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Negligence
A woman received health benefits through an HMO plan provided by her employer.
When her youngest child became ill, an HMO representative directed that the child be taken to a
hospital 42 miles away where the HMO received a discount, instead of to a hospital 20 miles away
that allowed no such discount. En route to the hospital, the child went into cardiac arrest.
Although he survived, the resulting circulatory damage led to other significant complications.
The woman sued the HMO for negligence. Although the HMO testified the more distant hospital
was a better pediatric facility, and the severe injuries were a result of the child's illness
rather than any delay in treatment, a jury awarded the plaintiff
$45 million in damages.
Negligence
A patient, who was enrolled in an HMO through his employer, had a
history of mental health problems. The patient received intensive outpatient treatment
from a managed mental health benefit provider, which was subcontracted by the HMO to
provide such services for its members. In late March, the patient sought psychiatric
hospitalization, but neither his physician nor the mental health utilization reviewer
would authorize payment for an admission for inpatient treatment. Ten days later,
the patient and his wife were killed when his car hit a telephone pole. The patient's
family sued the HMO, its mental health subcontractor, and the attending physician.
The family alleged that denial of hospitalization resulted in the patient's suicide.
The defendants claimed the car crash was an accident. On the eve of trial, the parties
settled out of
court for $750,000 after incurring substantial legal fees.
Negligence
A patient was diagnosed with a compressed nerve in his hand, and
a neurosurgeon
subcontracted by the patient's HMO recommended surgery to relieve
the pressure. The HMO denied
authorization for payment of the surgery and recommended physical therapy instead. The patient's
primary care physician, who also recommended surgery, unsuccessfully appealed the HMO's
decision. Although surgery was finally approved and performed seven months later, too
much nerve damage had occurred, and the problem could not be corrected. The patient
sued the HMO, alleging breach of contract for not providing timely care and negligence
for wrongly deciding that surgery was not medically necessary. The HMO claimed
it used appropriate criteria in recommending a more conservative treatment for the
patient's ailment, although it did admit ineffective communication between the
HMO and the patient's physicians regarding the lack of improvement with physical
therapy. The case was settled for
approximately $1 million, in
addition substantial legal fees.
Violation of Public Policy
A local managed care organization (MCO) decided to address
its rising medical costs by shifting existing network physicians from a discounted
fee-for-service basis to a capitation arrangement. A group of physicians affected by
the proposed change, along with an existing patient, filed a lawsuit against the
directors and officers of the MCO. They alleged that the change in
reimbursement violated public policy, because it would cause physicians
to leave the network and disrupt existing physician/patient relationships.
In addition to the underlying lawsuit challenging the legality of the
reimbursement change, a patient filed a request for an injunction to delay
the implementation of the MCO's reimbursement plan. Although the MCO was successful
in fending off the injunction request, they
incurred more than $100,000 in
legal fees. They settled
the lawsuit with the physician's group and the patient for for $14 million.
Utilization Management Decisions
An HMO plan member was denied coverage for
an inpatient treatment through the HMO's utilization
management (UM) process. The member sued the HMO arguing
that an injury resulted from not having the inpatient treatment.
In addition, the member alleged that the UM decision by the HMO's medical director
was a medical decision and thus not subject to ERISA (the Employee Retirement
Income Security Act) preemption and removal to federal court. The plaintiff
argued that the decision was subject to state malpractice rules and therefore
would entitle the plaintiff to a jury trial and potential compensatory and
punitive damages. The HMO argued that the UM decision was part of the
administration of claims process and therefore subject to ERISA preemption
and thus should be removed to federal court. The court ruled in favor of the
plaintiff and the plaintiff was ultimately awarded $2.5 million in
state court.
Violation of Duty of Good Faith
A health plan denied a subscriber's claim for
payment for a hospitalization. The subscriber and his physician repeatedly appealed
the denial through the plan's administrative process, and payment was consistently
denied. The subscriber filed a lawsuit against the health plan to recover hospital
expenses. The subscriber also alleged that he was entitled to additional
damages for violation of the covenant of good faith and fair dealing. The
State Supreme Court found that the health plan violated the duty of good
faith by repeatedly denying a claim for hospital benefits without advising
the subscriber of his contractual right to impartial review and arbitration
of the disputed claim. The court upheld the previous
jury award of $1,200 to
pay the hospital bill, with an additional $20,000 for
compensatory damages
and $80,000 in
punitive damages. Legal fees for the
case exceeded $100,000
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