July 1, 2002 Legal News

Managed Care



Fraud and Abuse

Be Careful Out There



Peer Review

Managed Care

Rush Prudential HMO v Moran
US Supreme Court

The Supreme Court in a 5-4 decision got Congress off the hook.  The Court agreed with 42 states including California and stated that ERISA does not preempt states from helping patients fight HMOs by requiring second opinions and paying for procedures that are justified by the independent review.  The primary physician must have recommended the treatment as medically necessary.  The law is saved from ERISA by being considered both an organization that delivers health care and an insurance company.  It is the regulating of insurance and the fact that there is nothing in ERISA that prevents states from making these laws that are the key factors. The ruling only applies to those individuals that purchase their insurance from an HMO and not those that are covered under their employers self insured plan. This ruling will take its toll on HMOs since they will now be subject to each state's rules, instead of a national standard.  Moran had been refused an operation to correct a painful condition after the treatment had been recommended by her primary practitioner.  The independent review board agreed with Moran.  The HMO still refused and Moran paid for the procedure herself and sued the HMO for reimbursement.  This decision affirmed the 7th Circuit decision that had been appealed by the HMO.  The HMO will now have to pay for the procedure, pay for the attorneys and has set precedent against HMOs that will need to be followed nation-wide.  Good going Rush Prudential and your attorneys.

Vaughters v Blue Cross and Blue Shield of Kansas City
MO Circuit Ct.

The physicians have finally won an important case against the HMOs.  Six pediatricians in the inner city of Kansas City signed a capitation contract with Blue Cross Blue Shield of Kansas City.  The contract started in 1983 and the contract called for increased payments to the physicians as the profits for the insurer increased.  The physicians had smaller increases than expected and then after a two year legal battle finally received the financial information from the plan.  The information showed the plan had hidden profits from the physicians by increasing their overhead from a contracted 7% to a high of 45%.  They also used the profits from the plan to start a new plan.  The five day trail against the Blues ended after a two hour deliberation by the jury.  The physicians won $3 million in compensatory damages and over $3 million in punitive damages.  The Blues state the charges are "inaccurate and unsubstantiated."  The jury didn't believe them as I am sure not many others do. They plan to appeal in order to delay the inevitable or to force a lower settlement.  The moral is if your contract has a clause that you will profit along with the insurer or hospital, make sure you get accurate financials at least yearly.

John Hopkins v Maryland
MD Ct. Appeal

Maryland misinterpreted federal law by refusing to pay for two liver transplants as "inappropriate".  The correct interpretation is "medically necessary".  The first one was a denial of a third transplant in a young man who had a history of drug abuse and liver failure.  The other case was a young female with an unknown cause of the liver failure.  

Bankruptcy of Health Plan of the Redwoods  
Sonoma County Bankruptcy Ct. 

More physicians are suing to be removed from the panel of physicians that are in HPR, which is undergoing Chapter 11 bankruptcy. An additional 21 physicians believe the instability of the HMO is hurting their medical practices financially.  This makes about 40 specialist physicians paid on a fee for service basis that are dropping out.  The HPR has continued to pay the capitation payments to the primary care physicians but have not paid any monies to the specialists.  If the court allows the physician's motions the HMO is dead. 

The court has temporarily disallowed the physicians disenrollment until the judge can study the issue more fully.  He will be looking to see if they have "personal service contracts" with the HMO.  These contracts may be ended with 30-90 day notice.  The HMO state the physicians have executory contracts and they can not be broken with a breach of contract suit being filed.  Let's hope it's the former since I would hate to have physicians present as slave labor who don't want to be there.  It may be a long time for an appointment with these physicians. 

Kaiser v Department of Managed Care
CA Ct. App.  

The state court of appeal has ruled the the Department may not force Kaiser to pay for Viagra.  State law only requires that prescriptions for medication for the terminally ill, diabetes, contraception and FDA approved meds for life threatening conditions.  The Department lost a similar case against Blue Shield for Xenical for the morbidly obese.  Top 


Bush v Columbia
Texas Superior Ct.

A jury awarded over $13 million to the relative of a brain injured man. In this case that facts were the patient went to the ED with a rapid heartbeat and given a wrong medicine which caused hypotension and brain damage.  However, the jury awarded past medical damages of $400,000, $140,000 of lost wages (taxable), $10 million in future medical and $3 million in punitive damages.  Columbia was given 98% of the blame and damages with a nurse given the remainder. The judge should toss the punitive damages award since it should not be allowed in negligence cases.  The future medical care award also is high since he has a reduced life expectancy.  I would expect an appeal.

McCorry v Evangelical Hospital
Ill. Ct. App.

The patient was paralyzed following a back surgery by a licensed independent practitioner.  The hospital was found that due to their advertising they could be named as an employer of the physician.  The hospital referred to their "highly qualified physicians" who work in "their hospitals".  The physician had an office on the hospital campus and there was nothing in the consent form that distinguished the physician as an independent contractor.        

Griffin v Providence St. Peter 
Wash. Superior Ct.

