Immune from liability

The Supreme Court blocks a potentially important legal path for people who want to sue HMOs. Now, the spotlight is on Congress.

By David McGuire

Published June 13, 2000 7:00PM (EDT)

In a major setback for patients' rights activists, the U.S. Supreme Court Monday blocked a potentially important legal path for people who want to sue HMOs for delaying or denying care.

The unanimous decision involved a seemingly technical contract issue with enormous implications for patients: Can HMOs be sued for "breach of fiduciary responsibility" if they give doctors financial incentives to limit treatment? Because such incentives are the lifeblood of HMOs, the justices ruled, the court could not endorse these lawsuits without triggering an unprecedented legal attack on the managed care industry as a whole.

The court, in a sense, punted the issue to Congress. Lawmakers are debating legislation that could give patients broader rights to sue HMOs.

"With this ruling, the Supreme Court isn't just asking for congressional action, they are shouting at the top of their lungs for us to act," said Rep. Charlie Norwood, R-Ga., co-sponsor of the legislation in the House.

"No other industry in America has immunity from liability for its mistakes, and HMOs don't deserve immunity either," Sen. Edward Kennedy, D-Mass., said in a statement. "Nothing is more likely to persuade an HMO to do the right thing than the knowledge it will be held accountable if it doesn't."

The court struck down an appeals court ruling allowing a woman to sue her HMO after the company's delay in diagnosing her stomach condition resulted in a ruptured appendix.

"Congress, which has promoted the formation of HMOs for 27 years, may choose to restrict its approval to certain preferred forms, but the [Supreme Court] would be acting contrary to congressional policy if it were to entertain [a] claim portending wholesale attacks on existing HMOs solely because of their structure," Justice David Souter wrote on behalf of the court.

The managed care industry, not surprisingly, cited the decision as a major victory.

"There is a recognition here of the value that (HMOs) bring to the health care system," American Association of Health Plans spokesperson Susan Pisano said. The court recognized, too, "what a different decision would have done in terms of unraveling the system," she said.

Nearly a decade ago, Cynthia Herdrich sued the Carle Clinic in Illinois. The HMO had made her wait eight days for an ultrasound after she complained of stomach pains. While she was waiting, Herdrich's appendix ruptured, causing an infection that required surgery.

While Herdrich received a modest malpractice settlement, she also sought to sue Carle for operating in a way that encouraged doctors to delay tests.

Managed care companies have long rewarded physicians who keep a lid on costs by reducing "unnecessary" prescriptions and referrals. HMOs are typically protected from lawsuits for refusing or stalling care by arcane legislation called Employee Retirement Income Security Act. ERISA sets federal standards -- and the court's decision Monday applies to federal courts. Patients may file malpractice claims against doctors or medical facilities in state courts.

A federal judge dismissed Herdrich's claim, but a federal appeals court allowed her to sue.

Although the court all but invited Congress to act, don't expect groundbreaking legislation anytime soon. The House passed the Norwood bill last October, but lawmakers have yet to come up with an acceptable way to marry the bill with far narrower legislation drafted by the Senate.

Partisan bickering has bogged down the conference process. Congressional observers say the court's decision will do nothing to light the fire of lawmakers.

David McGuire

David McGuire is a reporter in Washington.

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