If this were a general news magazine, our tale would begin by focusing on someone who had recently won a huge settlement against an HMO. It might be Teresa Goodrich, whose husband died of stomach cancer and who sued Aetna U.S. Healthcare because the plan denied David Goodrich access to experimental treatments. (Goodrich won $120 million; Aetna is appealing.) Or it might contain quotes from the attorney for Karen Johnson, a woman who got a hysterectomy that Humana refused to pay for. (Johnson won $13 million; Humana is appealing.)
While not playing down these tragedies (no one would want to go through what Teresa Goodrich experienced the last months of her husband's life), one needs to point out that such an article would be fairly simple to write. You have good guys and bad guys. There's the David-versus-Goliath angle, human interest, corporate greed, families in crisis, courtroom drama. After writing the article, the author might want to send it to Hollywood as part of a perspective for a screenplay. He might hit it big, but he'd never quite get to the heart of the matter.
Millions of Americans belong to managed care plans. All of us can identify with Goodrich and Johnson. But that's just the problem. Juries do identify with the plaintiffs to the point where, experts believe, it would be almost impossible for an HMO to get a fair hearing.
Health plan executives should be concerned. There's a huge push to allow patients to sue employer-sponsored plans and collect punitive damages. Such measures, floated in state legislatures and in versions of federal "Patients Bill of Rights" legislation, would remove the protection these plans have enjoyed historically under the 1974 Employee Retirement Income Security Act.
There's more. Government employees, church plans, and Medicare and Medicaid recipients have always been exempt from ERISA. (David Goodrich was a government employee; Johnson is covered under her husband's government insurance plan.) But thanks to the hard-nosed approached of some federal prosecutors, the stakes may soon be raised to astronomical levels in these contests.
There are many implications, not least of which is the fact that the rush to make it easier to sue plans might backfire against patients, points out Stephanie Kanwit, L.L.B., health care expert and partner in Epstein, Becker, & Green in Washington.
"I don't think, over the long run, that you're going to get quality medical care through the tort system," says Kanwit. "It's really a lottery system where a very few individuals get an enormous amount of money."
Such logic isn't getting much play these days. Democracies get the laws they want -- or deserve, as H.L. Mencken put it -- and none of this would be possible without a large undercurrent of anger directed at managed care.
Taking the health plan's side means bucking an overwhelming public need to find a villain and beat the tar out of him. Never mind that most Americans are happy with their health care. Never mind that, were it not for managed care curbing fee-for-service medicine's ever-rising costs, many wouldn't be able to afford coverage. (Many already can't.) The HMOs-as-villains mind-set is so deeply ingrained in our culture that any voice in the popular press that doesn't parrot the party line stands out.
Tom Philp, an associate editor at the Sacramento Bee, last November wrote a column about Johnson in which -- hold on to your seats -- he took Humana's side. While acknowledging that there have been "some patients who have been truly wronged," Philp pointed out that hysterectomies are one the most overutilized procedures and that most medical experts agree with how Humana handled the situation.
How starved is the HMO industry for any hint of fair coverage? The day after the column ran, Philp says, he received a call from an HMO lobbyist at 6:30 a.m. thanking him.
"It is easy to beat up on HMOs," says Philp, who has been writing editorials for the Bee for about a year and a half. Before that, he was on the medical beat. "My two years of medical writing was an extremely humbling experience. I learned to restrain myself from quickly jumping to any kind of opinion from a small set of facts."
Thanks to his background, Philp could see that wire stories about Johnson left out important details. "They did not answer the medical questions that I had." The more he dug, the more he could see that this was not an open-and-closed case.
What the industry can learn from this experience, he says, is that the anecdotal stories HMO executives dislike so much can be used to their advantage.
"A lot of people with the managed care companies don't like anecdotal journalism because they think anecdotal journalism is bad journalism," says Philp. "But trying to tell a broader story through a specific case is a good way to work."
Maybe. But the jury of public opinion is still out concerning whether Johnson reflects ill or well on HMOs. The official jury, meanwhile, has spoken, and it wasn't good for Humana. (See "HMO Did Right by Patient but Lost the Case Anyway") Also, again, Philp is only one columnist. There are thousands of others content to trot out the stereotype.
"Our paper's editorial opinion is that we are very sympathetic to the external review process," says Philp. "That's better than trying to let a jury decide." (The external review process is being promoted by the industry as a more effective -- and far less costly -- way than lawsuits to ensure HMO accountability. Of course, critics -- including Philp -- point out that plans really started pushing for the process only after the call for lawsuits became deafening.)
What the general news magazine article would miss -- and what Philp seems to allude to -- is that there are other victims in these stories: companies that do every ethical thing possible to review care decisions but still get smashed in the courtroom.
