|
Robert B. Sklaroff, M.D.
|
|
Initial - Contents & Citations TABLE OF CONTENTS
TABLE OF CONTENTS ... .. i
TABLE OF CITATIONS . x
DEFINITIONS .... xiv
I. JURISDICTIONAL STATEMENT .. 1
II. SCOPE AND STANDARD OF REVIEW . . .. 2
III. TEXT OF THE ORDER BEING APPEALED . 3
IV. STATEMENT OF QUESTIONS INVOLVED [all to be answered yes] .. 4
V. STATEMENT OF CASE . .. ... 5
VI. SUMMARY OF ARGUMENT ... .. 6
VII. ARGUMENT .... .. ... 7
A. The Departmentnot the petitionerhad the burden-of-proof. .. 1. The 1997 Transfer-Order noted a proper hearing hadnt been conducted; a decade hence, a proper hearing still hasnt been conducted. Asserting retroactively the case had been transferred for post-approval adjudication is phraseology that was added to the 1997 Kaiser Decision. 7
2. Despite the lip service paid to no special deference to the prior administrative decision, and the proceedings being de novo with no deference given to the Kaiser Order and not being an appeal of the Kaiser Order, there can be no doubt that the appellate review standard was applied. There is no statement or any indication of any independent analysis or review by Commissioner Koken; rather, she found only that there was no evidence submitted to reject Commissioner Kaisers analysis. The failure to do so establishes that the Koken 2006 Order did not comply with the requirements of the Insurance Holding Companies Act for determining whether there is an illegal anticompetitive effect on account of the consolidation of BCWP and PBS to form Highmark. 8
B. The Commissioner had jurisdiction over the Consolidation. . 8 1. The Commissioner had jurisdiction over the consolidation, because the Pennsylvania Insurance Holding Companies Act requires that the Insurance Commissioner approve all changes in control of domestic insurers or HMOs. 8
2. If the Act were read as exempting acquisitions by non-profit medical and hospital service associations, the Act still applies because Highmark was not organized under the statutes creating either type of association because (it is claimed), Highmark only inherited the Certificates of Authority of the predecessor entities. Therefore, when Highmark was formed de novo (to play this role), recalling that this was not a merger (rather, a consolidation), there was no pre-existing entity that could claim a presumed exemption. . 9
3. The Commonwealth Court mandated adjudicatory Hearings. .. 10
4. The LaFarge Opinion reinforced the need for an adjudicatory hearings process. .. 10
5. In her 12/2/2002 Order, the Commissioner supported the desirability for the Commissioner to have oversighted the consolidation without, for example, having invoked the Health Department. .. 10
6. The Consolidation was not approved by the PBS Corporate Members. . 11
7. PBS did not provide the Corporate Members necessary legal data about BCWP prior to the vote to approve the consolidation, thereby denying them the opportunity to weigh its impact on both fiscal and ethical planes. . 12
8. PBS (in-writing and orally, through its corporate officers and exec-utives) provided the Corporate Members material misrepresentations and omissions prior to the vote to approve the consolidation, thereby denying them the opportunity to weigh its impact on both fiscal and ethical planes. . 12
C. Highmark illegally holds dual-certification. 12 1. Pennsylvania law does not allow a single entity to operate under the Certificates of Authority for both Hospital Professional Health Service Plans. The regulatory scheme is exclusive as to a hospital plan corporation [40 Pa.C.S. § 6102] and concurrent with the Department of Health as to a professional health service corporation [40 Pa.C.S. § 6304]. .. 12
