LIABILITY
OF MANAGED CARE PLANS FOR MEDICAL MALPRACTICE
& CREDENTIALING/QA/UM EXPOSURE
(CONTINUED)
by
Brock D. Phillips
Introduction
Theories of Malpractice
Liability Arising Directly Out of Plan Activities
Indirect or Vicarious
Liability of Plan For Malpractice of Panel Members
End of ERISA Preemption
for Claims of Malpractice
Liability Under ERISA
For Treatment Disincentives or Failure to Disclose Treatment Disincentives
Strategies to Reduce
Liability for Malpractice Claims
Suits by Providers
Against Plans for Wrongful Exclusion Expulsion
4. End of ERISA Preemption for Claims
of Malpractice
Since
the U.S. Supreme Court's decision in Pilot Life Insurance Co. v. Dedeaux both
federal and state courts have grown accustomed to the notion that claims against insurers
and health plans are preempted by ERISA when the coverage is obtained through qualifying
employment. This decision constituted a sea change in the evolving law of bad faith since
in many states, bad faith claims held the promise of emotional distress and even punitive
damages. ERISA had (and still has) no provision for such damages. The only damages
recoverable under an ERISA claim are the cost of disputed benefits and attorneys' fees.
The Pilot Life decision greatly discouraged claims against health plans over
disputed benefits and the carriers saw their inventory of such cases decline
significantly.
Managed
care plans sued for medical malpractice under state or common law tort theories have been
quick to invoke ERISA preemption. The courts were initially inconsistent in their
consideration of the question of ERISA preemption of medical malpractice type tort claims
against health plans. Through the mid-1990’s decisions could be found which supported
virtually every possible conclusion.
However,
by 1999, it is quite apparent that courts are unlikely to hold that a claim for medical
malpractice asserted against a managed care plan is preempted by ERISA. The, courts have
distinguished between disputed claims for plan benefits, which are preempted, and
claims for ordinary negligence or malpractice, which more and more courts are holding are not
preempted by ERISA. Examples of three recent cases which demonstrate this trend follow.
Pappas et al
v. Asbel, D.O. & U.S. Healthcare
In
this case the Pennsylvania Supreme Court struck down an ERISA preemption defense, saying
that negligence claims against an HMO do not "relate to" an ERISA plan. Pappas
had been admitted to Haverford Community Hospital complaining of paralysis and numbness in
his extremities. He was covered by HMO-PA, operated by U.S. Healthcare. A staff physician
diagnosed an epidural abscess pressing on Pappas’ spinal column, and declared it a
neurological emergency after consulting with both neurologists and a neurosurgeon. The
physician made arrangements for immediate transfer of Pappas to Jefferson University
Hospital, but when the ambulance arrived for the transport, the physician was informed
that U.S. Healthcare was denying authorization for transfer to Jefferson, instead
directing that the patient be taken to Hahnemann University, Temple University or Medical
College of Pennsylvania (MCP). The physician contacted Hahnemann, which delayed more than
2 hours before telling him it would not have information on its ability to accept the
patient for at least another half-hour. At that point the physician arranged for the
patient to be transferred to MCP, more than four hours after initial admission. Pappas is
now a permanent quadriplegic from compression of his spine by the abscess.
Pappas
sued physicians as well as Haverford Hospital, both of which cross-complained against U.S.
Healthcare for its role in delaying the transfer. U.S. Healthcare filed a motion for
summary judgment asserting ERISA preemption. The matter went to the Supreme Court of
Pennsylvania which cited the U.S. Supreme Court decision in the case of New York State
Conference of Blue Cross & Blue Shield Plans v. Travelers Ins. Co. for the
proposition that the scope of ERISA preemption is not is broad as earlier cases suggested.
The Pennsylvania court observed that congress did not intend to preempt state laws which
govern the provision of safe medical care.
Blaine v.
Community Health Plan
In
this case a New York State judge ruled that neither ERISA nor New York Public Health Law
§ 4410 insulate a health plan from liability claims. The judge observed that the plan is
in the same position as any other health care provider with direct responsibility to the
patient.
Blaine
was initially treated by a Community Health Plan physicians’ assistant for back pain.
