Barriers Preventing Suits Against HMOs Are Tumbling

By John Thomas, Associate Editor
November 1, 1999 - Last updated: May 31, 2011

Slowly, and it would appear surely, the barriers preventing patients from suing health maintenance organizations (HMOs) for denial of necessary medical care are tumbling down. Some of those walls are being eradicated by legislation, others by judicial review on both the state and federal levels. The evidence was clear well before the U.S. House passed its Patient Rights legislation on Oct. 7

The 25-year-old Employee Retirement Income Security Act (ERISA), has made it nearly impossible for patients to sue their HMOs and other insurance carriers. ERISA was enacted partly because Congress wanted employers to establish health and pension plans without being exposed to expensive litigation.

ERISA, of course, pre-dates managed care, but courts have been reluctant to allow lawsuits based on denial of benefits. As a result, patients have been filing cases that question the quality of care they have received from their HMOs.

Several states have been active in enacting strong patient protection laws and the U.S. Supreme Court ruling expected next June could change the face of managed care.

In a closely watched development, California Gov. Gray Davis signed a series of bills in late September that give residents of that state the right to sue HMOs for punitive damages under certain conditions.

The legislation, which becomes effective Jan.1, 2001, is being called the most ambitious managed care reform package in the nation by industry observers. The bill originally included significant emotional distress as a cause of action, but that provision was removed at the last moment.

Under the measure, patients would have the right to sue if they can demonstrate significant harm, which is defined as “loss of life, loss or significant impairment of limb or bodily function, significant disfigurement, severe and chronic pain, or significant financial loss.”

The legislation also requires HMOs to pay for second opinions on some treatments, cover the testing and treatment of breast cancer, pay for contraceptives and expand coverage for serious mental health illnesses.

The action was closely watched since California often sets the trend that is followed by other states. California, after all, was where HMO medicine was first engineered, and now it appears the first state to pioneer HMO reform.

Several states have tightened the noose on HMOs this year.

Actually, California is the second state to allow patients to sue HMOs for denying care. Texas allows patients to seek damages, and the first case filed there concerns a man who was forced by his HMO to leave a mental health facility before his doctor thought prudent. The man went home and killed himself, the night he was discharged.

Georgia, Missouri and Louisiana have tough new procedures that permit patients to sue HMOs in state court over HMO decisions that denied medically necessary health care. All states have some form of legislation to protect consumers in managed care, and 30 have established external appeals procedures for patients who are denied care by their HMOs.

Meanwhile, in recent months, judges in 15 states, from California to New York have forced HMOs to defend their actions in cases involving suicide, heart attacks, sudden infant syndrome, cancer and other illnesses.

Supreme courts in Pennsylvania, Illinois and New York have ruled that patients can used sue?? HMOs for malpractice on the grounds that what treatments the companies will cover amount to medical care.

Courts in Pennsylvania have allowed two lawsuits against HMOs to go to trial in the last year. In one case, a man said he had become a permanent quadriplegic because of a three-hour delay in his transfer to a university hospital for treatment of an infection in his spinal cord.

The health plan said ERISA barred such claims, but the court disagreed, saying, “Congress did not intend to pre-empt state laws which govern the provision of safe medical care,” nor did it intend to prevent lawsuits making negligence claims against an HMO.

In the second case in Pennsylvania, a state appeals court ruled that an HMO could be sued for medical malpractice committed by professionals under an HMO’s direction. That case involved the 1992 death of a prematurely born infant. The parents allege that the doctor and telephone triage nurses for HealthAmerica failed to recognize that the mother, only five months pregnant, was entering labor and did not stop her from delivering.

In early October, the Illinois Supreme Court ruled that a patient could sue an HMO. “Where an HMO effectively controls a physician’s exercise of medical judgment and that judgment is exercised negligently, the HMO cannot be allowed to claim that the physician is solely responsible for the harm that results,” the court ruled.

The ruling came in a case of a Chicago woman who was told by her doctor to have an expensive diagnostic test to determine the cause of mouth pain. Her HMO, however, initially refused to approve payment for the test, a magnetic resonance imaging examination.

A year later the HMO relented and when the woman was tested, doctors found that cancer had penetrated the base of her tongue. She later died.

“HMO accountability is essential,” because the organization is a for-profit venture, the court ruled. The court said that HMOs act as health-care providers and not just as insurers since their rules on coverage affect doctors’ decisions.

In another Illinois case, a federal district court ruled that a women could sue her HMO on the grounds that its nurses failed to diagnose her husband’s cardiac distress over the telephone. A nurse told the 42-year-old man that his chest pain was probably a result of “excess stomach acids,” but he died a few hours later of a heart attack.

The court said that since the case involved “quality of care,” and not a denial of benefits, she could press her claim under the state’s wrongful death statute.

New York’s highest court ruled earlier this year that ERISA does not bar a widow’s lawsuit against U.S. Healthcare for allegedly delaying medical care to her husband and causing him to suffer a fatal heart attack.

The ruling was seen as a victory for the U.S. Labor Department, which filed an amicus brief in the case as part of its ongoing campaign to roll back ERISA preemption interpretations.

In Connecticut, a federal district court ruled that the state’s largest HMO could be sued for negligence by a man whose son had committed suicide. The HMO had stopped paying for psychiatric care for the man’s son and arranged for the youth to be transferred to a drug treatment center, where he hanged himself.

In a case that could change the face of HMOs, the U.S. Supreme Court has agreed to determine whether an Illinois HMO breached a legal duty to a patient whose appendix burst during an eight-day wait for a test to diagnose her abdominal pain.

The court will hold a hearing on the case in January and a decision is expected by June.

The question in the case is whether the HMO’s financial structure, under which doctors’ compensation depended in part on their success in holding down costs, meant that its patients’ best interests did not come first, as required under a federal appeal court’s interpretation of the federal law governing employer-sponsored health plans.

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