2. Only one entity, licensed as a hospital plan corporation, may operate a hospital plan; and only one entity, licensed as a professional health service corporation, may operate one of the types of professional health service plans [40 Pa.C.S. § 6104 & 40 Pa.C.S. § 6308]. Common usage dictates that the phrase, [i]t shall be unlawful for any person, other than a hospital plan corporation . . . to . . . operate a nonprofit hospital plan means any entity other than a hospital plan (to wit, a professional health services plan) cannot operate a hospital plan. (The same is true with the obverse.) . 12
3. Hospital plan corporations are specifically excluded from opera-ting as a professional health service corporation [40 Pa.C.S. § 6301]. 12
4. The Commissioner acknowledged the statute does not address how the different requirements between hospital and professional service plan corporations are reconciled. One entity cannot perform both functions. .. 12
5. The Nonprofit Corporations Act [15 Pa.C.S. § 5921(a)] governs corporate aspects of Highmarks formation (recognizing the capacity of two nonprofit corporations to consolidate), but it does not govern regulatory aspects of the transaction relating to Highmarks Certificates of Authority. The Act is sub-ordinate to the HPCA. Indeed, the Act cedes statutory oversight of details thereof (in this case) to the HPCA. The Act contains no mandate that contradicts the HPCA. The Act does not authorize Highmark to do anything prohibited under the HPCA. The Nonprofit Corporations Act is clear [15 Pa. Cons. Stat. Ann. §103]. . 13
6. Legislative intent corroborates this conclusion, segregating these entities. The 1939 (initial) enabling legislation (for PBS) was passed after failure of IBCs effort to amend the bills to permit it to sell medical services as part of its hospitalization coverage. . 13
7. Enabling statues insulate these entities from each other, necessitating that both exist independently. Fundamental differences between hospital plans and professional health service plans (related to Governance, Quality and Access, Social Mission and Regulators) contravene a single-licensed corporation from holding both types of certificates. .. 13
8. Adopting a chapter heading to define Highmark as a health plan corporation violates the fundamental rules of construction, documenting the fact that Highmark and the Department have exceeded statutory authority. The Court misconstrued the syntactical discussion of headings, for Highmark is a creature of an undefined title (Health Services Plan). ... 13
9. In other states, specific legislative authority was conferred prior to consolidation of comparable entities. .. 13
10. In her 12/2/2002 Order, the Commissioner provided argument supporting dual-certification that ignored law and logic, instead self-satirizing her oversight performance. .. 13
11. Resolution of this issue is now (and long has been) ripe. 13
D. Highmark illegally inherited its Certificates of Authority. 14
1. A Certificate of Authority is not a franchise, but a license to do business, personal to the holder and not transferable; a license has both property-rights and usage-rights components, neither being exclusive. .. 14
2. Highmark has functioned illegally because it never applied for (and, thus, was never granted) a new Certificate of Authority; no ruling overrides the inability to overcome applicable statute [Knecht]. . 18
3. In her 12/2/2002 Order, the Commissioner provided argument supporting licensure-inheritance that ignored law and logic, while corrupting Sklaroffs argument. ... 18
4. The Department was not able to abbreviate its regulatory activities after a fundamental corporate transaction (consolidation). .. 19
5. The Department was not able to subject issuance of a new Certificate of Authority to recognition of Highmarks new franchise (its new bylaws, its broader corporate purpose, and its new and different balance sheet), abdicating necessary assessment (of the way Highmark envisioned discharging responsibilities dutifully being carried out by its two predecessors). .. 20
