Drs. Pass & Bertherman, Inc. v. Neighborhood Health Plan
31 A.3d 1263
R.I.2011Background
- NHP is a Rhode Island non-profit HMO contracted with DHS to provide Rite Care benefits through monthly capitation payments.
- DHS funds flow to NHP, which controls and spends the funds via separate accounts for claims, benefits, and administration.
- NHP enters into participating provider agreements with optometrists and ophthalmologists to reimburse for covered services.
- Historically, NHP paid optometrists and ophthalmologists the same rate; on November 1, 2002, NHP paid ophthalmologists a higher rate.
- Optometrists sued in a certified class alleging violation of G.L. 1956 § 5-35-21.1(b) due to rate discrimination.
- A Superior Court judge granted summary judgment for NHP, finding the funds used were private, not public, under the statute.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Are funds used to pay providers public funds? | Optometrists argue funds are public funds because DHS transfers capitation money. | NHP contends funds remain private once deposited into NHP accounts and are not state-controlled. | Funds are not public funds for purposes of the statute. |
| Does § 5-35-21.1(b) prohibit rate discrimination when public funds are involved? | Optometrists rely on antidiscrimination language to block higher ophthalmologist rates. | NHP argues the statute did not cover private funds or private entities at the relevant time. | Statute did not prohibit discrimination because funds were private at time of payment. |
| Is NHP a state actor for purposes of constitutional/state action analysis? | Optometrists imply state action through DHS involvement and public funding. | NHP operates as a private contracting entity with no coercive state control. | NHP is not a state actor; DHS did not coerce or closely control NHP's decisions. |
Key Cases Cited
- Blum v. Yaretsky, 457 U.S. 991 (U.S. 1982) (state action not established by funding alone; nexus required)
- Rendell-Baker v. Kohn, 457 U.S. 830 (U.S. 1982) (private entity with funding not automatically state action)
- Jackson v. Metropolitan Edison Co., 419 U.S. 345 (U.S. 1974) (state action requires close nexus or traditional state power)
- Allison Engine Co. v. United States ex rel. Sanders, 553 U.S. 662 (U.S. 2008) (precision in statutory drafting; broad colloquial usage rejected)
- Lukes v. Department of Public Welfare, 976 A.2d 609 (Pa.Comm.Ct. 2008) (public records analysis; money trail focus)