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June 14, 1995

JOHN AMBROSINO, D.P.M., Plaintiff,

The opinion of the court was delivered by: CLAUDIA WILKEN

 Plaintiff's Motion for Summary Adjudication on his Second, Third and Fourth Causes of Action against Defendant Metropolitan Life Insurance Company was heard by this Court on March 10, 1995. Having considered the papers filed by the parties and oral argument on the motion, and good cause appearing, the Court hereby GRANTS the motion in part and DENIES it in part, as follows.

 Statement of Facts

 Plaintiff Ambrosino, a doctor of podiatric medicine, and Defendant Metropolitan, a corporation which transacts health insurance business, entered into a participating physician agreement in May, 1990. The agreement states that the relationship created by the agreement is intended to be that of independent contractors, and that either party may terminate the agreement with or without cause by giving thirty days' notice to the other party. The agreement recites that it terminates automatically, inter alia, if the participating physician is "placed on probation, or reprimanded, or fined" by an agency with disciplinary authority over the physician.

 Effective January 21, 1994, Plaintiff was placed on probation for six years by the Board of Podiatric Medicine because of a prior short-term dependency on demerol during the summer of 1991 and his conduct during that period of chemical dependency. This conduct included seeing patients while under the influence of demerol and misusing his prescription authority by using demerol prescribed for his patients. Mitigating circumstances included that the dependency resulted from proper use of demerol for severe gastro-intestinal problems, that Plaintiff had never performed any procedures on a patient while under the influence of demerol, that there was no indication that any patient had been harmed, and that Plaintiff had voluntarily entered a diversion program and had complied fully with the requirements of that program for two years. The probation imposed did not restrict Plaintiff's right to practice or to render patient care. However, it placed Plaintiff under stringent monitoring, including random urine tests to ensure that Plaintiff remained drug-free. Plaintiff was also ordered to pay $ 4000.00 to compensate the Board for its costs of investigation and prosecution.

 Prior to the imposition of probation on Plaintiff, Defendant learned of the pending charges. On or about October 5, 1993, Defendant's Provider Assessment Committee discussed Plaintiff's situation and recommended "delistment" on the basis that Plaintiff had misused demerol while involved in patient care. Network Director Marie Carpenter approved that recommendation. On January 4, 1994, Defendant gave thirty days written notice of its intent to terminate the participating physician agreement with Plaintiff. On January 17, 1994, Plaintiff requested a pre-termination hearing. On February 4, 1994, Defendant refused the request and confirmed the termination.

 Defendant maintains written criteria for the retention or termination of health care providers with which it contracts. These criteria provide for termination if the provider is placed on probation, reprimanded, or fined by any state agency in the United States that disciplines health care providers. They also provide for termination if a provider has or has had a chemical dependency/substance abuse problem, whether it is treated or untreated. It is undisputed that both of these criteria were considered in reaching the decision to terminate Plaintiff.

 In particular, Ms. Carpenter clarified that whether the health care provider's substance abuse had ever resulted in any harm to a patient and whether the health care provider posed any risk to future patients were not considered relevant to the termination decision. In the instant case, Defendant expressly did not consider whether Plaintiff had put patients at risk in the past, nor whether he posed any risk to future patients. Defendant also does not contend that Plaintiff's probationary monitoring program is inadequate to protect patient safety.

 This absolute bar imposed on care providers with a history of substance abuse is in contrast to Defendant's treatment of a physician with a history of malpractice. A physician with a history of malpractice is not terminated from participating physician status without an individualized determination of the risk he poses to future patients, based upon such factors as the number of malpractice cases and the period of time in which they arose, as well as an evaluation of the availability of alternative medical care in the area.

 Ms. Carpenter also testified on behalf of Defendant that Plaintiff's termination was based solely on the thirty days notice termination provision, not on the automatic termination provision. She further testified that, to her knowledge, no provider had ever been terminated by operation of the automatic termination provision due to the imposition of a sanction by a regulating agency, but only under the thirty day notice provision. Finally, she testified that the automatic termination provision was not in fact automatic, but rather was subject to an explicit procedure allowing Defendant to decide to retain a provider who had been sanctioned.

 Ms. Carpenter's testimony on behalf of Defendant is consistent with Defendant's responses to Plaintiff's requests for admissions. Defendant denied that it had either a practice or a policy of terminating the participating physician agreement of every physician placed on probation by a state licensing agency. There is no contrary evidence in the record to the effect that the apparent provision for automatic termination upon imposition of a sanction was in fact considered, treated or utilized as such by Defendant.

 Termination of Plaintiff's participating physician status creates a financial incentive for those of his patients insured by Defendant to find a new doctor, since these patients must pay increased deductibles and co-payments if they continue to receive care from him. In addition, other participating physicians in the network are prohibited from referring patients to Plaintiff as a non-participating provider unless there is no participating provider available.


 1. Standard for Summary Judgment

 Summary judgment is properly granted when no genuine and disputed issues of material fact remain, or when, viewing the evidence most favorably to the non-moving party, the movant is clearly entitled to prevail as a matter of law. Fed. R. Civ. P. 56; Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 91 L. Ed. 2d 265, 106 S. Ct. 2548 (1986); Eisenberg v. Insurance Co. of North America, 815 F.2d 1285, 1288-89 (9th Cir. 1987).

 The moving party bears the burden of showing that there is no material factual dispute. Therefore, the Court must regard as true the opposing party's evidence, if supported by affidavits or other evidentiary material. Celotex, 477 U.S. at 324; Eisenberg, 815 F.2d at 1289. The Court must draw all reasonable inferences in favor of the party against whom summary judgment is sought. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 89 L. Ed. 2d ...

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