6. The Department was not able to deny a petitioner his right to exercise due-process rights (acknowledged by the Commissioner). ... 20
7. The Department was not able to claim existence of a (false) distinction between holding and using a license. 20
E. The Presiding Officer excluded key antitrust concerns. 21
1. In his 7/5/2000 Order, the Presiding Officer inappropriately and inexplicably excluded considering at the Hearing basic antitrust concerns that were to be raised. .. 21
2. In his 11/2/2001 Order, the Presiding Officer inappropriately and inexplicably excluded from consideration at the Hearing basic antitrust concerns that were to be raised, and Highmark did not subsequently produce many approved documents. 21
3. In his 3/25/2002 Order, the Presiding Officer inappropriately and inexplicably rejected subsequent efforts to acquire documents in follow-up. 21
4. In his 11/27/2002 Order, the Presiding Officer inappropriately and inexplicably precluded presentation of evidence on (1)whether Highmark had fulfilled its social mission, and (2)whether KHPW affected competition, wrongly considering it an already affiliated person. 22
5. During the Hearing, the Presiding Officer precluded Sklaroff from acquiring a replacement for his suddenly-absent economic expert, contradicting the flexibility manifest in his 11/27/2002 order permitting the Department to delay testimony until its witness could become available. .. 22
6. During the Hearing, the Presiding Officer precluded Sklaroff from testifying regarding his appreciation of the antitrust issues, despite the fact that inter alia he had served as regional coordinator of a union (The Federation of Physicians and Dentists) who had served (successfully) as a representative of a physician-member who had been wrongfully terminated due to his involvement therein. .. 22
7. During the Hearing, the Presiding Officer precluded Sklaroff from testifying regarding any negative experience as a PBS subscriber; furthermore, Sklaroff was not even permitted to answer a generic question regarding how the PBS and Blue Cross plans had been established in Pennsylvania. ... 23
F. The Presiding Officer precluded Sklaroff from optimizing his testimony. .. 23 1. During the Hearing, the Presiding Officer precluded Sklaroff from being able to refer to prepared notes, even when he offered opposing counsel a chance to read them, precluding presentation of a complete case. .. 23
2. During the Hearing, the Presiding Officer precluded Sklaroff from being able to correlate the contents of his orientation (as a PBS Corporate Member) to stipulated facts related to the provision of Medicare and Medicaid managed care services. . 23
G. The Highmark Bylaws compromised the traditional PBS Social Mission. . 23 1. The Highmark bylaws precluded presenting Special Resolutions by physicians such as himself, thereby compromising the capacity to optimize achievement of the traditional PBS Social Mission to maximize the physical and mental status of all Pennsylvanians [Chapter 63], which was recognized in a PBS Monograph detailing institutional memory. .. 23
2. The Highmark bylaws eliminated any grass-roots involvement of physicians, disenfranchising such physicians as Dr. Sklaroff, who had been elected by his peers to serve as a PBS Corporate Member and who manifest the traditional PBS Social Mission through submission of Special Resolutions (which are explicitly precluded in the Highmark Bylaws, which also preclude election of provider representatives by providers). .. 24
H. The Highmark witness proved the antitrust violation. . 24
