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Malpractice Issues in Radiology |
1 Department of Radiology, Rush North Shore Medical Center, 9600 Gross Point Rd., Skokie, IL 60076, and Rush Medical College, Chicago, IL 60612.
Received June 15, 1999;
accepted after revision June 23, 1999.
Address correspondence to L. Berlin.
Introduction
Under ERISA, any recovery awarded to a victorious plaintiff in a lawsuit is limited to the value of the plan's benefit; there is no provision for the granting of monetary compensation for "pain and suffering" or punitive damages. These limitations, along with the high cost of litigation that can reach tens of thousands of dollars, make ERISA lawsuits cost-ineffective, if not valueless [3].
The preemption clause of ERISA has effectively conferred upon insurers and administrators of health care plans sponsored by private employers (ERISA does not apply to government employees or to individuals insured privately by health plans) a veil of immunity against medical malpractice lawsuits. This immunity has, in turn, placed the providers of medical services—the physicians—at greater risk for medical malpractice [4].
When ERISA was passed a quarter of a century ago, no one could possibly have anticipated how widespread managed care would become or have foreseen how ERISA's preemption clause would deny employees and their beneficiaries recourse against their employer-sponsored insurance plans for acts of negligence. In just the last decade alone, enrollment in managed care health programs has increased exponentially, from less than 10% of the nation's workforce to more than 77% [5]. At the same time, however, public opinion has shifted from support toward criticism of managed care practices. This change in public attitude has manifested itself quite prominently in two of our nation's most important institutions, the courts and the legislatures.
A previous article in this series [6] discussed the malpractice implications of managed care and the degree to which managed care has affected the practice patterns of radiologists. However, the degree to which ERISA preemption has expanded the potential liability of radiologists to medical malpractice litigation has not been addressed. Because managed care and malpractice exposure are so fundamentally interwoven with virtually every aspect of the day-to-day professional activities of radiologists, it would be beneficial for radiologists to understand how these two forces are currently undergoing major upheavals, both judicially and legislatively. A review of representative judicial decisions will illustrate these dramatic changes. The first two cases are examples of how valid employee grievances have been nullified because of ERISA preemption.
United States Court of Appeals, Louisiana, June 1992: Traditional
ERISA Preemption
Several weeks later, when no nurse was on duty at Mrs. Corcoran's home, the fetus went into distress and died. The Corcorans filed a medical malpractice lawsuit in a local Louisiana state court alleging medical negligence on behalf of United Healthcare. The defendants removed the case to a federal court on the grounds that the lawsuit was preempted by ERISA. There, United Healthcare claimed that it was immune from liability because it had been simply acting as administrator of an ERISA-governed plan. The local federal court agreed and dismissed the lawsuit. The Corcorans appealed, but a United States Court of Appeals affirmed the lower court's dismissal, stating [7]:
Congress intended the preemption provision to be applied expansively...to eliminate the threat of conflicting or inconsistent state and local regulation of employee benefit plans...United's decision [not to approve hospitalization] was not primarily a medical decision, but instead was [an administrative] decision....United gives medical advice—but it does so in the context of making a determination about the availability of benefits under the plan. Accordingly, we hold that the Louisiana tort action asserted by the Corcorans...allegedly resulting from United's erroneous medical decision is preempted by ERISA....Participants may not sue...to redress injuries flowing from decisions about what benefits are to be paid under a plan....Allowing the Corcorans' suit to go forward would contravene Congress's goals of ensuring that plans and plan sponsors would be subject to a uniform body of benefit laws and [avoid] the conflicting directives among states or between states and the federal government....State courts might develop different substantive standards applicable to the same employer conduct, requiring the tailoring of plans and employer conduct to the peculiarities of the law of each jurisdiction. Such an outcome is fundamentally at odds with the goal of uniformity that Congress sought to implement.
