UNPUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

GERALDINE K. RICHTER,
Plaintiff-Appellant,

v.

CAPP CARE, INC.,
                                                               No. 94-2660
Defendant-Appellee.

AMERICAN ASSOCIATION OF PREFERRED
PROVIDER ORGANIZATIONS,
Amicus Curiae.

Appeal from the United States District Court
for the Eastern District of Virginia, at Alexandria.
Claude M. Hilton, District Judge.
(CA-94-614-A)

Argued: December 6, 1995

Decided: February 26, 1996

Before HALL, MICHAEL, and MOTZ, Circuit Judges.

_________________________________________________________________

Affirmed by unpublished per curiam opinion.

_________________________________________________________________

COUNSEL

ARGUED: Timothy Dean Barto, RICHTER, MILLER & FINN,
Washington, D.C., for Appellant. John Mark Murdock, EPSTEIN,
BECKER & GREEN, P.C., Washington, D.C., for Appellee. ON
BRIEF: Douglas L. Elden, Robbin C. Elden, DOUGLAS L. ELDEN
& ASSOCIATES, Chicago, Illinois, for Amicus Curiae.
Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).

_________________________________________________________________

OPINION

PER CURIAM:

Plaintiff/Appellant, Geraldine K. Richter, M.D., is a physician and
orthopedic surgeon engaged in the private practice of medicine and
orthopedic surgery in Northern Virginia. Defendant/Appellee, Capp
Care, Inc., is a managed health care company (i.e., a preferred pro-
vider organization or "PPO"). Dr. Richter sued Capp Care, claiming
that Capp Care violated the Any Willing Provider Law, Va. Code
Ann. § 38.2-3407, by refusing to accept her as a preferred provider in
Capp Care's new Northern Virginia PPO.

Virginia's Any Willing Provider Law provides in pertinent part
that:

          A. One or more insurers may offer or administer a health
          benefit program under which the insurer or insurers may
          offer preferred provider policies or contracts that limit the
          numbers and types of providers of health care services eligi-
          ble for payment as preferred providers.

          B. Any such insurer shall establish terms and conditions
          that shall be met by a hospital [or] physician. . . in order
          to qualify for payment as a preferred provider under the pol-
          icies or contracts. These terms and conditions shall not dis-
          criminate unreasonably against or among such health care

                    2
          providers. No hospital [or] physician . . . willing to meet the
          terms and conditions offered to it or him shall be excluded.
          ...

Va. Code Ann. § 38.2-3407.1

After a bench trial the district court entered judgment in favor of
Capp Care. See Richter v. Capp Care, Inc., 868 F. Supp. 163 (E.D.
Va. 1994). The court held that Capp Care was not subject to the pro-
visions of section 38.2-3407 because Capp Care is not as insurer.
Also, the court held that even if Capp Care was subject to the provi-
sions of section 38.2-3407, Capp Care did not violate that section
when it denied Dr. Richter's application to become a preferred pro-
vider. Dr. Richter now appeals.

I.

By its terms, section 38.2-3407 applies only to"[o]ne or more
insurers . . . ." While Capp Care is not an insurance company, and
Capp Care does not issue insurance policies, all of the stock of Capp
Care is owned by six insurance companies. Also, Capp Care adminis-
ters health benefit programs of various insurance company payors
(including four of its insurance company shareholders) and third party
insurer-payors (i.e., employers) throughout the United States. More-
over, the standard form of contract between Capp Care and an indi-
vidual payor (including an insurance company payor) expressly
appoints Capp Care as the payor's "Agent and Attorney-in-Fact" to
establish, manage and maintain the preferred provider organization
and network. Accordingly, Dr. Richter argues that Capp Care is sub-
_________________________________________________________________

1 The following definitions are pertinent:

          "Insurer" means an insurance company.

          "Insurance company" means any company engaged in the busi-
          ness of making contracts of insurance.

Id. § 38.2-100. Preferred provider policies or contracts are defined as "in-
surance policies or contracts that specify how services are to be cov-
ered." Id. § 38.2-3407E.

                    3
ject to the provisions of section 38.2-3407, and Capp Care, of course,
disagrees.2

We need not and do not reach this issue, however, because we con-
clude that Capp Care's decision to deny Dr. Richter's application did
not amount to unreasonable discrimination in violation of section
38.2-3407. We therefore affirm the district court's decision on that
limited ground.

