Rudolph v. Pennsylvania Blue Shield

NIGRO, Justice,

concurring.

I concur in the result of the Majority Opinion. I write separately because I find that judicial review of the findings of the Medical Review Committee is not grounded in due process, but, rather, the unconscionability of the contract provisions providing for no review other than the Medical Review Committee.

*16The dissenting opinion properly observes that the due process protections afforded by the Fourteenth Amendment to the U.S. Constitution can only be invoked when the action complained of may be fairly said to be that of the state. There is no protection afforded for merely private conduct, even though discriminatory or wrongful. Pennsylvania Medical Providers Ass’n v. Foster, 136 Pa.Cmwlth. 232, 582 A.2d 888, 893 (1990). Furthermore, it has long been recognized that “state action” requires “a sufficiently close nexus between the State and the challenged action ... so that the action may be treated as that of the State itself.” Jackson v. Metropolitan Edison Co., 419 U.S. 345, 360, 95 S.Ct. 449, 458, 42 L.Ed.2d 477 (1974). This Commonwealth has therefore held that the actions of even highly regulated industries, such as utilities and insurance, do not constitute state action simply by virtue of the body of legislation under which they operate. Id. at 350, 95 S.Ct. at 453. It is only when comportment with a specific state regulation compels the private entity to act in derogation of the Fourteenth Amendment that obeisance to such directive becomes state action. Id. at 357, 95 S.Ct. at 456. See also Flagg Bros., Inc. v. Brooks, 436 U.S. 149, 98 S.Ct. 1729, 56 L.Ed.2d 185 (1978); Moose Lodge No. 107 v. Irvis, 407 U.S. 163, 92 S.Ct. 1965, 32 L.Ed.2d 627 (1972); Murphy v. Harleysville Mutual Ins. Co., 282 Pa.Super. 244, 422 A.2d 1097 (1980).

The Professional Health Services Plan Corporations Act, 40 Pa.C.S. § 6328 et seq., regulates health insurers such as Blue Shield, a private, non-profit corporation. The Act requires that disputes relating to the professional health services rendered by physician providers “shall be considered and determined only by the health service doctors as selected in a manner prescribed in the bylaws of the professional health service corporation.” 40 Pa.C.S. § 6324(c). The fact that state regulation refers such disputes to Blue Shield’s bylaws does not alone convert the actions of Blue Shield into that of the state. Foster, 582 A.2d at 893. Thus the due process protections of the Fourteenth Amendment are not applicable *17to the reimbursement review process afforded provider physicians who contract with Blue Shield.

The standard contract between Blue Shield and its participating physicians requires that, in exchange for being registered as a Blue Shield provider, the physician agrees to be governed by the Regulatory Act and the bylaws of Blue Shield. Insurance contracts such as this are therefore generally viewed as contracts of “adhesion.” Bishop v. Washington, 331 Pa.Super. 387, 400, 480 A.2d 1088, 1094 (1984). Under such a contract, the parties are usually not of equal bargaining power and the weaker party must adhere to the terms of a form contract which are not negotiable. Id. In other words, its terms are not bargained for but rather dictated by the insurer. Antanovich v. Allstate Ins. Co., 507 Pa. 68, 87, 488 A.2d 571, 581 (1985). Not every such contract is necessarily unconscionable. Once a contract is deemed to be one of adhesion, its terms must be analyzed to determine whether the contract as a whole, or specific provisions of it, are unconscionable. Denlinger, Inc. v. Dendler, 415 Pa.Super. 164, 608 A.2d 1061 (1992).

The doctrine of unconscionability is both a statutory and a common law defense to the enforcement of an allegedly unfair provision in a contract. Wagner v. Estate of Rummel, 391 Pa.Super. 555, 561, 571 A.2d 1055, 1058 (1990) alloc. denied, 527 Pa. 588, 588 A.2d 510 (1991). Furthermore, whether a contract or clause is unconscionable is a question of law for the court. Bishop, 331 Pa.Super. at 399, 480 A.2d at 1094. This Court has adopted the definition of unconscionability articulated by Judge Skelly Wright in Williams v. Walker-Thomas Furniture Co., 350 F.2d 445 (D.C.Cir.1965):

Unconscionability has generally been recognized to include an absence of meaningful choice on the part of one of the parties together with contract terms which are unreasonably favorable to the other party.

Witmer v. Exxon Corp., 495 Pa. 540, 551, 434 A.2d 1222, 1228 (1981).

*18The bylaws of Blue Shield, which provide that disputes regarding reimbursements between the corporation and the provider physician be determined by a Medical Review Committee, have the appearance of “fairness” because a majority of the Committee must be doctors, resembling a “peer review” body. However, a closer examination reveals that each of the members of the Committee is appointed by the chairman of the Board of Directors of Blue Shield and a majority of those members must themselves be members of the Board of Directors or members of the corporation. The Committee therefore has every reason to be biased in favor of the company whose chairman appointed it and in keeping with its fiduciary responsibility to the financial interests of the corporation. If the bylaws are interpreted as to rule out de novo judicial review of such disputes, requiring a provider physician to agree to such terms is oppressive and therefore unconscionable since meaningful review is merely illusory.

This Court has explained the circumstances under which we may determine whether public policy is violated by a particular insurance clause:

Public policy is to be ascertained by reference to the laws and legal precedents and not from general considerations of supposed public interest. As the term “public policy” is vague, there must be found definite indications in the law of the sovereignty to justify the invalidation of a contract as contrary to that policy....
It is only when a given policy is so obviously for or against the public health, safety, morals or welfare that there is a virtual unanimity of opinion in regard to it, that a court may constitute itself the voice of the community in so declaring. There must be positive, well-defined, universal public sentiment, deeply integrated in the customs and beliefs of the people and in their conviction of what is just and right and in the interests of the public weal ... Only in the clearest cases, therefore, may a court make an alleged public policy the basis of judicial decision.

*19Hall v. Amica Mutual Ins. Co., 538 Pa. 337, 347-48, 648 A.2d 755, 760 (1994) (citations omitted). Such a violation of public policy is instantly present.

Blue Shield’s contract of adhesion presents provider physicians with no choice but to accept that their adversary is also the final adjudicating authority. As a consequence, the provider physician is often “stuck” with making treatment decisions based, not in the best medical interests of the patient, but on likelihood of reimbursement. Thus, an unconscionable contract, driven substantially by economics favorable to Blue Shield, may ultimately result in the physician’s being hamstrung in providing the best possible medical care for the patient. I believe that such is contrary to the “beliefs of the people and ... their conviction of what is just and right and in the interests of the public weal ...” and, as such, requires this Court to interpret the intent of The Professional Health Services Plan Corporations Act to include impartial judicial review of the decisions of Blue Shield’s self-serving Medical Review Committee. I therefore concur in the result of the Majority Opinion and would affirm the decision of the trial court on the aforementioned basis.