Then, perhaps envisioning changes in public opinion that have eventually materialized, the court seemed to express regret and suggest legislative reform [7]:
The result ERISA compels us to reach means that the Corcorans have no remedy, state or federal, for what may have been a serious mistake. This is troubling for several reasons. First it eliminates an important check on the thousands of medical decisions routinely made in the burgeoning utilization review system. With liability rules generally inapplicable, there is theoretically less deterrence of substandard medical decision-making....Cost containment features such as the one at issue in this case did not exist when Congress passed ERISA....The world of employee benefit plans has hardly remained static since 1974. Fundamental changes such as the widespread institution of utilization review would seem to warrant a reevaluation of ERISA....Our system, of course, allocates this task to Congress, not the courts.
United States Court of Appeals, Missouri, July 1993: Traditional
ERISA Preemption
The Kuhl family filed a medical malpractice lawsuit against the insurance company, alleging that its failure to approve prompt transfer to St. Louis for open-heart surgery constituted a breach of the standard of medical care. The lawsuit was filed in a state court in Missouri, but the defendants had the lawsuit removed to a federal court on the grounds of ERISA preemption. The federal court judge agreed that the lawsuit fell under ERISA law and dismissed the case. The Kuhl family appealed, but the federal court of appeals affirmed the lower court's dismissal [8]:
The Kuhls contend...that [the insurance company] committed medical malpractice because it assumed the role of Buddy Kuhl's physician by making decisions about proper medical treatment...[and] by delaying the surgery in St. Louis....These state law claims arise from the administration of benefits under the [employer's] plan and are therefore preempted by ERISA....Although the surgery in St. Louis was unquestionably canceled as a result of [the insurance company's] decision not to precertify payment, the decision not to precertify payment relates directly to [the insurance company's] administration of benefits.
The court then expressed its discomfort, if not outright frustration, with the existing law [8]:
We recognize the obvious salutary effect that imposing state law liability on [the insurance company] might have on deterring poor precertification decisions. However, this is precisely the type of state regulation of plan administration that ERISA was designed to replace...[ERISA] was intended to ensure that plans and plan sponsors will be subject to uniform body of benefits law...[and] to minimize the administrative and financial burden of complying with conflicting directives among states....Congress could not have foreseen the precertification review process when it enacted a preemption clause so broad that it relieves ERISA-regulated plans of most tort liability....Modification of ERISA in light of questionable modern insurance practices must be the job of Congress, not the courts.
To change interpretation of ERISA preemption, the local judiciary needed direction from the nation's highest court. This direction came in 1995, when the Supreme Court of the United States effected a turning point in the judicial application of ERISA preemption. In a case involving the Traveler's Insurance Company, the Supreme Court unanimously ruled that a New York State statute that required hospitals to collect surcharges from patients covered by commerical insurers was not preempted by ERISA. The Supreme Court pointed out that much of the language in the original ERISA legislation was "unhelpful" and held that the courts had heretofore applied the ERISA preemption too broadly. The Supreme Court concluded that "nothing in the language of ERISA...indicates that Congress chose to displace general health care regulation, which historically has been a matter of local state concern" [9].
Although the Supreme Court of the United States subtly unlocked the door that had previously safeguarded ERISA preemption immunity, a United States Court of Appeals decision later in 1995 pushed the door wide open when that court ruled that a malpractice lawsuit could not be preempted by ERISA.
United States Court of Appeals, Pennsylvania, June 1995: A
Rent in the Veil of ERISA Immunity
The federal appeals court first drew a distinction between two sections of the ERISA statute, section 502 that dealt with "complete preemption," and section 514 that focused on "simple preemption." The court explained that complete preemption is concerned with those state laws that fall within the civil enforcement provision that applies to denial of medical benefits. The court ruled that removal to the federal court was improper because the plaintiff's claims merely attacked the quality of the benefits received, not that the plan erroneously withheld benefits due. As a result, explained the court, the plaintiff's claims fell outside the scope of section 502. On the other hand, preemption under section 514, or simple preemption, into which the plaintiff's claims did fall, had to be evaluated according to the specific facts of the case. Thus, resolution of the issue had to be determined only by the state court. The court added [10]:
Nothing in the complaint indicates that the plaintiffs are complaining about their ERISA welfare plan's failure to provide benefits due under the plan...Instead, the plaintiffs...complain about the low quality of the medical treatment that they actually received....ERISA [was not meant to] create a remedy for a participant injured by medical malpractice....We find nothing in the legislative history suggesting that [ERISA] was intended...to control the quality of the benefits received by plan participants. Quality control of benefits, such as the health plan benefits provided here, is a field traditionally occupied by state regulation and we interpret the silence of Congress as reflecting an intent that it remain such....Patients enjoy the right to be free from medical malpractice regardless of whether or not their medical care is provided through an ERISA plan.
