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Prosecuting a RICO Claim

RICO is a criminal law prosecuted by the Justice Department. The Justice Department has sued physicians under RICO for submitting false insurance claims using the mails and telephone.[49] RICO also has a private attorney general provision; this allows individuals who have been harmed by the RICO violations to sue for treble damages and attorney's fees. Their damages are trebled to punish the defendant. As with the antitrust laws, RICO is intended to compensate only for economic injuries. RICO cannot be used in place of a medical malpractice lawsuit by an injured patient.

The most likely RICO plaintiffs will be other physicians or health care business.[50] Plaintiffs do not need to be a direct target of the illegal activity to recover under RICO. They need only be injured through the pattern of racketeering. For example, assume that a managed care plan provides illegal incentives to participating physicians. Some physicians in the community are injured because they refuse to participate in a plan that requires them to compromise their medical care decision making. If this plan has enough market share, these physicians will lose business. If the insurance company insures a substantial percentage of the community, the nonparticipating physicians may be driven out of business. The nonparticipating physicians could sue the insurance company and the physicians who "stole" their patients by participating in the plan.

Peer review actions could be fertile ground for RICO litigation. Any physician participating in a peer review action who also receives illegal incentives is at risk for a RICO lawsuit. The plaintiff might be a physician who is being reviewed by a peer review committee for a PPO that provides incentives to encourage physicians to reduce hospitalization. Assume that the physician is being reviewed because she keeps patients in the hospital too long and orders too many tests. There is no evidence that she harms the patients, but she does cost the PPO a lot of money. If the peer review committee sanctions the physician, she could sue independent contractor physicians and the PPO for conspiring to sanction physicians who did not support the scheme to reduce hospitalizations.

The physician would argue that the peer review committee members were given financial incentives to put financial considerations above their fiduciary obligations to the patient. Since the federal law protecting peer review activities (see Chapter 19) does not protect actions taken in bad faith, this physician could get to the jury because the illegal incentive plan would be evidence of bad faith.

Failing medical business will also generate RICO claims as creditors and debtors look for solvent parties to share the costs. A hypothetical example might be Doctors' Hospital, which begins providing incentives to physicians to admit insured patients to its facility. These physicians begin to divert to Doctors' Hospital insured patients who otherwise would have been admitted to Holy Name Hospital. The patient mix at Holy Name Hospital shifts to medically indigent patients, and the hospital goes bankrupt. Holy Name Hospital was injured by the incentives provided by Doctors' Hospital. If Holy Name Hospital can establish that these incentives were predicate acts under the definition in RICO, it can sue Doctors' Hospital and the individual members of its medical staff under RICO. The damages in such a lawsuit could easily exceed $100 million. The individual physicians would share responsibility for paying the verdict.

[49]U.S. v. Bachynsky, 934 F2d 1349 (5th Cir 1991).

[50]Hinsdale Women's Clinic, S.C. v. Women's Health Care of Hinsdale, 690 F Supp. 658 (NDIll, Jun 20, 1988).


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