II.

A.

The following facts are taken from the trial record.

In 1991 Dr. Richter received a public reprimand from the Virginia
Board of Medicine after entering into a consent order. The reprimand
was in lieu of concluding formal administrative hearings in which Dr.
Richter was accused of obtaining (by fraud) and possessing Schedule
IV controlled substances, Ativan and Halcion.

The consent order provided that Dr. Richter agreed with the recom-
mendations of a team of doctors that evaluated her medical condition.
The recommendations specified that she should receive individual
therapy, develop better methods with the help of a psychologist for
dealing with stress in her life, and "[if] people still felt that alcohol
and drugs were an ongoing factor in her life, than[sic] she should
agree to submit to" drug testing. At trial Dr. Richter testified that she
did not seek any counseling or therapy after the issuance of the repri-
mand because she "didn't need it."

In 1993 Capp Care contracted with various health care providers
in Northern Virginia in order to establish and operate a new PPO net-
work in Northern Virginia. Capp Care entered into an agreement with
_________________________________________________________________
2 The American Association of Preferred Provider Organizations has
filed an amicus curiae brief in support of Capp Care's position, asserting
that "the extension of section 38.2-3407 to non-insurer PPOs is contrary
to public policy advocating the use of managed care organizations to pro-
vide high quality health care at reasonable costs."

                     4
Northern Virginia Provider Services, Inc. ("NVPSI"), whereby all
NVPSI participating physicians would be offered the opportunity to
join Capp Care's Northern Virginia PPO network and to qualify for
payments as preferred providers. Under the agreement NVPSI agreed
to provide its members with information concerning Capp Care's
Northern Virginia PPO network, a copy of Capp Care's standard form
of Provider Agreement (with Amendments thereto), and a copy of a
release authorizing NVPSI to provide Capp Care with certain infor-
mation for credentialing purposes.

The agreement between Capp Care and NVPSI also provided that:

         CAPP CARE agrees to accept a copy of the credentialing
         application and related data (including periodic updates in
         connection with recredentialing) submitted to NVPSI by
         each NVPSI physician in lieu of requiring the physician to
         submit a new credentialing application (or separate updates
         in connection with recredentialing). CAPP CARE reserves
         the right to request additional information in addition to the
         information set forth in the physician's NVPSI application
         and reserves the right to make all final decisions as to
         whether a physician participates in the network. Any request
         by CAPP CARE for additional information in connection
         with initial credentialing or recredentialing NVPSI members
         must be made to NVPSI and CAPP CARE must demon-
         strate that such additional information is reasonably neces-
         sary for its credentialing decisions.

Dr. Richter is a member of NVPSI. In contemplation of the formal
signing of the Capp Care/NVPSI agreement, NVPSI sent its members
a "Contract Overview" outlining the steps its members needed to take
in order to become a preferred provider in Capp Care's Northern Vir-
ginia PPO network.

The Contract Overview explained that Capp Care would enter into
individual contracts with those members of NVPSI who wished to
become preferred providers. The Contract Overview further explained
(1) that "NVPSI physicians who elect to participate in this arrange-
ment will be notified by Capp Care of their effective date following
submission of a signed Provider Agreement and Capp Care's review

                   5
of credentialing information," (2) that "[a]ll NVPSI physicians are eli-
gible to participate with Capp Care as preferred providers, subject to
review of physician credentials by Capp Care," and (3) that "Capp
Care has agreed to rely on NVPSI's physician information in connec-
tion with initial credentialing in lieu of submission of a Capp Care
physician application."

Dr. Richter signed the Provider Agreement and authorized NVPSI
to release her credentialing information. Evidently, the credentialing
information did not include information concerning Dr. Richter's
public reprimand because the reprimand did not fall into any category
of information about which Dr. Richter was required to inform
NVPSI or about which NVPSI was required to inform Capp Care.
Using publicly available information, however, Capp Care learned of
Dr. Richter's reprimand and rejected her application to become a pre-
ferred provider.3

This was not the first time that Dr. Richter had failed to gain accep-
tance in a PPO in the aftermath of her public reprimand. Since 1991
she had been rejected by PPOs or HMO networks on several occa-
sions, and her membership in two PPOs had been terminated. Never-
theless, after making several attempts to have Capp Care reconsider
its decision, Dr. Richter filed her complaint alleging that Capp Care
violated Virginia's Any Willing Provider Law, Va. Code Ann. § 38.2-
3407.

