Patients challenge HMOs in wave of medical lawsuits

At least 20 cases pending amid fears that finances determine health care

February 20, 2000|By Lyle Denniston | Lyle Denniston,SUN NATIONAL STAFF

WASHINGTON -- As Congress ponders cures for complaints about health care, patients are not sitting idly in an anteroom, awaiting results. With the help of inventive lawyers, they are rushing to courts, making some progress toward a patient's "bill of rights."

The wave of lawsuits, aimed at the managed health care industry, grows out of rising suspicions by many patients that the financial bottom line, not a medical chart, determines the care they receive -- or don't receive -- from doctors or health groups.

After one recent victory in a lower court, Lynn Dowd, a Chicago lawyer, said: "I don't think anyone with a straight face can deny that not all, but some, HMOs are interfering with the care patients are receiving from their doctors, to the patients' detriment."

A Washington lawyer for managed-care clients, Stephanie W. Kanwit, countered last week that "the companies feel these lawsuits are legalized blackmail, raising highly inflammatory charges" -- including "racketeering."

Now, the first of the new wave of cases has reached the Supreme Court, for a hearing Wednesday.

The cases, in a sometimes coordinated flurry that reaches across the managed-care industry, echo the lawsuits that have targeted the tobacco industry. And there appears to be no shortage of patients willing to be plaintiffs.

Some of the new challenges look promising, even though malpractice lawsuits against health plans have seldom succeeded, and lawsuits based on federal employee benefit law have gained little for patients.

New interpretations of existing laws appear to be making the difference, when courts are persuaded to embrace them.

Patients have had success with two highly visible lawsuits -- the two cases being watched most closely by the medical community, patients, insurers, lawyers and investors. Each case -- both of them from Illinois -- has some way to go before being resolved.

More than 20 other major lawsuits are pending, including a case in federal court in Baltimore. That lawsuit claims that Blue Cross Blue Shield of Maryland violated federal law -- including the anti-racketeering law -- by using cost-limiting standards to deny coverage for mental health and substance abuse patients.

Supreme Court case

One of the Illinois cases being followed most closely is the one at the Supreme Court. The hearing on it this week might provide clues about the justices' willingness to permit the federal courts to establish new rights to sue.

That case asks the justices to clarify when doctors in a medical plan violate federal law by reducing patient care to save money for the plan -- and, perhaps, to reap financial benefits themselves.

The court could decide that case on narrow, technical grounds. But the health care industry is acting as if the outcome will be far more decisive than that.

The patient gained in lower court the right to sue an HMO for a doctor's cost-based medical decision. Industry groups have warned the court that the case raises the risk that health plans will be "continuously second-guessed and penalized" by courts.

The health plan and the doctor in that case, Dr. Lori Pegram of Bloomington, Ill., have called the lower-court decision "dangerous and disruptive to health care providers and the nation's overall system of health care delivery."

The patient, Cynthia Herdrich, claimed that her appendix ruptured after Pegram made a faulty diagnosis of stomach pain and postponed a diagnostic test too long. The doctor ordered the postponement, Herdrich contended, so that a less expensive exam could be done in a facility of that health plan instead of at a Bloomington hospital. Pegram, as a member of the plan, stood to gain a financial bonus for limiting the cost.

A federal appeals court, delivering a stern lecture to the managed-care industry, ruled in August that Herdrich's lawsuit could go forward under federal employee benefit law. The doctors who run the health plan, that court said, are liable if their decisions violated their obligation under federal law to operate the plan solely for the patients' benefit.

"We must remember," the appeals court said, "that doctors, not insurance executives, are qualified experts in determining what is the best course of treatment and therapy for their patient.

"Medical care should not be subject to the whim of the new layer of insurance bureaucracy now dictating the most basic, as well as the important, medical policies and procedures from the boardroom."

The investment firm of Salomon Smith Barney, in an analysis of the new wave of lawsuits, concluded that the Pegram case "will dominate health insurance industry publicity" through the first half of the year.

During the second half of the year, the firm said, attention will switch to the second of the two most prominent cases, going to trial in a state court in Illinois in November.

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