1. The Highmark witness testified that, when she worked for PBS, she dealt with a relevant product service area as being health insurance. Unlike the Courts claim, this is not so similar to the reported line of business as to corroborate that assumed market, and it is not so different as to compel some other conclusion, despite the fact that it added an entirely tangential category of business, the impact of which was not studied by the Department. . 24
2. The Highmark witness testified that, when she worked for PBS, she dealt with a relevant geographic area as being definable as that of the BCWP (i.e., the western 29 counties). Unlike the Courts claim, this was a dramatic departure from the statutorily-presumed statewide market. .. 25
3. The Department should not have excluded large market-shares from antitrust analysis by alleging they were already affiliated. . 25
I. The Commissioners 5/26/2006 Order was profoundly defective. . 25
1. The Presiding Officer admitted bias, and consistently exhibited same when crucial matters were adjudicated. ..... . 25
2. The Department did not perform its initial adjudication with due diligence. . 25
3. The Commissioners 5/26/2006 Order dismissed without discussion the salient facts established at the Hearing regarding the Social Mission (as it affected the Highmark bylaws) and the Monopoly concerns. .. 25
4. The Commissioners 5/26/2006 Order was defective, both with regard to its having ignored Sklaroffs Post-Hearing Brief and with regard to her having ignored Sklaroffs Reply to the Briefs of Respondents Highmark and the Department. 25
K. The Commissioner did not perform antitrust analysis with due diligence. . 26 1. The Commissioner erred as a matter of law in excluding the concededly large market shares of the consolidating companies from her analysis of the anticompetitive effect. . 26
2. The Commissioners erred at each stage of the mandated-analysis, omitting mandated tests and demonstrating contradictory procedures; indeed, the 2006 Order does not perform the market concentration test and the impact (Insurer A/Insurer B) test, nor does it independently analyze how the IHCAs anticompetitive provisions apply to the transaction. .... 26
3. The Commissioners exclusion of WBC and PBS from the anti-competitive effects analysis was a fundamental error; it was based on the erroneous decision to allow rules of general interpretation [insurer] to supersede specific definitions or requirements [involved insurer]. .. 28
4. It cannot be rationally contended that the Pennsylvania Legislature or the National Association of Insurance Commissioners intended to exclude from the market share calculation two of the primary participants in the health insurance market from the consideration of the effect of the consolidation of these two companies and their subsidiaries on the market. .. 29
5. Whether the Highmark transaction would create an anticompetitive effect (against which the Legislature required the Commissioner to guard) is an analysis that has yet to be properly done by any Commissioner. ... 30
6. Capital Blue Cross has been harmed by Highmarks dual-licensure. .. 32
7. That Capital Blue Cross has opposed the Highmark consolidation undermines the theory that the already-affiliated provision applies; 50-50 decision-making did not permit either entity to control the outcome. .. 32
L. Capital Blue Cross should have standing to raise its concerns. .. .. 34 III. SUMMARY . 36
1. The Insurance Department had the Burden of Proof, not Sklaroff. ............................... 36
2. The Insurance Department should have reviewed the Consolidation. ..... . . 38
3. Highmark cannot hold Dual-Certification. . 39 4. Highmark cannot inherit Certificates of Authority. . 39 5. The market-shares of BCWP/PBS should have been considered during performance of antitrust analysis. .. 40
6. The Hearing Officer should have permitted Sklaroff to replace his suddenly-absent economic expert, abusing his discretion. .. 41
7. Sklaroff should have been permitted to invoke his notes and provide limited observations regarding his status as a medical practitioner. .. 41
