POTENTIAL
EXPOSURE FOR CREDENTIALING, QUALITY ASSURANCE, UTILIZATION MANAGEMENT AND MEDICAL
MALPRACTICE (CON'T)
Brock D. Phillips
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.
U.S. Healthcare petitioned the U.S. Supreme Court to take the case, and in June of 2000, the court vacated the judgment and remanded the case to the Pennsylvania Supreme Court for further consideration in light of its decision in Pegram
v. Herdrich (see below). As Pappas was largely decided on state law negligence grounds, it is unclear how the Pennsylvania Supreme Court will apply the Pegram analysis (mixed coverage and treatment decisions by HMO's are not subject to a fiduciary standard under ERISA) in reconsideration. This decision should be closely watched.
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);
Thompson v. Gencare Health Systems, 202 F.3d 1072 (8th Cir. 2000)
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, spoke out strongly against ERISA preemption of state law tort claims against managed care plans. The Justice Department filed amicus briefs hostile to ERISA preemption in a significant number of cases.
Unfavorable press and the actions of the administration have created a climate in which it is likely that most or all jurisdictions will rule against preemption of medical malpractice claims.
The recent U.S. Supreme Court case of Pegram v. Herdrich is of interest on the issue of liability for malpractice claims. In this June 2000 decision, the U.S. Supreme Court overturned a decision of the 7th Circuit which had held that a physician owned HMO may be sued for breach of fiduciary duty under ERISA for adopting a financial incentive structure which rewarded the physician-owners for limiting medical treatment, tests and referrals for the HMO's subscribers. The issue of financial incentives to withhold treatment, and disclosure of such incentives were the center piece of the case, but the Court's decision reflects clear approval for the lower court trend of treating malpractice claims as not preempted.
The facts of Pegram are common to these types of cases. The patient was enrolled in a physician owned HMO and brought suit related to allegations of delayed diagnosis of appendicitis. She suffered a ruptured appendix and consequent peritonitis arising out of an alleged 8-day delay in her diagnosis. The district court granted summary judgment to the HMO, but the circuit court reversed, holding that the plaintiff had stated a viable cause of action under ERISA for breach of fiduciary duty. The 7th Circuit observed that ERISA requires plan fiduciaries to act solely in the interest of plan beneficiaries. It held that the HMO's physician owners were plan fiduciaries as they had the exclusive right to control every aspect of the HMO's governance, including resolution of claims for benefits made by subscribers. The court ruled that the plaintiff had adequately pled a breach of fiduciary duty by alleging that the HMO's financial incentive structure created a conflict of interest which encouraged the HMO's physician owners to maximize their incomes by limiting subscribers' medical treatment, testing and referrals.
The U.S. Supreme Court, in a decision announced in June of 2000, reversed the 7th Circuit, holding that the mere existence of financial incentives in a managed care plan is not, in and of itself, an actionable breach of fiduciary duty under ERISA. The foundation for the court's opinion was its conclusion that when a plan makes mixed treatment and eligibility decisions, it is not acting as a fiduciary for its insured/member. The court acknowledged that a clear dividing line between coverage decisions and treatment decisions is not easy to find in HMO type products.
What we will call pure "eligibility decisions" turn on the plan's coverage of a particular condition or medical procedure for its treatment. "Treatment decisions," by contrast, are choices about how to go about diagnosing and treating a patent' s condition: given a patient's constellation of symptoms, what is the appropriate medical response?
These decisions are often practically inextricable from one another, as amici on both sides agree. See Brief for Washington Legal Foundation as Amicus Curiae 12; Brief of Health Law, Policy, and Ethics Scholars as Amici Curiae 10. This is so not merely because, under a scheme like Carle' s, treatment and eligibility decisions are made by the same person, the treating physician. It is so because a great many and possibly most coverage questions are not simple yes-or-no questions, like whether appendicitis is a covered condition (when there is no dispute that a patient has appendicitis), or whether acupuncture is a covered procedure for pain relief (when the claim of pain is unchallenged).