The federal appeals court then returned the case to the state court for evaluation of whether preemption under the simple preemption section was warranted.
The Supreme Court of the United States further curtailed ERISA preemption in a 1997 decision that upheld a New York State tax on plan-sponsored clinics. Voting 7 to 2, the justices ruled that ERISA does not preclude states from imposing taxes on receipts of plan-sponsored clinics [11]. Commenting on this decision, the vice president for legal and regulatory affairs of the Association of Private Pension and Welfare Plans said, "This is obviously a loss for those of us who believe in ERISA preemption...It is another small step down the road to watering down the protections that ERISA has afforded" [12]. An attorney for the American Medical Association went much further, exclaiming, "This case is a very significant indication from the Supreme Court that the realm of ERISA preemption is over" [13].
Immunity from medical malpractice lawsuits conferred on managed care organizations by ERISA preemption received an even more staggering blow with a United States Court of Appeals decision in 1998.
United States Court of Appeals, Illinois,
August 1998: Further Erosion of ERISA Preemption Immunity
Across the country, health care critics and consumers are complaining that the quality of medical treatment in this nation is rapidly declining, leaving a "fear that the goal of managing care has been replaced by the goal of managing costs"....An increasing number of Americans believe that dollars are more important than people in the evolving HMO system....To regain trust, HMOs need to be more sensitive to the doctor-patient relationship and remove the physician from direct financial interest in patient care....The shift to profit-driven care is at a gallop....For the public who are mostly healthy and use little care, awareness of the degradation of medicine builds slowly; it is mainly those who are expensively ill who encounter the dark side of market-driven healthcare....HMOs refer to the proportion of premiums they pay out for patient care as their "medical-loss ratio"—a chilling choice of words. Medical-loss ratios of for-profit HMOs paying a flat fee to doctors for treatment average only 70% of their premium revenue. The remaining 30% went to administrative expenses—and profit....We must remember that doctors, not insurance executives, are qualified experts in determining what is the best course of treatment and therapy for their patients. Trained physicians, and them [sic] alone, should be allowed to make care-related decisions (with, of course, input from the patient). Medical care should not be subject to the whim of the new layer of insurance bureaucracy.A doctor who is responsible for the real-life financial demands of providing for his or her family...might very well "flinch" at the prospect of obtaining a relatively substantial bonus for himself or herself. Here...physicians were intimately involved with the financial wellbeing of the enterprise in that the yearly "kickback" was paid to physicians only if the annual expenditure...on benefits was less than the total plan receipts....Doctors stood to gain financially when they were able to limit treatments and referrals....The defendant's incentive systems depleted plan resources to the detriment of the patients.
A more recent federal appeals court decision in Texas illustrates how judicial sentiment against ERISA preemption has gathered even more momentum [15].
United States Court of Appeals, Texas, April 1999:
Continued Attack on ERISA Preemption
In a decision rendered on April 20, 1999, the Supreme Court of the United States continued the trend toward whittling down ERISA preemption. The case involved a California man who filed a claim for disability benefits [17, 18]. The claim was denied because the patient had applied for benefits beyond his age of eligibility as determined by the insurance plan. However, according to California law, the disability benefits should have been awarded. The lower federal court ruled that the lawsuit could not proceed because of ERISA preemption. A federal appeals court, however, reversed the lower court. The Supreme Court upheld the appeals court reversal, a decision lauded by an attorney for the American Medical Association who exclaimed, "In practical terms, this holding takes much of the guts out of the concept of ERISA preemption as it applies to physicians, and allows states to introduce innovative legislation to protect patients' rights" [19].
