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Thursday, February 24, 2000
Court hears a challenge to HMO cost-cutting ideas
Justices ponder the priorities in a doctor-owned HMO - to the company or to a single patient
From Caller-Times wire services
WASHINGTON - Grappling for the first time with the complexities of managed health care, the Supreme Court raised a blizzard of questions Wednesday about a patient's challenge to a health maintenance organization that offered financial incentives to doctors to hold down costs.
After hearing arguments for an hour on issues that could affect more than 160 million Americans in employer-sponsored health plans, the court appeared skeptical about letting patients sue HMOs for offering such bonuses.
The questions, raised by eight of the nine justices, reflected a variety of legal concerns: Why should the court get into the details of how a health plan is designed? What is the difference between acceptable and unacceptable financial incentives to doctors? Is it conceivable that Congress, which has encouraged the development of HMOs since 1973, intended to limit one of the standard techniques they use to control costs?
Moreover, the court wanted to know, what exactly does the patient in this case, Cynthia Herdrich, want as a remedy? She belatedly received the care she needed, after her appendix ruptured in 1992, and she won damages of $35,000 in a medical malpractice suit in Illinois state court.
Finally, the justices wanted to know, if the HMO or its doctors have a "fiduciary duty" under federal law, does that mean they have a duty to act in the best interest of Herdrich - or that they must conserve the assets of the health plan for all the people who get coverage through the same group?
The argument in the case, Pegram vs. Herdrich, No. 98-1949, came as Congress was considering legislation that would set new standards for managed care and make it easier for patients to sue HMOs. President Clinton strongly supports such legislation. The issue before the Supreme Court is whether Herdrich, having won a jury verdict in state court, should be allowed to pursue her claim that her HMO violated its duty to her under the 1974 federal law.
Ginzkey said Herdrich's HMO was riddled with conflicts of interest. The same doctors own the health plan, treat patients, decide whether to pay claims and are eligible to receive bonuses as a result of cost savings, he said.
In another matter, the court outlawed Hawaii's practice of letting only people of Hawaiian blood vote for leaders of a program that benefits descendants of the island's original residents. Voting 7-2, the justices said the voting restriction is a form of unlawful racial discrimination.
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