In a tactic to get the hospital to the bargaining table the plaintiff has gone public.  The patient went to the ED with abdominal pain and after an MRI had a gall bladder removal.  She died post-op possibly from an overdose of pain medicine.  The hospital denies any cover-up but the coroner gives the cause of death as multiple drug doses.  The patient was given twice the ordered dose of Fentanyl, morphine and PCA of Dilaudid.  This is the second time the nurse on duty had exceeded the prescribed opiate dosage. She was eventually fired and her license suspended and fined $500 by the state nursing board.   

Brown v Community Hosp. San Bernadino
San Bernadino Superior Ct.

The plaintiff, a four month old male, was taken to the hospital and admitted for a respiratory infection.  He was admitted to the pediatric ward and the parents were told they could take him home tomorrow.  After the parents left to tend to their other children, a nurse found the tot face down and not breathing.  Resuscitation was performed and the child transferred to a tertiary institution.  He is now in a PVS.  The jury gave the  verdict of $15.8 million present value with a future value of $43,5 million.  This was reduced to $11 million after MICRA.  The attorney for the child was the same LA attorney (MD, JD) who has won about $100 million a year for his clients.     

Meza v Kaiser
Binding Arbitration 

The three month pregnant female came to the Kaiser ED with nausea and vomiting associated with dehydration.  The patient was place in an OB examining room where she was given IV fluids and awaited the OB.  During this time a Kaiser radiology technology student sexually assaulted four times over a ten minute period.  The student confessed two weeks later.  Kaiser was sued for negligence under  vicarious liability.  The panel stated correctly that since the student was not assaulting the woman as part of his job, the organization could not be liable.  In order to be liable for the conduct of an employee, the organization must either be aware of past transgressions or the employee must be doing the assault while in the scope of employment.  This was far afield from the scope of employment and there was no prior notice.     

Miller v Rupf (Kaiser)
Filed in US Dist Ct.   

In a just filed case Miller's heirs filed a wrongful death and civil right violation law suit against Kaiser and Rupf, the Coroner for Contra Costa County, California.  Miller went in for a repair of a ruptured Achilles tendon and while awaiting surgery at a Kaiser facility died.  There is some facts to allege an overdose of narcotic was the cause. The Coroner's office in the county has a contract with Kaiser to teach internal medicine to Kaiser residents and to perform the Kaiser autopsies.  The suit states the pathologist called it a coronary death despite the pin hole eyes indicative of drug overdose and the normal cardiac monitor.  The cause was stated to be cardiac but the heart was not present at the autopsy since it had already been donated for transplantation.  After the autopsy the cardiac tracing was discarded.  California has no separate tort for spoliation of the evidence. This should be interesting as arbitration will not hold here.      Top


Dist. Ct. Texas

A federal judge tossed the first case challenging HIPAA.  The judge ruled there was no injury and there was no legal standing to challenge the law.  Another suit is pending in South Carolina.        Top

Fraud and Abuse

US v Tenet Healthcare

Tenet has settled the suit by the government over its national laboratory and billings at two of it's hospitals.  it agreed to pay $55.75 million for fraudulent cost reports in it's Florida Palmetto Hospital home health agency and the California Brotman Medical Center.  This was a whistleblower suit by the former Brotman Controller, who will get about $2 million.   

US v Saint Clare 

Saint Clare Health Systems paid $1 million to settle charges they billed as inpatient for those who received care as outpatients.  The System is also being forced into a compliance program with semi annual very expensive reports.  

US v General American

General American, an insurance firm that was supposed to process Medicare insurance forms and make sure they were not fraudulent has agreed to pay the government $76 million for failure to do its job.  The insurance firm has been accused of falsifying records and quality assurance data that showed it was doing a good job.  The company has subsequently been acquired by MetLife.  This qui tam suit will net $14.4 million for a husband and wife who worked for General Insurance.         

United Food Union v J&J
NJ Superior Court

 The suit just filed in the New Jersey court by several unions and public interest groups accuse Johnson and Johnson of "bribing" physicians to prescribe Remicade, an anti-arthritis drug.  The suit accuse J&J of falsely inflating the average wholesale price of the drug and then charging the physicians substantially less than the published price.  this allowed the physicians to pocket the material difference.  The suit goes on to state that J&J instructed the physicians to charge the higher price even though they received the drug at the lower one.   Top

Be Careful Out There

One would believe that a company as large and powerful as HCA could hire lawyers with brains.  If they can't, how about you.  The Justice Department had settled claims with HCA last year for $845 million for fraud and abuse.  HCA, as part of the settlement, released some of its internal documents to the government with an explicit declaration that the disclosure did not result in a waiver of any privilege.  The other insurers are now wanting refunds from HCA and want the same information as they released to the government.  HCA states that it's privileged.  The insurers sued and on June 10th the 6th Circuit stated that once a document is released, the privilege to keep it confidential is waived to all the world.  This shows how much the waiver words are worth, not as much as the paper they are written on.        Top