Clearly, the cases reviewed show a growing reluctance on the part of the federal courts to deal with ERISA lawsuits alleging medical malpractice, and in fact the federal courts seem desirous of letting state courts resolve the issue. How are state courts likely to deal with medical malpractice lawsuits relating to ERISA preemption, managed care, and HMOs? We don't have to look very far for the answer. In December 1998, a Pennsylvania Supreme Court decision minced no words in expressing the opinions of its justices.
Supreme Court of Pennsylvania, December 1998: A Ruling
Against ERISA Preemption
The patient sued his physicians and U. S. Healthcare. The physicians settled the case, but U. S. Healthcare was dismissed from the suit by the local state court on the grounds of ERISA preemption. The patient then appealed to an appellate court in Pennsylvania, which reversed the lower court's decision and reinstated the case. Defendants then brought an appeal to the Pennsylvania Supreme Court, which upheld the appeals court reversal.
The Pennsylvania Supreme Court began its decision by reviewing the history of ERISA preemption. Although the court acknowledged that the United States Supreme Court had not yet directly addressed whether malpractice claims against an HMO would fall under ERISA preemption, the Pennsylvania Supreme Court nonetheless pointed to earlier decisions that implied that an ERISA preemption would not protect these HMOs from medical malpractice litigation. The Pennsylvania Supreme Court then concluded [20]:
Negligence claims against health maintenance organizations do not relate to an ERISA plan....We believe it would be highly questionable for us to find that these claims were preempted when the United States Supreme Court has stated that there was no intent on the part of Congress to preempt state laws concerning the regulation of the provision of safe medical care.
Concurring in the decision, another Pennsylvania Supreme Court justice added [20]:
[It was claimed that] U.S. Healthcare's refusal to authorize a medically necessary transfer...caused plaintiff's ultimate injury....I find that U.S. Healthcare's actions constituted, in effect, an individual medical decision or judgment as opposed to a decision affecting the administration of an employee benefit plan. Here, the [plaintiffs] are merely attempting to assert their already existing rights under the generally applicable state law....Patients enjoy the right to be free from medical malpractice regardless of whether or not their medical care is provided through an ERISA plan....I believe the overall purpose for the enactment of ERISA, as well as subsequent case law, would indicate that the negligence claim against U.S. Healthcare does not fall under the aegis of the preemption clause.
As mentioned earlier, ERISA preemption issues are not applicable to privately purchased medical insurance plans. Even though two recent appellate court decisions in Illinois do not bear directly on ERISA, they nonetheless give a good indication as to how state courts are likely to deal with alleged medical malpractice attributed to HMOs and other managed care organizations.
Appellate Court
of Illinois, March 1998: Physicians Can Be Agents of HMOs
The patient filed a malpractice lawsuit against Share, alleging that the delay in diagnosis was caused by negligence. The local state trial court dismissed the lawsuit, reasoning that because Share had merely contracted with independently practicing physicians rather than directly employing them, Share could not be held responsible for actions of these physicians. The patient then appealed to the state appellate court, which reversed the lower court's dismissal. The appellate court ruled that the evidence showed that Share's compensation arrangement with physicians may have indeed constrained the medical decisions of those physicians and that Share maintained a certain control over its physicians through quality assurance programs. The court stated [21]:
Share's use of a capitation system could lead to a reasonable inference that Share's method of compensation...created a disincentive to order tests or make referrals and thus exert control over its physicians' medical decisions...Share's member handbook [stated that Share] would provide "all your health care needs," [and that] each primary care physician is "your health care manager." The patient paid her fee to Share, not to the doctor....Plaintiff's argument as to the modern reality regarding the aggressive advertisement of HMOs is compelling...hospital [cannot] escape liability for the rendering of negligent health care because the person rendering the care is an independent contractor...regardless of the perception created in the mind of the public....The same public policy argument applies to HMOs, whose aggressive advertising campaigns arguably create an expectation in the public that they are providers of health care...HMOs should not be allowed to hold themselves out as total providers of health care and then seek to avoid liability.
The Petrovich case is now pending before the Illinois Supreme Court. In an interesting if not unusual alliance, both the Illinois Trial Lawyers Association (composed mainly of plaintiffs' attorneys) and the Illinois State Medical Society have filed briefs on behalf of the plaintiff [22].
