HMOs Win Big in Supreme Court
A unanimous U.S. Supreme Court ruled today that patients cannot sue their HMO (Health Maintenance Organization) under federal law when the HMO's cost-cutting practices result in improper medical treatment.
The case involved the rights of patients to sue their HMO under the rules of the Employee Retirement Income Security Act of 1974 (ERISA). In essence, the Court ruled that an HMO and its doctors do not breach a fiduciary duty under ERISA by implementing a managed-care program in which the HMO and its physicians receive financial incentives to provide medical care to the HMO's enrollees in a cost-effective manner.
Writing for the unanimous Court, Justice David Souter states, "The question in this case is whether treatment decisions made by a health maintenance organization, acting through its physician employees, are fiduciary acts within the meaning of the Employee Retirement Income Security Act of 1974. We hold that they are not." (Read the full text of the Court's opinion.)
The U.S. Justice Department argued before the Court on behalf of the health care industry, saying that state law rather than the ERISA federal law governed the doctor-patient relationship.
Today's ruling holds potential impact for over 160 million Americans who are members of some form of health maintenance organization.
The case, Pegram, et al., v. Herdrich, was argued on Feb. 23, 2000.
Lower court's opinion
The ruling of the U.S. 7th Circuit Court of Appeals in Herdrich v. Lori Pegram, M.D., et al. From FindLaw..
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