Even an expert who seems to favor the idea of making HMOs more liable -- Alice G. Gosfield, a Philadelphia health lawyer and chairwoman of the board for the National Committee for Quality Assurance -- betrays the attitude that HMOs are, after all, corporations, and a suit shouldn't be a crisis.
"For a doctor, a malpractice lawsuit is a horrible, nightmarish thing that can ruin his career and his life," says Gosfield. "For a corporate entity like an HMO, a lawsuit is a nasty thing but it is not demoralizing. A lot of the reason this anti-HMO atmosphere exists is that, until recently, relatively few payers paid attention to the individual patient in terms of satisfaction. That has not been a priority."
This charge is not without merit, even after one acknowledges that plans do not benefit from the liability caps that were passed in many states to protect physicians during the liability crises in the 1980s.
Have HMOs brought some of this on themselves? Absolutely. Too reluctant to drop the insurer's view of physicians as "them" instead of "us," too slow in establishing external review processes, too insulated to realize just how much resentment exists in the land: To these charges the only rational plea is guilty, guilty, guilty.
Be prepared. It's advancing on many fronts. Congress is looking into it again. The Democratic Patients Bill of Rights failed by five votes in the House last year. Democrats picked up five seats in the midterm elections. There's support on the other side of the isle as well. Republican Rep. Charles Norwood of Georgia in early January introduced a bill -- the Access to Quality Care Act -- that allows patients to sue. Backers argue that plans will think hard before denying needed care. Opponents predict the suits will drive up the cost of insurance and swell the ranks of the uninsured.
Congress may reach some compromise that says, "Let's see how the external review system works before pushing expanded access to liability." Or, it may stall until after the 2000 elections. Who knows? Not state legislators, and that may be why they're not waiting for Congress to act. Nineteen states have mandated that plans establish some form of external review.
Court decisions are also not going managed care's way. Goodrich shows how much a plan could conceivably lose. Johnson illustrates that even the installation of a sound review process that leads to a reasonable medical decision might not be able to protect you.
Other decisions chip away at ERISA.
In Pappas v. U.S. Healthcare, the Pennsylvania Supreme Court ruled that ERISA doesn't apply to state laws with a "tenuous, remote" connection to benefits plans. On Feb. 12, the same court denied a petition for reargument.
Then there's Plocica v. NYLCare of Texas Inc., a case that's being watched by everyone because it is the first attempt to use recently-passed state legislation to bypass ERISA.
Of course, some argue that the situation is not that dire. The American Association of Health Plans quickly points out that only one state, Texas, has in fact passed legislation that would pre-empt ERISA.
AAHP spokesman Donald White says his organization believes that these state initiatives may be sputtering out before they get started.
More than half of the states considered liability laws in 1998 and none of them passed, says White. (Texas enacted its law in 1997.) "To us, that doesn't look like a rising tide of state liability legislation."
This could change, according to how things eventually play out in Plocica, a case in which the plaintiff charges that the plan's decision to end hospital care for a suicidal patient led to the man's death. The latest round did not go well for Aetna U.S. Healthcare, which purchased NYLCare after the suit was filed. A federal circuit judge upheld the statute while also ruling that the external review process, which was designed to provide a remedy short of court, was pre-empted by ERISA. The state is appealing.
Louis Saccoccio, the AAHP'S general counsel, points out that the other state legislative move that's gotten much attention, one in Missouri, is much less drastic.
"What Missouri did was pass a law that repealed the protection of the corporate practice of medicine," says Saccoccio. In other words, Missouri, like most states, had laws against the practice of medicine by corporations but had a special exemption for HMOs. Missouri recently eliminated that exemption so that if an HMO was sued for making a medical decision, it could no longer reply "but making medical decisions is OK for us." So, as Saccoccio observed, "It's not a full-blown liability law. In Texas, they actually set up a statutory basis for liability."
Saccoccio, like White, isn't panicking. "I don't believe there will be an onslaught of litigation, but health plans should continue to do what they're doing and try to do it as best they can."
Is the AAHP protesting too much? Kevin Outterson, J.D., a health care partner at Baker, Donelson, Bearman, & Caldwell and vice chairman of the American Bar Association's managed care committee, thinks so. "There have been some estimates that health care premiums could rise 10 percent or more if HMOs are held liable for treatment decisions."
The AAHP is nervous enough that on Feb. 22 it called on members to install review processes and offered guidance on how to do so.
Greater liability has also been pushed for those situations where ERISA doesn't apply, says Robert Layton, J.D., a health care partner with the Los Angeles office of Sheppard, Mullin, Richter, & Hampton.