In another Illinois case, an appellate court has ruled that HMOs can be held vicariously liable for negligent actions of independently practicing contracted physicians, even if they are not directly employed by the HMO.
Appellate Court of Illinois,
November 1998: HMOs Can Be Vicariously Liable for Physicians with Whom
It Contracts
Appearances count. It does not matter that the doctor was in fact an independent contractor....The HMO [acted] in a manner that would lead Jones as a reasonable person, to conclude that [her doctor] was an employee or agent of the HMO....Aggressive advertising campaigns arguably create the expectations in the public that [HMOs] are providers of healthcare....Jones was given no choice of pediatrician. She testified [the] HMO gave her [the doctor] with assurances he was a good pediatrician....We conclude [the] HMO's aggressive marketing techniques in its statements...created an issue of material fact concerning apparent authority of [the pediatrician] to act for [the] HMO.
As already pointed out, interpretation of current law holds that only public and church employees, and those who buy their insurance directly have the right to sue health plans for damages resulting from improper care. Thus, most Americans have been barred by ERISA from suing for anything other than the cost of treatment that may have been denied. That the public would like to change the law conferring ERISA immunity on employer-sponsored HMOs and managed care plans is shown in a Kaiser Family Foundation—Harvard University survey of 1200 adults. When asked if they favored laws that allow people to sue health plans, 73% of the respondents answered "yes"; 19%, "no"; and 8%, "didn't know" [26].
Many of the judges in the court decisions reviewed here, as well as much of the public, look to federal and state legislators to eliminate the immunity granted by ERISA preemption. Legislators seem to be responding to this call.
Legislative attempts to curtail ERISA preemption continue in many state legislatures, often generating considerable contention and passion. One Illinois lawmaker who backs such legislation has lamented, "I can sue everybody else for spilling a hot cup of coffee or waiting too long on a plane or for cracking my back on the sidewalk, but I can't sue an HMO" [30]. In support of the other side of the argument, however, a Chicago Tribune editorial admonished, "HMO reform legislation will force increases in HMO premiums. Employers will pay these increases, pass them along to employees, or quit insuring. The dubious achievement of this legislation, then, will be better, more expensive health insurance for fewer workers" [31]. A spokesman for managed care organizations had commented earlier, "ERISA's preemption of state law remedies provides very little incentive for health plans to make clinically appropriate decisions, but a wave of new malpractice suits will serve mostly one special-interest group—plaintiffs' trial lawyers eager to get their hands on health plans as an easy target with deep pockets" [5].
There has been considerable activity at the federal level as well. Legislation to limit ERISA preemption by permitting lawsuits against HMOs failed in the United States Senate last year. However, three leading managed care reform bills are now pending before the United States House of Representatives. A managed care reform bill drafted by Republican representatives from Georgia, Oklahoma, and Arizona awaits deliberation [32]. Although considerable support exists for such legislation from segments of the judiciary, the general public, and Congress, the support is far from unanimous. "A legislative effort to permit patients to sue HMOs would be adverse," warns a spokesman for the Business Round Table, a group of the nation's largest corporations and employers. The group is financing advertisements that tell the public that allowing patients to sue health plans sponsored or funded by an employer could dramatically increase health costs to the point at which employers will drop coverage [33].
Two important court actions have occurred since the submission of this article. On September 28, 1999, the United States Supreme Court announced that it would review the lawsuit involving Cynthia Herdrich [36], and on September 30, the Supreme Court of Illinois upheld the Illinois appellate court's decision in the Petrovich case [37].
Recent court decisions and state legislation have weakened ERISA immunity and have created a climate of uncertainty. The following pointers will assist radiologists in dealing with this changing climate as it pertains to managed care, HMOs, and potential ERISA liability.
It is essential that cost limitation programs not be permitted to corrupt medical judgment...A physician who complies without protest with limitations imposed by a third-party payer, when his medical judgment dictates otherwise, cannot avoid his ultimate responsibility for his patient's care.
Additionally, radiologists and other physicians should adhere to the following guidelines:
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Introduction
United States Court of...