PacifiCare Resolves Texas Dispute

The memorandum should lead to a definitive settlement agreement in 30 days, PacifiCare says.

The dispute is the result of provider contracts that PacifiCare's Texas subsidiary negotiated in the 1990s. The subsidiary agreed to give the physician groups flat "capitation" payments for each primary-care patient served. The groups were supposed to use some of the revenue to pay for specialty care, but the groups failed and left many specialists unpaid.

PacifiCare originally argued that it had satisfied its obligations when it sent the three physician groups their capitation payments. It insisted that the specialists ought to try to collect from the failed physician groups.

Texas regulators argued that PacifiCare had no legal right to delegate responsibility for payments to the physician groups. The regulators sued PacifiCare over the issue in an Austin, Texas, state court in February 2002.