B.

The district court rejected Dr. Richter's claim. The court found that
Dr. Richter "was informed, in writing, that as one of the terms and
conditions for membership she would have to be credentialed by
Capp Care. She similarly was advised that acceptance of her applica-
tion was contingent upon such credentialing by Capp Care." Richter,
868 F. Supp. at 165. The district court further found that "Capp Care
rejects the applications of all physicians who have been disciplined by
state medical boards for conduct of the type for which plaintiff was
_________________________________________________________________
3 Specifically, Capp Care learned of the disciplinary action against Dr.
Richter through a book entitled 9479 Questionable Doctors and newspa-
per articles received from a clipping service.

                    6
reprimanded" and that Capp Care will reconsider such applications
"where the physician provides documentation he or she has under-
gone treatment for the conditions which caused the conduct." Id.

The district court then found that "Capp Care rejected plaintiff's
application because of her reported disciplinary action by the Virginia
Board of Medicine" and that "Capp Care's use, in the credentialing
process, of information about plaintiff's disciplinary action is consis-
tent with credentialing practices throughout the medical community."
Id. The court also found that the publicly available information upon
which Capp Care relied in rejecting Dr. Richter's application "pro-
vided reliable reports of plaintiff's reprimand and the findings of the
Virginia Board of Medicine in the `Consent Order.'" Id.

Based on the foregoing, the district court concluded that "Capp
Care communicated to plaintiff, through NVPSI, the fact that creden-
tialing by Capp Care was a term and condition of acceptance" and
that "Capp Care's credentialing policy to deny the applications of
physicians who have been disciplined for professional misconduct,
did not discriminate unreasonably against plaintiff." Id. at 167. The
court emphasized that Dr. Richter had failed to show that "Capp Care
accepted the applications of other similarly situated physicians who
were disciplined by the Virginia Board of Medicine or that Capp
Care's consideration, in its credentialing, of her reprimand by the Vir-
ginia Board of Medicine for professional misconduct is an unreason-
able criterion." Id. The district court therefore entered judgment in
favor of Capp Care.

On appeal Dr. Richter challenges these factual findings and legal
conclusions. She claims that "credentialing" by Capp Care was not a
term and condition for membership in Capp Care's Northern Virginia
PPO and that Capp Care agreed not to examine any credentialing
information other than that provided by NVPSI. In addition, Dr. Rich-
ter claims that the public information relied upon by Capp Care was
not reliable, that as a fully licensed physician she was prepared to
comply with all terms and conditions for membership in Capp Care's
Northern Virginia PPO, and that Capp Care had accepted physicians
in the past who had been disciplined for matters related to substance
abuse. Thus, Dr. Richter believes that the terms and conditions under

                    7
which Capp Care rejected her application unreasonably discriminated
against her in violation of section 38.2-3407.

III.

We review the district court's findings of fact under the "clearly
erroneous" standard, Fed. R. Civ. P. 52(a), and we review de novo the
district court's conclusions of law. E.g., Salve Regina v. Russell, 499
U.S. 225, 231 (1991). Findings of fact are clearly erroneous only
when the reviewing court, after having considered all of the evidence,
is "left with the definite and firm conviction that a mistake has been
committed." United States v. Gypsum Co., 333 U.S. 364, 395 (1948).
No such mistake has been made here.

A.

The trial record shows that Dr. Richter was on notice that creden-
tialing was a term and condition for her acceptance as a preferred pro-
vider in Capp Care's Northern Virginia PPO. In particular, the
Provider Agreement expressly stated that Capp Care"reserves the
right to make all final decisions as to whether a physician participates
in the network." Likewise, the Contract Overview provided to Dr.
Richter stated that credentialing was a term and condition that had to
be met before Capp Care would accept a preferred provider applica-
tion. Accordingly, we agree with the district court that "Capp Care
communicated to plaintiff, through NVPSI, the fact that credentialing
by Capp Care was a term and condition of acceptance."