8. Procedural and Evidentiary Rulings by the Presiding Officer were prejudicial to the ability of Sklaroff to prepare and present his case. 42
9. Pre-Hearing Rulings by the Presiding Officer were prejudicial to the ability of Sklaroff to prepare and present his case. 43
10. Highmarks Bylaws failed to perpetuate the physician leadership role that PBS recognized as pivotal when maintaining its Social Mission. .. 43
11. Highmarks witness proved the antitrust violation, regarding both the geographic and product components thereof. 43
12. The Commissioners 2006 Decision and Order was not sufficient for appellate review. . 45
13. The Commissioner failed to perform sufficient antitrust analysis. 45
IV. CONCLUSION 46
ATTACHMENTS ... Appended
Order of the Commonwealth Court [12/27/2007] Reconsideration Denied .................. A
Opinion and Order of the Commonwealth Court [11/14/2007] 937 A.2d 552 Capital Blue Cross v. Pennsylvania Insurance Department Docket # 1215 & 1238 C.D. 2006 ............. B
Adjudication and Order of the Insurance Commissioner [5/26/2006] Docket # MS96-04-098 . C
TABLE OF CITATIONS
Pennsylvania Statutes/Regulations
2 Pa.C.S. § 504 .. . 2,7,8,31,36
2 Pa.C.S. § 702 . 34
2 Pa.C.S. § 1551(a) 2
15 Pa.C.S. § 103 .. 13
15 Pa.C.S. § 5102 . 39
15 Pa.C.S. § 5921(a) 13
15 Pa.C.S. § 20101 10
15 Pa.C.S. § 20101-21207 ... 10
31 Pa.C.S.A § 151.3(b) .. . 14,39
31 Pa.C.S.A §151.6 . 14,39
40 Pa.C.S. § 621 ... 33
40 Pa.C.S. § 764 ... 33
40 Pa.C.S. § 991.1401 29,29,33
40 Pa.C.S. § 991.1401 et seq. .. 8, 39
40 Pa.C.S. § 991.1402 22,22
40 Pa.C.S. § 991.1402(f)(1)(ii) .. . 26,27
40 Pa.C.S. § 991.1402(f)(1)(ii)(a) 22
40 Pa.C.S. § 991.1403 22,22
40 Pa.C.S. § 991.1403(b) . 22
40 Pa.C.S. § 991.1403(c)(2) 22
40 Pa.C.S. § 991.1403(d) . 28
40 Pa.C.S.. § 991.1403(d)(1) .. 26,30
40 Pa.C.S. § 991.1403(d)(2) ... 22
40 Pa.C.S. § 991.1403(d)(2)(i) 27
40 Pa.C.S. § 991.1403(d)(2)(ii) .. 31
40 Pa.C.S. § 991.1403(d)(2)(iv) .... 30,30,31
40 Pa.C.S. § 991.1403(d)(3) ..... . 22
40 Pa.C.S. § 6101 et seq. . 16
40 Pa.C.S. § 6102 . 12
40 Pa. C.S. § 6103 38
40 Pa. C.S. § 6103(b) .. 33
40 Pa.C.S. § 6104 .. . 12,15
40 Pa. C.S. § 6107 38
40 Pa.C.S. § 6301 . 12
40 Pa.C.S. § 6301 et seq. . 16
40 Pa.C.S. § 6304 12
40 Pa.C.S. § 6306 . 14
40 Pa.C.S. § 6307(b) 33
40 Pa.C.S. § 6308 . 12,15
72 Pa.C.S. §§ 7901-7906 . 33
§ 72 Pa. Code § 152 . 31
§ 210 Pa. Code § 63.5 3
40 P.S. .. 39
47 P.S. 4-468 ... 39
Pennsylvania Rules of Appellate Procedure
301 . 1
2135 .. 36
1926 . 11
Cases
Berninger v. Workers Compensation Appeal Board (East Hempfield Township), 761 A.2d 218 (Pa. Cmwlth. 2000) .. 11
Callahan v. Pennsylvania State Police, 494 Pa. 461, 431 A.2d 946 (1981) 38
Citizens Against Gambling Subsidiaries, Inc. vs. Pennsylvania Gaming Control Board, 591 Pa. 312, 916 A.2d 524 at 629 (2007) . 35
Committee to Preserve Mill Creek v. Secretary of Health, 281 A.2d 468 (Pa. Cmwlth. 1971 ... 37
Fair Rest Home v. Commonwealth, Department of Health. Pa. Cmwlth, 401 A.2d 873 (1979) . .. 17
Brooks v. Office of Vocational Rehabilitation, 682 A.2d 850, 855 (Pa. Cmwlth., 1996) .. .. 38
Commuters Commission v. Pennsylvania Public Utilities Commission, 170 Pa. Super. 596, 607, 88 A.2d 420, 425 (1952) .. 38
Highmark v. BCNEP. Pa.Sup.Ct. #s 183, 205, 309, 663 MDA 2000 ... 46 [f.n.]
Hospital Utilization Project v. Commonwealth, 507 Pa. 1, 13 N.7, 487 A.2d 1306, 1312 N.7 (1985) .. 38
In re: Application of El Rancho Grande, Inc., 496 Pa. 496, 437 A.2d 1150 (1981) .. 35,35
Knecht v. Medical Serv. Assn of Pa., Inc., 143 A.2d 820, 823 (Pa. Super. 1958) .. 19,20,39,50
LaFarge, et al. vs. Commonwealth of Pennsylvania Insurance Department, 690 A.2d 10,10,37
Lyness v. State Board of Medicine, 529 Pa. 535, 5442, 605 A.2d 1204, 1207 (1992) 40
Nernberg v. City of Pittsburgh, 620 A.2d 692 (Pa. Cmwlth. 1993 . 35
