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Suit Aftermath: What Are HMOs' Softest Spots?

MANAGED CARE February 1998. © MediMedia USA
News and Commentary

Suit Aftermath: What Are HMOs' Softest Spots?

MANAGED CARE February 1998. ©1998 Stezzi Communications

Kaiser Permanente has settled a wrongful-death lawsuit, brought by the family of a Texas man, for an eye-popping $5.3 million. The family claimed Ronald Henderson's heart attack was the result of a Kaiser cost-cutting plan that left him untreated for heart disease.

Kaiser lawyers argued that Henderson was an overweight smoker who did not obey doctors' orders, and that cost-cutting had nothing to do with his death. But during legal procedures, it was revealed that a Kaiser executive was intoxicated when he developed the HMO's plan to slash hospital admissions in North Texas.

"I don't know how many Wild Turkeys on the rocks I had," Kaiser executive John Vogt said in court papers, the Associated Press reported. The HMO settled after a test jury said it would have awarded the family 10 times the amount if the case had gone to trial.

Shortly after the Kaiser settlement — timing is everything --a study by CNA HealthPro, the insurance conglomerate, indicated that health plans should review their credentialing and denial-of-benefits/utilization-review policies as a step toward reducing liability expenses. That the Kaiser case dwarfs any settlement reported in the CNA study might make plans' risk managers nervous enough to recheck operations.

The study indicates that managed care plans are most vulnerable in the area of vicarious liability — negligence arising from medical malpractice (failure to diagnose or coordinate care). Between 1992 and 1996, 36 percent of successful claims involved vicarious liability. But claim for claim, the costliest settlements were for denial of benefits or utilization review, followed by problems rooted in sloppy credentialing practices. The highest single payment based on benefits-denial/UR was $600,000, while that for vicarious liability was $50,000 --one one-hundredth the size of the Kaiser settlement.