LexisNexis | Medical Malpractice

HMO Malpractice?

In a world where health care insurance is increasingly offered in the form of a Health Maintenance Organization (HMO), often people who are not medically trained are responsible for making coverage decisions. What happens when the HMO's failure to authorize a treatment or procedure results in an injury to one of its members? Can the HMO be held liable for medical malpractice?

HMOs are governed by the Employee Retirement Income and Security Act (ERISA). ERISA preempts all state laws that impact self-funded employee health plans. As a result, ERISA bars any state from enforcing a law that would allow HMO members to sue their HMO for the negligent failure to authorize treatment. ERISA provides very limited benefits to patients injured by HMOs. In addition, HMO members suing under ERISA are not entitled to a jury trial.

Despite ERISA's prohibition of state laws that aim to regulate HMOs, some courts have held HMOs liable for negligent treatment of their members. In one such case, an HMO member's physician determined that a patient needed 30 days of inpatient psychiatric care. The HMO declined to cover more than 10 days. Upon discharge after the ten days, the patient committed suicide. Ruling in favor of the patient, the California court ruled that an organization, such as the patient's HMO, that substantially shaped the course of patient care could be held liable for the quality of the care actually delivered.

A Pennsylvania court also held that an HMO could be held liable for injuries to its members as a result of its hiring incompetent physicians. In that case, a physician retained by the HMO removed a mole from a patient's back and discarded it without having a biopsy done to determine whether it was cancerous. The patient died of malignant melanoma and her estate sued the HMO. Finding in favor of the patient, the court held that the HMO had a "nondelegable duty" to select and retain only competent primary care providers.

Thus, while ERISA does preempt many laws that aim to regulate HMOs, some courts have carved out exceptions under which a claim can be brought against a negligent HMO. In addition, Congress is attempting to agree on a federal Patient's Bill of Rights that would allow a jury trial in cases brought under ERISA.