Faced with this evidence, Dr. Richter argues that in making its cre-
dentialing decisions Capp Care agreed not to examine any informa-
tion other than that provided by NVPSI. Therefore, according to Dr.
Richter, Capp Care could not examine publicly available information
when making its credentialing decision. We cannot accept Dr. Rich-
ter's argument.

While it is true that Capp Care agreed that it would rely upon a
physician's NVPSI application in connection with initial credentialing
and that any request for additional information in connection with cre-
dentialing would be made to NVPSI, nowhere did Capp Care waive

                    8
the right to look at relevant information -- especially publicly avail-
able information. Indeed, when read in context, both the Provider
Agreement and Contract Overview make clear that Capp Care merely
agreed that it would look to NVPSI to obtain credentialing informa-
tion and that Capp Care would not request additional credentialing
information directly from a physician. Capp Care did not, however,
agree to base its credentialing decisions exclusively upon information
provided by NVPSI or to refrain from examining information readily
available to any member of the public.

Furthermore, it is reasonable (and obvious) to assume that Capp
Care would examine publicly available information bearing on the fit-
ness of an applicant to practice medicine. And, of course, Dr. Richter
knew that her reprimand was public information and that other PPOs
had rejected her application to become a preferred provider as a con-
sequence of her reprimand. It therefore should not have come as any
surprise to Dr. Richter that Capp Care would take her public repri-
mand into account in making its credentialing decision. Accordingly,
we will not disturb the district court's decision on this ground.

B.

Dr. Richter also argues that it was improper for Capp Care to rely
upon newspaper articles describing the disciplinary action against her
because there were conflicts between the reports in different newspa-
pers and that Capp Care should have followed up with an independent
investigation of its own. There is no dispute that Dr. Richter was pub-
licly reprimanded by the Virginia Board of Medicine. Therefore, so
long as Capp Care did not discriminate unreasonably against Dr.
Richter when it rejected her application based on that reprimand, it is
of no consequence whether there were actual conflicts in the newspa-
per clippings or whether it would have been better if Capp Care had
conducted its own investigation.

Dr. Richter contends, however, that discrimination occurred here
because she continues to be fully licensed to practice medicine in Vir-
ginia, and thus Capp Care was obligated to accept her application.
That argument makes little sense. In effect, it would eviscerate Vir-
ginia's Any Willing Provider Law by precluding a PPO from setting
any term or condition for acceptance other than one ensuring that a

                    9
preferred provider is licensed to practice medicine. Virginia certainly
intended -- and section 38.2-3407 makes clear-- that a PPO may
demand that their preferred providers meet standards above merely
being licensed to practice medicine.

Here, the trial record shows that the Virginia Board of Medicine
publicly reprimanded Dr. Richter after she was accused of obtaining
(by fraud) and possessing Schedule IV controlled substances. The
public reprimand was part of a consent order to which Dr. Richter
agreed in lieu of concluding the formal administrative hearings insti-
tuted against her. True, Dr. Richter did not lose her medical license
as a result of the reprimand, but this does not mean that Capp Care
violated Virginia's Any Willing Provider Law when it rejected her
application based on that reprimand.

Similarly, the fact that Capp Care had accepted applications from
other physicians who had been disciplined for matters related to sub-
stance abuse does not mean that Capp Care discriminated unreason-
ably when it refused to accept Dr. Richter's application. Dr. Richter
testified at trial that she has not received any counseling or therapy
since the issuance of the reprimand because she"didn't need it." Yet,
as the district court found, "Capp Care rejects the applications of all
physicians who have been disciplined by state medical boards for
conduct of the type for which plaintiff was reprimanded," but Capp
Care will reconsider such applications "where the physician provides
documentation he or she has undergone treatment for the conditions
which caused the conduct." Richter, 868 F. Supp. at 165. Dr. Richter
has not demonstrated to us that these factual findings are clearly erro-
neous. We, therefore, agree with the district court that Capp Care's
decision to reject Dr. Richter's application did not violate Virginia's
Any Willing Provider Law.

IV.

Based on the foregoing, the judgment of the district court is
affirmed.

AFFIRMED

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