Newsletter Fall 2000
Managed Care Organizations (MCO)

The Employee Retirement Income Security Act (ERISA) of 1974 has long been used to prevent a patient's rights to sue an HMO and precluded any state law referring to insurance. Then, in 1995, the Supreme Court overturned that act and allowed states to exercise their police powers over health care and insurance.

In 1997, Texas became the first state to allow consumers to sue an HMO for medical malpractice. The law's anti-retaliation provision forbids managed care from dropping or refusing to renew a doctor or health care provider who advocates medically necessary treatment on a patient's behalf. The anti-indemnification provision bars a plan from including language in provider contracts that would hold the plan harmless for its own actions.

Within the first year, 591 patients requested independent reviews from the Texas Department of Insurance (TDI). Approximately half of the decisions made by MCO's have been upheld and the other half overturned. Reviewers for these cases state it hasn't been unusual to ask for additional data, only to find that some plans didn't involve specialists in their decisions to deny care.

In 1998, then Texas Attorney General Morales, filed suit against Aetna, Humana Health plans of Texas, NYLCare Health Plans of the Southwest and NYLCare Health Plans of Gulf Coast. In June 2000, the Fifth US Circuit Court of Appeals upheld the Texas law, stating it did not violate ERISA, however the Court did agree with Aetna that a health plan cannot be forced to submit its decision to deny coverage to an independent review organization (IRO). The right to sue pertains to treatment, not coverage decisions; health plans may be liable for negligent care but not for coverage disputes over denial of a medical service.

Within the last year there has been a flurry of legal action against health plans, specifically MCOs. This has included physician groups, state attorney generals and insurance commissioners.

Both the Connecticut Attorney General and physician groups are suing large HMOs in a bid to reform the health care industry. Attorney General Blumenthal stated that “HMOs force patients to accept less effective care simply so they can increase their profits”. The State Medical Society-Independent Practice Association Inc. sued its HMO, for breach of contract and violations of the Connecticut Unfair Trade Practices Act and Connecticut Unfair Insurance Act. The accusations included usurpation of control over medical decisions, failure to pay physicians in a timely manner and system wide administrative lapses contributing to communication breakdowns.

Preeminent plaintiff class action law firms have filed in United States District Court of New Jersey against Prudential Insurance and its healthcare subsidiaries. The case alleges that PruCare breached express terms of its health care plans for determining whether proposed care was `medically necessary' by using standards inconsistent or in conflict with generally accepted standards.

In California, Kaiser Permanente, the state's largest health insurer and one of the nations largest nonprofit HMOs was recently fined $1 million for systematic problems that resulted in the death of a 74 year old woman with a ruptured aortic aneurysm. The California Medical Association recently sued the state's three largest for-profit health insurers. CMA cites the companies impose unfair contract terms, deny and delay payments for medically necessary treatments and underpay physicians. The lawsuit filed in U.S. District Court in San Francisco names WellPoint Health Networks, HealthNet and Pacificare.

Brown & Toland Medical Group in California has brought suit against Aetna for breach of contract. The 1,600 physicians of Independent Practice Association (IPA) allege that Aetna's conduct resulted in millions of dollars of damages, by failing to update, use and reconcile eligibility and financial data.

Aetna has also been named in another class action by the AMA, charged with flouting a state law in Georgia requiring claims be paid in 15 days. The Insurance Commissioner and Treasurer of Florida are fining two large MCOs there for violating state prompt payment laws.

New York Attorney General and Citizen Action groups released a report citing greater than 50% of the 28 New York HMOs fail to comply with laws to provide patients with health plan information.

At the 70th annual Scientific Session of the American Heart Association, (1) speaker Paul Casale, MD, presented his study of nearly 4,000 patients with acute myocardial infarction (AMI) under the age of 65. Comparing clinical outcomes, based on type of insurance (fee-for-service versus health maintenance organizations), Casale reported in-hospital mortality was significantly higher for HMO patients. Fee-for-service patients were provided with more clinical procedures including cardiac catheterization and angioplasty. He concluded, for patients presenting with AMI, that enrollment in an HMO is an independent predictor of in-hospital mortality.

