In most states health maintenance organizations (HMOs), preferred provider
organizations (PPOs), and other managed care plans do not directly employ and
supervise physicians. The physicians are either employed by physician’s
associations that contract with the plan or independent practitioners who
contract directly with the plan. These contracts contain provisions that are
intended to encourage the physicians to change the medical care decisions
that they would have made in the absence of the plan.
Some of these provisions, such as those governing the submission of bills and
discount schedules for prompt payment, have no effect on medical care
decision making. Others have profound effects on physician decision making.
The most benign of these incentives are disallowing or heavily discounting
procedures that the plan wants to discourage. This gives physicians the option
to offer the care and absorb the reduced reimbursement. These become more
troubling when they are coupled with provisions that prevent discounting care.
This prevents physicians from providing the treatment at cost to help needy
patients. The most ethically and legally problematic provisions are those that
prohibit the physician from rendering the necessary care. Some plans
attempted to have physicians contractually agree not to provide routine
ultrasound to pregnant women and not to inform the women that routine
ultrasound was available. By preventing women from knowing about the
procedure, the plans hoped to avoid complaints from women who wanted
These practices violate the physician’s fiduciary duty to the patient, and may
violate state criminal laws, such as commercial bribery laws. Such violations
would be mail and wire fraud, if they involved the telephone or mails, and may
be predicate acts on their own, depending on the wording of the state statute.
Violating a state commercial bribery statute is a predicate act for RICO if the
statute provides for imprisonment for greater than one year. Several states
specifically prohibit physician incentives under their commercial bribery laws
and provide for imprisonment for more than a year. In these states, physician
incentive plans are clearly predicate acts for RICO. Some states do not
specifically mention physicians in their commercial bribery statutes but prohibit
bribing physicians. These states have case law that defines a physician as
fiduciary. Even in states that do not directly criminalize physician incentives
under a commercial bribery statute, a plaintiff can argue that the model penal
code prohibitions on bribing physicians are evidence that incentive plans
violate the physician’s common law fiduciary duty. These breaches of the
physician’s fiduciary duty can be the basis for mail and wire fraud, which are
predicate acts for RICO.