Pregnancy complicated her back problems and she underwent a discectomy and claims
additional surgery will be needed. Blaine alleges her injuries were caused by staff
negligence in failing to provide her with various diagnostic tests, and further, she
claims the Plan did not adequately supervise the assistant, nor did it have appropriate
written policies governing the use and operations of physicians’ assistants.
The
court found that the absence of a physician to treat Blaine resulted from CHP’s
unilateral determination of medical treatment. It held that the claim was not over the
withholding of benefits and therefore was not preempted by ERISA. The judge determined
that CHP erased the line between administrative and treatment functions, and may not avoid
its responsibilities to its patients by taking advantage of the confusion it created in
presenting itself and its employees as medical providers by now saying that to ask about
its failure to provide adequate care would be to inquire into its administration of the
plan.
Nealy v. US
Healthcare HMO
In
the Nealy case a New York appellate court agreed with briefs by the U.S. Dept of
Labor and New York State, holding that ERISA does not preempt a state law malpractice
claim brought against a primary care physician. Nealy was brought by the widow of a
37 year old Bronx man who died of a massive heart attack while awaiting referral to an
"in plan" cardiologist. Mr. Nealy had been treated by another cardiologist while
covered under an indemnity plan, but when his employer switched coverage to US Healthcare,
an HMO product, Mr. Nealy was denied permission to continue care with his treating
cardiologist, who was not on the HMO’s panel. He was eventually given a referral to
an "in plan" cardiologist but died before he could get in to see that physician.
In reaching its decision the New York court relied on the more recent U.S. Supreme Court
decision of New York State Conference of Blue Cross & Blue Shield Plans v.
Travelers Ins. Co.
There
are still some jurisdictions in which controlling decisions hold claims for medical
malpractice are preempted by ERISA. Some of those cases include:
Kuhl
v. Lincoln National Health Plan, 999 F.2d 298 (8th Cir. 1993);
Jass
v. Prudential Health Care Plan, 88 F.3d 1482 (7th Cir. 1996);
Tolton
v. American Biodyne, 48 F.3d 937 (6th Cir. 1995); and
Corcoran
v. United Healthcare Inc., 965 F.2d 1321 (5th Cir. 1992).
This
observer believes that even the jurisdictions where there are cases holding that claims
for medical malpractice are preempted are vulnerable to the more recent trend that such
claims are not preempted.
Some
of the leading cases finding no ERISA preemption of medical malpractice type claims
against managed care plans (in addition to the three recent cases discussed above)
include:
Dukes
v. U.S. Health Care; Visconti v. U.S. Health Care, 57 F.3d 350 (3d Cir. 1995);
Pacificare of Oklahoma v. Burrage, 59 F.3d 151
(10th Cir. 1995);
Burke
v. Smithkline Bio-Science Labs, 858 F.Supp. 1181 (M.D. Fla. 1994);
Jackson v. Roseman, 878 F. Supp. 820 (D. Md.
1995);
Independence HMO, Inc. v. Smith, 733 F. Supp. 983
(E.D. Pa. 1990);
Smith v. HMO Great Lakes, 852 F. Supp. 669 (N.D.
Ill. 1994); and
Ouellete v. Christ Hospital, 942 F. Supp. 1160
(S.D. Ohio 1996).
Factors
which may play a role in the continuing drift of courts against ERISA preemption for
malpractice type tort claims include press coverage of the issue and the position of the
Clinton administration. Although ERISA preemption of bad faith type claims is now almost a
decade old, the subject of ERISA preemption did not catch the attention of the media until
the last few years when it became more focused on "managed care" issues.
Needless to say, press coverage has been very hostile toward the concept of ERISA
preemption. The tone of articles usually suggests ERISA preemption is a shameful legal
trick which deprives injured plaintiffs of their rightful day in court.
Also
of interest is the fact that since 1996 the Clinton administration, through the Department
of Labor, has been speaking out strongly against ERISA preemption of state law tort claims
against managed care plans. The Justice Department has filed amicus briefs hostile to
ERISA preemption in a significant number of cases.
Unfavorable
press and the actions of the administration are creating a climate in which it is probably
likely that most or all jurisdictions will rule against preemption of medical malpractice
claims.
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