SUPREME COURT: Rules in Favor of HMOs
HMOs cannot be sued in federal court for offering financial incentives to doctors who curb costs, the U.S. Supreme Court unanimously ruled yesterday. According to the ruling, HMOs offering such bonuses do not violate their responsibilities under the 1974 Employee Retirement Income Security Act (ERISA) (Walsh/Goldstein, Washington Post, 6/13). Writing for the court, Justice David Souter noted, "No HMO organization could survive without some incentive connecting physician reward with treatment rationing" (Greenhouse, New York Times, 6/13). He added, "Since the provision of profit is what makes the HMO a proprietary organization," subjecting it to federal lawsuits "would be nothing less then the elimination of the for-profit" and perhaps even the not-for-profit HMO (Asseo, AP/Philadelphia Inquirer, 6/13).
Will the Ruling Hurt HMOs?
Patients can still sue HMOs in federal court under "certain limited circumstances," and yesterday's ruling "had no effect on patients' right to sue doctors and hospitals in state courts for medical malpractice," the Washington Post reports (6/13). In fact, some analysts argue that the apparent victory may come back to haunt HMOs. Gregg Bloche, co-director of the Georgetown/Johns Hopkins joint program in law and health policy, said, "The managed care industry lost by winning. The door is now open, perhaps wide open, for an influx of state cases against HMOs for withholding treatment." Additionally, the decision hinted that health plans may be responsible under ERISA to disclose financial arrangements with doctors (Appleby, USA Today, 6/13). Souter wrote: "Although we are not presented with the issue here, it could be argued that [HMOs are] a fiduciary insofar as [they have] discretionary authority to administer the plan, and so it is obligated to disclose characteristics of the plan and of those who provide services to the plan, if that information affects beneficiaries' material interests." This finding is "particularly attractive, because it does not depend on any particular plaintiff having requested the information from a particular plan," according to attorney Jerome Marcus, who is using a similar argument in an ERISA suit against managed care companies (New York Times, 6/13). Attorney Marc Machiz added, "We are going to have decisions saying HMOs must be honest and straightforward" (USA Today, 6/13). In backing HMOs, the high court overturned a 1998 decision by the Seventh Circuit Court of Appeals allowing the ERISA suit brought by an Illinois woman with undiagnosed appendicitis whose HMO forced her to wait eight days for tests (New York Times, 6/13). Her appendix subsequently burst, causing serious infection that required major surgery.
A Call for Action
Yesterday's ruling threw the issue back to Congress. "The fact is that for over 27 years the Congress ... has promoted the formation of HMO practices. ... If Congress wishes to restrict its approval of HMO practice to certain preferred forms, it may do so," Souter wrote (Washington Post, 6/13). Noting that the decision "does nothing to protect patients from HMOs that put profits ahead of patient care," Rep. Charles Norwood (R-Ga.) argued, "The Supreme Court isn't just asking for congressional action. The justices are shouting at the top of their lungs for us to act." He added, "That's why it's important that we send the president a bill that covers all Americans, provides a review process to challenge HMO decisions and holds an HMO accountable when it makes a decision that harms or kills someone" (Pear, New York Times, 6/13). FamiliesUSA Executive Director Ron Pollack agreed. He said, "The court decision clearly gives a greater sense of urgency about the conference. It's also a nod to (the House bill) -- it shows HMOs are not [currently] accountable for the care they provide."
Victory Is Sweet
HMOs hailed the decision as a victory. An American Association of Health Plans spokesperson said, "This decision has pointed us away from the legal system and toward better avenues." And a spokeperson for Senate Majority Whip Don Nickles (R-Okla.), chair of the managed care conference committee, noted, "The Supreme Court agreed that you can't sue your way to quality health care ... Opening up employers and plan sponsors to unconstrained liability would only serve to destroy an entire system of health care delivery in this country" (Fulton, CongressDaily/A.M., 6/13).