plaintiff physicians and their patients.. Regence had knowledge of these relationships or expectancies.. Regence intentionally interfered with these contracts or business expectancies, inducing or causing a loss of good will, loss of future business expectancy and other damages as set forth below.. Regence s Select Network program used wrongful means and/or for an improper purpose, which harmed the individual Plaintiff physicians. VI. FOURTH CAUSE OF ACTION BREACH OF CONTRACT WITH PROVIDERS.1 Regence utilizes standard provider agreements with all WSMA members, including the individual Plaintiff physicians. Eliminating WSMA s members from Regence s Select Network program is in breach of the contract between theses physicians and Regence. Removing medical providers from a network is a de facto decredentialing of the provider, and is not in conformity with the provider contracts, which give the provider a right to a hearing before such actions are taken.. In part, Regence s Contract with physicians provide, in part, as follows: The Practitioner hereby constitutes and appoints the Company to offer his/her professional services to all groups of employees and individuals covered under Subscriber Agreements entered into or designated by the Company. COMPLAINT - of () FACSIMILE () -

8 By refusing to allow providers the opportunity of serving their patients within the Select Network, Regence has breached its obligation to the individual Plaintiff physicians and other WSMA members in Washington.. Regence s Provider Manual also provides, in part, that: The appeals process is intended to give practitioners as well as organizational providers (herein after known as provider(s)) an opportunity to make sure Regence BlueShield (hereinafter referred to as the Company) has reviewed all relevant information in making its decision regarding recredentialing of provider for continuation on a network, or for other substantial infractions outlined in the contract.. In breach of its contracts with physicians, Regence refused to afford the individual Plaintiff physicians and other WSMA s members the internal appeals process before de-selecting them from the Select Network.. Regence s contracts with physicians provide that Regence shall actively market Regence Plains that provide incentives for the patients to seek services from providers within Regence s network. Regence breached this provision through the conduct described above.. As a result of the multiple breaches of the contract described above, the individual Plaintiff physicians have suffered damages and will incur future damages in an amount to be proven at trial.. As a result of the multiple breaches of the contract described above, WSMA members are likely to suffer future damages if Regence is not enjoined from its illegal activity. COMPLAINT - of () FACSIMILE () -

9 VII. FIFTH CAUSE OF ACTION INJUNCTION.1 Because Regence has deferred, but not eliminated this Select Network program, the individual Plaintiff physicians and WSMA have a well-grounded fear that Regence will continue such illegal activities.. These illegal activities will result in substantial and irreparable injury to the individual Plaintiff physicians and other WSMA s members.. Therefore, Regence should be enjoined from implementing its Select Network program. Such injunction is also authorized under the Consumer Protection Act, RCW. et. seq., entitling plaintiffs to attorneys fees and costs. WHEREFORE, Plaintiffs pray the Court enter judgment as follows: A. That the Court award the individual Plaintiff physicians money damages; B. That the Court award the individual Plaintiff physicians punitive damages up to three times actual damages; C. That the Court issue an injunction enjoining Regence and any subsidiaries from implementing the Select Network Program; D. That the Court award Plaintiffs reasonable attorney fees and costs; and E. For such other relief as the Court deems just and proper. Dated this day of September, 0. COMPLAINT - of By J. Richard Creatura, WSBA No. rcreatura@gth-law.com John C. Guadnola, WSBA No. 0 () FACSIMILE () -

10 James W. Beck, WSBA No. Attorneys for Plaintiffs COMPLAINT - of () FACSIMILE () -