US Supreme Court bars federal lawsuits against HMOs

The Supreme Court in the United States, in a unanimous decision, ruled that patients could not sue their health maintenance organisation (HMO) in federal court for giving doctors financial incentives to cut medical costs.

Justice David Souter wrote for the court, “No HMO organisation could survive without some incentive connecting physician reward with treatment rationing.”

The case at issue was that of Cynthia Herdrich, a former legal secretary from Bloomington, Illinois. She was covered by the Carle Clinic Association, a health maintenance organisation, through her husband's employer, State Farm Insurance.

In March 1991 she went to her HMO doctor, Lori Pegram, complaining of severe abdominal pain. Although her condition worsened, Dr Pegram did not order an ultrasound diagnostic procedure at a local hospital; instead Ms Herdrich had to wait eight days for the test at an HMO affiliated hospital more than 50 miles away.

Before the test could be performed, Ms Herdrich's appendix ruptured, resulting in peritonitis and several days in hospital. Ms Herdrich won a $35000 (£23300) malpractice suit in an Illinois state court.

However, she went on to sue the Carle Clinic Association in federal court. She argued that the health maintenance organisation, by giving doctors a share of the profits at the end of the year, was giving them an incentive to make decisions in their own interest rather than in the interests of their patients.

This, she claimed, was a breach of their fiduciary duty under the Employee Retirement Income Security Act of 1974 to the members of the employee benefits plan, to whom it was obliged to provide medical care.

In rejecting Ms Herdrich's argument, the Supreme Court ruled that it was up to Congress to decide whether patients gain new rights to sue health maintenance organisations for injuries they experience at the hands of doctors and insurers.

But the House and the Senate have been struggling for nearly a year to draft a “patients' bill of rights,” which would include setting out the limits on lawsuits against health maintenance organisations in federal rather than state courts.

Gregg Bloche, a Georgetown University professor of law and public health, said the ruling gave “a strong signal that the court will allow treatment decisions to be the subject of state malpractice law.”

Ronald Pollack, executive director of the watchdog group Families USA, said, “HMOs, in most cases, are absolutely free of any attempts to hold them accountable for delays or denials of care.”

However, the American Association of Health Plans, representing more than 1000 health maintenance organisations, called the ruling “a resounding victory for maintaining affordable care … and … an equally resounding defeat for suit-happy trial lawyers and those who seek through class action suits to destroy the country's private healthcare system.”

Cynthia Herdrich: the Supreme Court ruled against her

(Credit: AP PHOTO/LESLIE E. KOSSOFF)