Paxon Maymar, Inc. v. Commonwealth, Liquor Control Board, 312 A. 2d 115, 118 (Pa. Cmwlth., 1973) .. . 29 Pellizzeri v. Bureau of Professional and Occupational Affairs, 856 A.2d 297 (Pa. Cmwlth, 2004) .. . 11
Pennsylvania Association of Independent Insurance Agents v. Foster, 616 A.2d 100 (Pa. Cmwlth., 1992) .. .. 35
Pennsylvania Automobile Association v. State Board of Vehicle Manufacturers, Dealers and Salespersons, 550 A.2d 100 (Pa. Cmwlth., 1988) .. . 35
School District of Erie v. Hamot Medical Center of Erie, 602 A.2d 407, 409 (Pa. Cmwlth., 1992) .. 38
Society Hill Civic Association v. Pennsylvania Gaming Control Board, 40 EM 2007, Docket numbers 1356, 1364, 1367, 1751 and 1362, __ Pa. __ 928 A.2d 175 (2007) . 35
Soja v. Pennsylvania State Police, 500 Pa. 188, 455 A.2d 613 (1982) .. . 40
Tsolo v. Foster, 561 A.2d 861, 863 (Pa. Cmwlth, 1989) . 17
Weinberg v. Insurance Department and Keystone Insurance Company, 398 A.2d 1120 (Pa. Cmwlth., 1979) 38
Young J. Lee, Inc. v. Commonwealth Dept of Revenue, 474 A.2d 266 (1983) .. 16
Young J. Lee, Inc. v. Commonwealth, Dept of Revenue, 504 Pa. 367, 474 A.2d 266 (1983) 16
Miscellaneous References
NAIC Insurance Holding Company System Regulatory Act [§§ 2 & 3.1] . 29
Proceedings of the NAIC, Vol. II, at 32, 40-41 (6/1980) 29
1. Act means Insurance Holding Companies Act.
2. BCNEP means Blue Cross of Northeastern Pennsylvania.
3. BCWP means Veritus Inc., d/b/a Blue Cross of Western Pennsylvania.
4. Blues Plans or The Blues means Blue Cross and Blue Shield plans generally.
5. Capital means Capital Blue Cross and Capital Advantage Insurance Company.
6. CBC means Capital Blue Cross.
7. Commissioner means the Insurance Commissioner of the Commonwealth of Pennsylvania.
8. Consolidating Companies means PBS and BCWP.
9. Consolidation means the consolidation of Blue Cross of Western Pennsylvania and Pennsylvania Blue Shield to form Highmark.
10. Department means the Pennsylvania Department of Insurance.
11. GAAP means Generally-Accepted Accounting Principles.
12. HealthGuard means HealthGuard of Lancaster, Inc.
13. Highmark means Highmark Inc.
14. HMO means health maintenance organization.
15. IBC means Independence Blue Cross.
16. IHCA means Insurance Holding Companies Act.
17. JOA means Joint Operating Agreement.
18. Kaiser Decision means the 11/27/1996 Decision and Order of Insurance Commissioner Linda S. Kaiser. 19. KHP means the Keystone Health Plans generally.
20. KHPC means Keystone Health Plan Central, Inc.
21. KHPE means Keystone Health Plan East, Inc.
22. KHPW means Keystone Health Plan West, Inc.
23. MFN means most favored nation agreement or clause [an agreement between an insurer and a provider that the provider will not give a better price to any other insurer]. 24. NAIC means National Association of Insurance Commissioners.
25. NCL means Pennsylvania Nonprofit Corporation Law of 1988.
26. Order means the 5/26/2006 Order.
27. PBS means Medical Service Association of Pennsylvania d/b/a Pennsylvania Blue Shield.
28. PMS means the Pennsylvania Medical Society.
29. PPO means Preferred Provider Organization.
30. PSIM means the Pennsylvania Society of Internal Medicine.
31. PSIM Intervenors means PSIM and Dr. Sklaroff.
32. Sklaroff or Dr. Sklaroff means Robert B. Sklaroff, M.D.
33. SAP means Statutory Accounting Principles.
34. Subsidiaries means Keystone West, Keystone Central, Keystone East, Trans-General, United Concordia, and HealthGuard.
35. Trans-General means Trans-General Insurance Company, Inc.
36. Transaction means the consolidation of PBS and BCWP and acquisition of the six subsidiaries.
37. United Concordia means United Concordia Life and Health Insurance Company.
38. UPMC means University of Pittsburgh Medical Center.
39. West Penn means Western Pennsylvania Health System.
|
|
To contact me--Robert B. Sklaroff, M.D.--just send an e-mail (rsklaroff@comcast.net).
|