This report originally appeared in the June 2010 issue of DOTmed Business News

The Eleventh Circuit Court of Appeals has decided that a lawsuit against Humana Military Healthcare Services cannot proceed as a class action. The suit accused Humana of systematically underpaying 260 hospitals for medical services the facilities gave to veterans under a federal program, thereby breaching the individual network provider agreements. Humana, a managed care organization, won a managed care support contract with the federal government pursuant to its CHAMPUS/TRICARE program in 1995 to provide outpatient non-surgical services to TRICARE beneficiaries.

Humana had challenged the district court's determination that "common questions," most notably whether the federal government had forced Humana to pay hospitals lower rates, would predominate over individual questions, and that a class action was a better forum to resolve the disputes. The 11th Circuit held that the district court had abused its discretion in determining the one common issue was more important than the many distinct and important uncommon questions in the litigation, and therefore, the case was unsuitable for class-action treatment.
The 11th Circuit agreed with Humana that claims for breach of contract involves the terms of the parties' agreement and common questions rarely will predominate if the terms of each contract vary in substance, as in this case. In addition, the laws of the six states where the class member hospitals are located would apply both to the agreements and the interpretation of extrinsic evidence, which would overwhelm the common questions of the plaintiffs. The 11th Circuit said the district court's proposed use of subclasses corresponding to the six bodies of applicable state law was an inadequate response to the differences in those laws.

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