Curtiss v U. of Wisconsin

Curtiss practiced medicine for 15 years in Illinois and during that time ran for the Illinois legislature.  He also has a spinal tumor that restricts his ability to walk.  He went back to school in a family practice residency and was only offered a three month contract.  This was due to the long time between his internship and application for residency.  He attended a lecture on Islam at the University Medical School and questioned the two Islamic presenters.  Soon after he was told his contract would not be renewed.  No reason was given.  Curtiss then filed a complaint before the EEOC.  His fellow residents state he was good and knew his medicine but the university states it was for performance.  Curtiss later applied to Michigan State and was accepted but later rejected after a phone call from MSU to Wisconsin.  This sets up the problem bad performance versus real or perceived discrimination on either religious or ADA grounds.  I look forward to the result.        

Thomas,MD v Medical Center Physicians
Idaho Supreme Ct.

Thomas was employed by and a shareholder of Medical Center Physicians, P.A. In 1994, he reported a fellow shareholder to the executive committee for unprofessional conduct.  The executive committee agreed with some of the allegations and warned the reported physician that continuation of the practice would mean dismissal from the organization.  While this doctor was on vacation, Thomas treated one of his patients and disagreed with the treatment rendered by the physician.  He sent the patient to an outside physician for care.  The doctor found out about the treatment by Thomas and reported Thomas to the quality assurance committee.  The committee reprimanded Thomas for an inflammatory note in the patient's chart.  Thomas then wrote a memo regarding the events and distributed it to the quality assurance committee, the chief administrator, and the CEO of Mercy Medical Center, an unaffiliated hospital.  The Medical Center executive committee were not happy campers and the doctor resigned.  The Board of Directors then had a meeting that Thomas was not invited to and let Thomas go and paid him for his stock and partnership interest. Thomas then sued for multiple claims including wrongful discharge and the associated torts along with defamation.  The Medical Center counter sued for breach of contract and unjust enrichment. Thomas attempted to amend his complaint to add emotional distress and this was dismissed by the judge.  The Medical Center won a summary judgment on all points.  Thomas appealed.  The upper court agreed with the summary judgment on all of Thomas' claims since he had waived them by agreeing to the settlement.  Thomas' claim for emotional distress was reinstated and the summary judgment regarding wrongful discharge in violation of a public policy claim was overturned.  These now go back to trial.  I believe that Thomas would have won many other of the summary judgment if he had different legal advice and not accepted the buy out. If the Medical Center is wise, which I have serious doubts about, they will now quietly settle the claims so their internal dirty laundry will not become public.  

Equality Emergency Med. v Valley Pres. Hosp.
CA Ct. App.

After raising significant concerns about the care in the hospital the contracted ED medical group was told their contract would not be renewed.  The group sued under the whistle bower protections for the poor hospital care.  The group lost since they are not employees, but independent contractors.   It seems a shame that if someone wants to raise the standard of practice, they are removed.        Top


Penn. v Paolino, MD
Penn. Superior Ct.

Dr. Richard Paulino was sentenced to 30-120 years in prison for the illegal dispensing of OxyContin.  He was also convicted of 179 counts of insurance fraud and forgery and practicing without a license.  He had lost his license in 2000 due to the lack of malpractice insurance. 

Florida v Luyao, MD
Fl. Superior Ct.

Dr. Asuncion Luyao has been charged with four counts of manslaughter in the 13 deaths attributed to her prescriptions of OxyContin.  The doctor's attorney states that pills found near some of the victims were prescribed by someone else.  Luyao is the fourth physician to be charged with criminal behavior in connection with OxyContin deaths.  Dr. John Graves of Panhandle was convicted for manslaughter in four deaths.  Dr. Denis Deonarine of Jupiter is been charged and is awaiting trial on first degree murder.  Dr. Frank Fisher in California has also been charged with manslaughter.  Dr. Luyao had her license summarily suspended several months ago.  She will also be sued in many cases for civil malpractice.        Top  

Peer Review

O'Halloran v Charlotte Hungerford Hosp.
Conn. Superior Ct.

In looking for ways around the HCQIA limitations on suing medical staffs an ingenious attorney stated that under the Connecticut Unfair Trade Practices Act, the hospital made disparaging remarks about the plaintiff and conspired to have his privileges reduced,  the plaintiff won a ruling that the relationship between the hospital and its medical staff members has a commercial aspect and is covered under the Act.  The trial can go forward on the charges.  This, of course, only applies in Connecticut.

Payne v Columbia Plaza of Ft. Worth
ND of Texas

A physician when reappointed to the medical staff had conditions and limitations placed on his privileges. The physician refused, resigned without requested going through a hearing and sued under the Sherman Antitrust Act.  Of course, he lost.  He has privileges at other hospitals and therefore there is no injury under the Act.  He will now be reported to the State and NPDB.        Top


DISCLAIMER: Although this article is updated periodically, it reflects the author's point of view at the time of publication. Nothing in this article constitutes legal advice. Readers should consult with their own legal counsel before acting on any of the information presented.