In December, physicians participating in Health Net received a contract addendum intended to bring the plan into compliance with the 2005 RICO settlement agreement. After reviewing the document, California Medical Association officials discovered that the addendum and the underlying contract contained language that not only violates the RICO settlement agreement, but also violates the Knox-Keene Act.

In particular, the definition of "medically necessary" in the addendum and the underlying contract is inconsistent with the terms of the RICO settlement agreement. The contract also requires contracted physicians to participate in all of Health Net's products, reversing its agreement in the settlement to not require universal participation. And if physicians decide to terminate their Health Net contracts to renegotiate rates, they could be slammed with a "renegotiation fee" equal to 3 percent of their Health Net payments for the prior 12 months.

In response, the CMA filed a dispute with a compliance dispute facilitator, a legal representative appointed by the courts to advocate on behalf of the RICO plaintiffs. The facilitator takes concerns to the payer and tries to bring the payer into compliance with the RICO settlement agreement.

"I hope our dispute with Health Net will play out the same way it did with Aetna," says Aileen E. Wetzel, associate director for the CMA Center for Economic Services. "After Aetna agreed to the terms of the RICO settlement, it began sending contracts and addendums to physicians that were noncompliant as well. So CMA filed a complaint. What resulted was Aetna sending an updated addendum that was compliant with the RICO settlement."

In the meantime, CMA officials issued a warning to Health Net physicians, suggesting they read carefully the Health Net contract and addendum before signing them. The officials emphasized that doctors do not have to accept bad contracts or contracts that are not mutually beneficial.

"We cannot tell physicians not to sign the Health Net contract," Wetzel says. "But CMA has developed a contract analysis of the Health Net addendum outlining what our concerns are and where we believe it is not compliant. Physicians need to review the addendum and determine whether or not it makes business sense for their medical practice."

The Health Net contract analysis can be viewed in the members-only section at www.cmanet.org. To access it, click on "Physician Advocacy," then "Reimbursement Advocacy" and then "Health Net Contract Analysis."