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 ultrasound.

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.