Make certain to carry out the charge of managing care

October 1, 2005

In a case that likely will be appealed, a San Antonio jury recently awarded $7.4 million in actual damages resulting from the alleged negligence by a health maintenance organization and several providers. In the lawsuit, a deceased woman's family accused Humana, two physicians, and a physician practice group of negligence in a wrongful death action. The jury decision resulted from a three-week trial presided over by a Republican-appointed judge with an insurance defense background. In accordance with Texas law requiring the apportionment of liability, the jury found Humana liable for 35% of the actual damages and the entire $1.6 million in punitive damages.

IN A CASE THAT likely will be appealed, a San Antonio jury recently awarded $7.4 million in actual damages resulting from the alleged negligence by a health maintenance organization and several providers. In the lawsuit, a deceased woman's family accused Humana, two physicians, and a physician practice group of negligence in a wrongful death action. The jury decision resulted from a three-week trial presided over by a Republican-appointed judge with an insurance defense background. In accordance with Texas law requiring the apportionment of liability, the jury found Humana liable for 35% of the actual damages and the entire $1.6 million in punitive damages.

In an attempt to avoid ERISA preemption, the plaintiffs were careful to plead their challenge to managed care not on the basis of a denial of benefits, but based on the allegation that the HMO used substandard care in performing its obligations in "managing" care. They asserted that the HMO failed to follow its member handbook, physicians' manual, and internal policies and procedures.

The jury found that Humana failed to apply case management processes to the deceased for purposes of identifying chronic or potentially catastrophic diseases. Case management, the plaintiffs alleged, was supposed to deal with patients with complex diseases. Specifically, the plaintiffs showed that the deceased suffered from emphysema, kidney disease, and a circulatory condition that affected the kidneys. They claimed that she should have been closely monitored in the months before her death.

Several federal court decisions, including the recent Supreme Court decision in Aetna vs. Davila, have made it difficult for plan members to sue HMOs and insurers in cases where their health plans were purchased by their employers. In attempting to distinguish the case from those cases falling under ERISA preemption, the plaintiffs artfully stated their claim as a failure to exercise ordinary care in performing managed care functions, as compared with cases involving a denial of medical care.

NEW CAUSE OF ACTION

This case appears to recognize a new cause of action-not previously barred by ERISA preemption. It will be interesting to see whether the appellate court will agree with the trial court and recognize a new duty for HMOs and health insurers to exercise a certain level of care in "managing" health services provided to members.

Historically, most state laws (including HMO Acts and Medical Practice Acts) have not only recognized that HMOs and insurers do not practice medicine, they have strictly prohibited such activities. Consequently, in reviewing the representations made by HMOs and insurers in their member materials, the judiciary ought to keep this prohibition in mind. In setting standards for care management, the courts should limit the duties to be imposed in a manner that does not require the exercise of medical judgment.

This decision should serve as a wake-up call to the industry to review member materials and evaluate management functions described therein, given that the duty recognized by the trial court emanated from Humana's own written materials in "managing" health services.

Barry Senterfitt is a partner in the insurance industry practice of Akin Gump Strauss Hauer & Feld LLP, and is located in the firm's Austin, Texas, office.

This column is written for informational purposes only and should not be construed as legal advice.