Independent review option wilts as courts boost HMO liability

Baby goes out with bath water?

Independent review boards, first launched a year ago in Texas and now viewed by many as a superlative innovation for patients unhappy with HMO coverage decisions, suffered a mortal blow in October.

Currently, the concept is barely lingering on legal life support — a stay by the court — until appeal proceedings are complete.

The one-year-old independent review process, launched as part of sweeping late-1997 Texas legislation related to HMO liability, has been adopted by at least 19 other states. The process is a mediation system designed to give patients a way to challenge claim denials via an entity outside the insurer but not in court. Its intent is to reduce legal costs.

While experts aren’t predicting the impact yet because the decision is on appeal, it is expected that the case will be closely watched because so many other states have adopted the process.

Review process conflicts with ERISA guidelines

According to U.S. District Court Judge Vanessa Gilmore in Austin, TX, the independent review process does not stand legal scrutiny. The reason is that the review processes — as well as many other features of the HMO legislation — attempt to give the state authority over plans regulated by the Employee Retirement Income Security Act (ERISA) of 1994, or self-insured plans. Her ruling coincides with a series of legal battles over how self-insured plans, which fall under ERISA federal guidelines, stand in relation to state requirements.

"If Congress wants the American citizens to have access to adequate health care, then Congress must accept its responsibility to define the scopes of ERISA pre-emption and to enact legislation that will ensure every patient has access to that care," Gilmore wrote in her decision on Oct. 9. Several versions of "patients’ rights" bills in Congress addressed these issues, but Congress did not act on them by fiscal ’98 year-end.

Gilmore’s ruling does allow patients to sue their HMOs for denying them adequate health care — an improvement in the eyes of many consumer groups.

Following Gilmore’s Aetna v. Texas Department of Insurance decision, Texas Insurance Commissioner Elton Bomer and Aetna Life & Casualty Co. joined forces and obtained a stay for the independent review process pending completion of an appeal.

"While I respect the court’s ruling, I am not pleased with it," Bomer said in a prepared statement for the press. "Consumers are the losers because they will be denied access to the independent review process, which has been working very well in Texas.

"The court upheld the consumer’s right to sue an HMO for negligence but unfortunately this remedy is only available after harm — often serious harm — has occurred. The independent review process was a mechanism designed to prevent harm and this process has been taken away from the consumer."

Aetna, which had opposed the legislation when it was being debated, is now favoring recouping the independent review process. Officials view it as one way to reduce more expensive legal battles. The carrier did not drop the suit, however, because the suit addressed additional issues other than the review process.

Another HMO-related decision in Pennsylvania decided in late 1998, Shannon v. McNulty, MD, and HealthAmerica Pennsylvania, also affirms a patient’s rights to sue an HMO for malpractice. In that ruling, the court applied to HMOs many of the same responsibilities assigned to hospitals, including a requirement "to oversee all persons who practice medicine within its walls."

In the Shannon case, plaintiffs Mario and Sheena Shannon alleged that the physician in charge and the HMO’s telephone triage nurses did not recognize that Mrs. Shannon, who was five months pregnant, was going into labor. As a result, the ruling specified that the HMO, via decisions made by telephone triage nurses, can also be held liable. (See related story, above right.)

The two decisions offer minimal legal comfort for physicians. Increased legal liability for HMOs will likely increase the pressure physicians face in HMO contracts, some experts predict.