THE PEOPLE vs. HMOs

February 23, 2000
		The Supreme Court heard arguments over whether patients can sue their HMO's for providing doctors financial incentives to cut costs. The Health Unit is a partnership with the Henry J. Kaiser Family Foundation.

Online NewsHour Focus Patients' Bill of Rights Jan. 20, 2000: Common ground in health care reform Nov. 25, 1999: Democrats debate health care Oct. 7, 1999: Patients can sue HMOs Oct. 6, 1999: Congress debates health care reform Sept. 30, 1999: The people vs. HMOs Browse the NewsHour's coverage of health.   American Association of Health Plans Supreme Court Historical Society	RAY SUAREZ: The case before the court today asks whether patients under federal law can sue their HMO's for providing doctors certain financial incentives to cut costs. For more on this case we turn to NewsHour regular Jan Crawford Greenburg, national legal affairs correspondent for the Chicago Tribune. Jan, let's start at the beginning. How does this argument get from a doctor's office in central Illinois to the U.S. Supreme Court? JAN CRAWFORD GREENBURG: It started in 1992 when Cynthia Herdrick, a part-time legal secretary had a pain in her abdomen. So she went to her doctor and her doctor scheduled her for an ultrasound eight days later and at a facility about 50 miles away that was affiliated with her HMO. In the meantime, before she could get there, her appendix ruptured. So Herdrick sued for medical malpractice. She had to have emergency surgery. She said that was improper, of course. Then she subsequently added the claim that now is at issue in a case before the Supreme Court.
	The way HMOS conduct their business
	RAY SUAREZ: So she's not arguing about the medical facts at hand. What is she asking for in this case? JAN CRAWFORD GREENBURG: No, she's not. On her medical malpractice claim, she won in the lower courts and she recovered $35,000. But she also -- and in the claim at issue here-- said she should be able to attack the structure of the HMO; its system of offering these incentives to doctors to keep down costs, she says, creates a classic conflict of interest because it puts doctors' interests ahead of patients' in a way that violates federal law. Now, a federal appeals court in Chicago said that she had stated a cause of action, that she could proceed to trial, another trial, on this issue -- and whether or not the HMO could be liable under federal employee benefits law, a notoriously complex and very difficult law. RAY SUAREZ: So in effect, her side came into court today looking for permission to continue on with this case about the structure of HMOs? JAN CRAWFORD GREENBURG: That's right. That's why this case, because it does get to the way HMOS basically conduct their business, has attracted so much attention. RAY SUAREZ: Okay. What did her side have to say in court today? JAN CRAWFORD GREENBURG: She was going in trying to preserve the ruling below in arguing that the appeals court was correct. And she maintained that this wasn't such a big deal, so to speak, because this was a very unique HMO, she said. It was small. It was owned by the doctors. So the courts really in this case, she maintains, won't have this broad sweep and it won't undermine the way HMOs are set up because the larger HMOS-Humana, Aetna-- aren't owned by the doctors who provide services through them. Now the flip side of that, and the lawyer for the HMO, of course, saw it very differently. He said it's no exaggeration to say that this case basically presents questions about the future of medical care in this country in the way that it is delivered.
	The Justices' reactions
	RAY SUAREZ: So how do you think the Justices saw the arguments? Were they buying one side or another? JAN CRAWFORD GREENBURG: Well, like I said, I mean, this is a very complex law. And they spent quite a lot of time looking, a, at how this case would be applied. They seemed skeptical of Herdrick's lawyer's argument that it would apply pretty narrowly. You know, Justice Breyer said, well, it seems like you are attacking the structure of HMO's, and Justice David Souter said that the interest of any HMO is to keep the costs low. So there was some concern there. The chief justice, William Rehnquist, raised concerns about where would you draw the line? If you allowed a patient to attack the incentives at issue here, how could you not prevent HMO's from implementing any kind of measures to contain costs? Justice Scalia seemed sympathetic to that point as well. But some of the other Justices seemed a bit more sympathetic to Herdrick's claim. Justice Anthony Kennedy, for example, acknowledged that in this era of managed care and the way that it has evolved, doctors can wear two hats. When you go to see a doctor, you're going to see him as a doctor who is providing you medical treatment and medical services, but the doctor in some cases also has to make decisions about whether certain treatment is covered under your health plan. RAY SUAREZ: So, an HMO doctor in effect wears two hats, but when consulting with you doesn't apparently wear both of them? JAN CRAWFORD GREENBURG: Maybe that's not always clear. That's one of the issues and one of the things that some people have argued for, that we should have more disclosure about the way that HMO's are set up. RAY SUAREZ: Now, a lot of this has to do with ERISA, which is now about 25 years old, a long involved acronym but the law under which HMOS are involved. Did the fact that this is a law passed by Congress come up today in the confines of the high court? Was there any discomfort over revisiting that kind of law? JAN CRAWFORD GREENBURG: Yeah, sure. For one thing, the ERISA, that's the employee benefits law that is at issue here is terribly complex. You know, I would think it's probably not something that the justices ever want to get into because it's just really difficult and it can be pretty boring and dry. But the larger issue of whether or not Congress intends for HMO's to be sued in this manner made several of the Justices uncomfortable. Justice O'Connor, for example, said, "why are courts getting into this messy business?" Implying that this is something that perhaps Congress should, you know, be clear about. And if it hasn't specifically made its intent clear, why should courts have to look at these HMO's and these various financial incentives on a case-by-case business? That, O'Connor suggested, created some kind of slippery slope that she didn't think courts really needed to be going down. RAY SUAREZ: Would this make big law a ruling in this case or sort of narrow law that would just apply to the kind of HMO that Ms. Herdrick sued? JAN CRAWFORD GREENBURG: It's probably going to... Well, we don't know yet. That's why the case is being so closely watched. This is a court that likes to do things pretty incrementally. It's reluctant to issue these grand, sweeping rulings. But the reason the industry is so closely watching this case is that the potential is there for a broad ruling, like the ruling that the U.S. Court of Appeals for the 7th Circuit issued, that allowed these attacks on HMO's. RAY SUAREZ: Jan Crawford Greenburg, thanks a lot.