"There seems to be a growing movement among some federal prosecutors that HMOs should be tried in federal courts for both federal civil and criminal liability," says Layton. "If I were an HMO executive, I'd have to take them seriously."
These prosecutors are not waiting for new legislation to try cases, Layton points out. "They're viewing this as a form of white-collar fraud that can result in prosecution."
The federal civil False Claims Act was passed during the Civil War to prosecute unscrupulous arms suppliers who, for instance, sold 5,000 bags of gunpowder but delivered 5,000 bags of coffee grounds. This law could be applied to denials of coverage or claims of insufficient care, says Layton.
Suppose that an HMO member and her doctor request that the member be allowed to stay in the hospital for six days to recuperate from surgery. The plan will pay for only four days. The patient goes home and reinjures herself. Under ERISA, the plan's responsibility would probably be limited to the costs for the two days that were denied.
Federal authorities are now suggesting, however, that if instead of receiving coverage under an employer-sponsored plan governed by ERISA, the HMO member's coverage is being paid by Medicare, the government can sue the plan for fraud for those two days and then broaden the claim to every Medicare member in the plan who may have been the victim of the same restrictions. But that's not all, says Layton.
"They can be liable for triple the amount the government claims it was cheated plus a penalty of $5,000 to $10,000," he says. Let's say two days in the hospital cost $2,000. The government's claim could be $2,000 times perhaps thousands of affected Medicare members times three, plus penalties. Any way you do the math, the answer can be financially ruinous.
"The ultimate number would be phenomenal," Layton points out. "By contracting with the federal government to serve Medicare and Medicaid members, the managed care plans are essentially promising a certain level of care. To the extent that they intentionally do not deliver that care, the prosecutors view that as fraud."
Criminal liability could, theoretically, be brought to bear under "at least a dozen federal criminal statutes" similar to the False Claims Act, says Layton.
"Could a federal prosecutor utilize one of these statutes?" asks Layton. "I believe so. Would he bring that kind of case? Judging from the zealousness of some of them, especially on the East Coast, I wouldn't put it past him."
Still, throwing HMO executives in jail is a fantasy exercised by only the most rabid anti-managed care camps. No expert contacted seriously thinks that will ever come to pass. A more likely possibility, says Layton, would be for prosecutors to take a page from the playbook they've used to try cases against hospital companies. "There, they've used the threat of criminal sanctions to get a bigger civil settlement."
These federal prosecutors are not messing around.
Or, better yet, don't meet James Sheehan -- in court. Sheehan, the chief of the civil division for the U.S. Attorney's Office for the Eastern District of Pennsylvania, is one of the "ambitious young prosecutors" Layton talks about.
Sheehan says that when an HMO selects criteria on which to approve or deny services, it must do so "in good faith." Are you installing an external review committee? That's fine. Just make sure it's not what Sheehan calls a "tuna fish panel."
"That's when you bring in five doctors and tell them, 'You're going to be our consensus panel. Here's a tuna fish sandwich, and by the way, the sodas and coffee are over there.'"
Link your policy to generally accepted clinical practice guidelines, says Sheehan. "Are plans asking themselves, 'What's best for the patient?' More important, how are those guidelines sold to providers? Is it, 'Use our guidelines and reduce utilization by 43 percent?' Or is it, 'Use our guidelines and get the best clinical information available?'"
He also investigates whether medical directors are unduly influenced by CEOs or CFOs. "We have to prove a pattern of deception and breach of faith."
When asked how he decides to investigate an HMO, Sheehan is offered the example of the tragedy in Texas -- which he quickly rejects. One instance does not a probe launch. "What I'm looking for are patterns," says Sheehan, who could conceivably cast a net over the Mid-Atlantic states because the regional Medicare processing office is in Philadelphia and, therefore, under his jurisdiction.
That this federal prosecutor approaches the matter of HMO negligence with zeal perhaps comes as no surprise. What might be surprising is that such self-righteous anger may also be a prime motivator of the lawyers hired by the Karen Johnsons and Teresa Goodrichs of the world. It is perhaps ironic that an industry that too often suffers from characterization sometimes leans on its own stereotypes. Are the lawyers you will face well paid? Yes. Will they be motivated solely by money? Not all of them -- certainly not the best of them.
George Parker Young, representing the plaintiffs in Plocica, says that he is working on a case now where he doesn't expect to be compensated for $200,000 in fees and expenses. Not that he considers himself a charity. He does, however, feel a little like David facing the giant.
"The HMOs have very expensive lawyers," says Young. "They fight the litigation the way the tobacco companies fight." He would rather not go to court over these sorts of issues and points to the establishment of an external review process in Texas as the preferred route.
