Court hears debate on right to sue HMOs over cost-cutting decisions

Doctor-owned company says patient's case poses threat to medical system

February 24, 2000|By Lyle Denniston | Lyle Denniston,SUN NATIONAL STAFF

WASHINGTON -- The Supreme Court appeared torn yesterday between a desire not to interfere with cost-cutting by HMOs and a curiosity about ways to let patients sue if medical decisions are made just to save money -- especially when doctors pocket some of the savings.

At a hearing on the first managed care lawsuit to reach the court, the justices engaged in a lively exploration but gave no clear hints of how they are leaning on patients' rights to sue HMOs or their medical staffs over flawed treatment.

A lawyer for a health maintenance organization in Bloomington, Ill., tried to convince the court that the future of medical care -- "its delivery and its regulation" -- was riding on the outcome of the case.

But a lawyer for an Illinois patient whose stomach pain was misdiagnosed by an HMO doctor before her appendix burst said her lawsuit sought nothing more than to hold doctors legally to blame "when they are getting paid -- by HMO bonuses -- for denying care."

Neither attorney appeared to have won over the court, leaving the justices to sort out in private deliberations over the next couple of months how far to go to authorize patients' lawsuits.

The justices' reactions yesterday ranged widely, from comments that the courts should not interfere with a managed care system Congress has authorized, to paying close attention to the details of cost-saving within HMOs that sometimes affect the care patients are given.

The industry is watching the case closely. Carter G. Phillips, a Washington lawyer for the Illinois HMO and the doctor involved, began by saying it "was no exaggeration to say that the future of medical care is implicated."

If the actions of the doctor and the HMO in this case violate federal benefits law, Phillips contended, "all managed care does, as well."

But James P. Ginzkey, a lawyer for the Illinois patient, Cynthia Herdrich, countered that the only real question for the court is: When do a doctor's bonuses for cost-saving treatment decisions amount to "undue influence" on medical judgment?

Though pressed by several justices to define that phrase more precisely, Ginzkey did not do so. But he offered an example: "If I'm a physician making $100,000 and have two kids in college, and I can make another $50,000 in incentives -- by limiting costly treatment -- that is undue influence."

Among the justices, Sandra Day O'Connor seemed the most skeptical about turning patients loose to sue doctors and HMOs. She pointed out that Herdrich has won a state malpractice case against her doctor.

O'Connor also questioned the need for further legal remedies: "Why should the court get onto this slippery slope, when Congress built this scheme of privately owned systems, with inherent incentives to keep costs down? Why should the court get involved in this messy business of deciding what is an undue influence and what isn't?"

In the Illinois case, the doctors who practice in the HMO involved also own it, and they benefit from cost-containment measures. Herdrich's lawsuit claims that her appendix ruptured because the doctor postponed a diagnostic test as a way to save the HMO money. Her case has yet to go to trial.

While her lawyer sought yesterday to show that it was unusual for an HMO to be owned by the doctors so that they receive the full benefit of cost containment, the HMO's lawyer said that the financial incentive arrangement is very common in the industry.

James A. Feldman, a Justice Department lawyer representing the Clinton administration, urged the justices to draw a clear distinction between treatment decisions made by doctors, something that should be left to state medical malpractice law, and health plan management, something that could raise issues under federal benefit law.

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