"A lot of what we do is steer people away from the courthouse and into the independent review process," says Young. "We have a good system here that everybody agrees works well. It's finding the HMOs wrong about half the time, which scares me. A lot of what I do is just answer calls. I spend a lot of my time as a traffic cop."
He dismisses the notion that making health plans more accountable will force them to micromanage physicians, as some experts predict.
"The trial lawyer side of me loves the idea that managed care companies think that they need to exercise more control of doctors because, believe me, I'll get hold of that and present it to juries and by the time I'm through, $120 million will seem like a drop in the bucket," he says. "In truth, I don't think they'll micromanage more."
How? Voluntarily establishing an external review process seems to be the popular answer. (See "Setting Up External Review Process May Be Best Defense Against Lawsuits") But as Sheehan and Layton indicate, a review process not backed by a deep commitment to quality won't float -- certainly not in front of a jury. Health plan executives need to review their contracts, plan disclosures, and advertising materials to ensure that they are not vulnerable to claims of "promised but not delivered" levels of care.
Gary Scott Davis, J.D., cochair of the Managed Care Law Institute of the American Health Lawyers Association, says you should fine-tune guidelines so that they're applicable at the local level.
"One of the issues that came up in Johnson was that the doctors on the external review committee lived in California while the patient lived in Kentucky," says Davis. "It matters where the patient lives. If you're a national HMO, it's not prudent to have one central external review panel."
HMOs should also re-examine their care decision-making process, he says. "Who is it making the decision? Is it a nurse using a computer algorithm to second-guess the onsite physician? There has to be a similarly situated professional making the decision who has no vested interest in the decision she's making."
Sheehan suggests that HMO executives always try to listen to what employees have to say. "You need an organized system to hear what people are upset about," he says. "You might want to set up a hot line for employees to register complaints."
Maxine Fass, J.D., a health care partner in the New York firm of Stroock & Stroock & Lavan, worked for 10 years at Health Insurance Plan of Greater New York. There, she led an in-house legal staff that served the entire HIP system.
She suggests that plans may save themselves legal hassles by reviewing the "paper" involved in decision-making processes. Make sure policies and procedures are consistent and well-articulated, and that decisions on coverage are documented in a way that demonstrates those policies were followed in each case.
"You need clear distinctions between the plan's function and the physician's function," says Fass. "If appropriate, clarify that while participating doctors make the treatment decisions, the plan makes only benefit or coverage decisions. Tighten your internal procedures for how you go about making benefits coverage decisions. There is really nothing that upsets members as much as the feeling that they're being treated capriciously. Juries and judges will want to see that you have a policy that's clearly laid out and that you've followed that policy. If you can show that, then you're 75 percent of the way toward winning your case."
Take a close look at how decisions are made.
"You may want to think about limiting the number of people who make these kinds of decisions," says Fass. If the buck stops at the medical director's desk, then make sure an insurance policy stops there also.
"You can buy good insurance policies that will cover medical directors for administrative-type functions," says Fass. (See "Can Insurance Protect Plans Against Punitive Damages? Maybe")
Outterson sees disease management as an excellent alternative to both traditional managed care and government over-regulation.
"Plans are realizing that they've probably reached the limit on their ability to ration care through managed care technology," says Outterson. "HMOs are looking at the data they've collected and they're seeing that most of their costs are generated by 10 percent of their members. A lot of our clients are looking at disease management. It's the opposite of rationing."
He says disease management means directing resources toward that part of the population that most needs them, such as patients at high risk for congestive heart failure. "But the savings you get in the end are going to be well worth it."
Prevention, for so long a clinical goal, should be a legal one as well. Not that there are any guarantees. You never know what a jury's going to do. When Kanwit is asked what HMOs should do to prepare for litigation, she laughs. "Gee, I don't know," she says. "Good luck finding out."
The Kaiser Family Foundation and Harvard University surveyed 1,200 adults to get a reading on how much support exists for giving consumers the right to sue HMOs for malpractice. Suing HMOs seems like a good idea to respondents until they are asked to consider the possibility that such lawsuits could also lead to premium increases, more government intervention, and fewer employers supplying health benefits.
When asked if they favored laws that allow people to sue health plans, 73 percent said yes, 19 percent said no, and 8 percent didn't know. However, when respondents were asked to consider possible effects of such a move, support weakened.
Executives should not breathe sighs of relief just yet. The same survey indicates that the basic idea of suing HMOs seems to be gaining momentum that cuts across the political spectrum.
SOURCE: SURVEY ON AMERICANS' VIEWS ON THE CONSUMER PROTECTION DEBATE., KAISER FAMILY FOUNDATION AND HARVARD UNIVERSITY, 1998.