Every et al. reported in the American College of Cardiology, (2) that HMO hospitals use fewer procedures and longer length of stay to treat patients with AMI. Even after on site facilities became available there was not a significant increase in procedures in the HMO group. While the more conservative treatment involves a longer length of stay, the shorter length of stay in the fee-for-service group may have been on the basis of knowledge of the patient's coronary system obtained in visualization procedures.

Within the last six months JAMA (3) reported a study of 60,000 patients undergoing coronary artery by-pass graft surgery, comparing insurance plans. The authors stated that managed care plans sent cardiac surgery patients to medical centers with higher mortality rates than traditional insurance plans. The authors concluded that managed care contracts with hospitals based on lower costs rather than outcomes, and that the incentive should be for hospitals to compete on a quality of care basis instead.

Brown et al reported in JAMA (4) the outcomes of stroke patients in Medicare HMOs versus fee-for-service plans. HMO patients were sent to nursing homes more regularly and were less likely to be discharged to rehabilitation facilities following the acute event. Similarly a study from Harvard found that patients enrolled in an HMO were discharged sooner than conventional Medicare patients. They concluded that further study of the ultimate outcome of such care was needed.

Elevated cholesterol (hyperlipidemia) is clearly a known risk factor for cardiac diseases. A study reported in March 2000 (5) looked at cholesterol treatment practices in an HMO primary care setting. Using the standards of the National Cholesterol Education Program (NCEP), less than one sixth of the HMO patients requiring treatment received such treatment. The authors suggest that some of the financial incentives and types of reimbursement may influence the limitation of services to patients by physicians, largely on a basis of costs.

The Medical Outcomes Study (MOS), published in JAMA, (6) was a four year observational study, comparing chronically ill patients treated in fee-for-service and HMO systems in three large urban areas. The conclusions found that elderly patients from HMO were more likely to have poor physical health outcomes in all 3 sites and physically limited patients and those in poverty were at greater risk for decline in an HMO system.

In evaluating the trends in malpractice awards for patients with breast cancer, (7) the most common complaint was delay in diagnosis. The average age was 44 years old and the average delay was 14 months. HMOs were cited for denial of six month follow-up, improper treatment, and failing to refer to specialist for biopsy. Because of the basic tenet of cost containment in HMOs, there may be a disincentive to perform fine-needle aspirations or ultrasounds and referrals may not be offered or occur too late.

A report published earlier this year (8) evaluated rates of hospitalization for asthma based on insurance status. It is recognized that hospitalization for asthma can be avoided if ambulatory care is provided in an effective manner. With direct medical costs of asthma estimated to be $5 billion annually in the US, hospitalization and emergency care accounts for 60% of these costs. The costs of the emergency care for HMO patients was the same as fee-for-service patients however hospitalization stays were significantly shorter for HMO patients. The HMO patients had significantly lower medication costs in treatment of asthma. The authors conclude that while restricted formularies lower drug costs in managed care, this may in fact lead to higher costs in other departments (ED).

Suicide is the eighth leading cause of death for all Americans. An excellent study (9) addressed how managed care barriers to treatment may dramatically affect patient outcome. In Florida, several managed care organizations developed criteria to deny payment for psychiatric admissions, for patients deemed appropriate by emergency psychiatric staff. Examples included: 1) that a patient had to have a specific suicide plan to qualify for admission 2) the patient had to have acute suicidal ideation or ruminations; and 3) had to have a prior history of suicide attempts. In testing these criteria, the authors studied 100 patient presenting to the Emergency Department (ED) after a serious suicide attempt. The vast majority of these patients attempted suicide impulsively, with 84% having no preexisting plan and 90% giving no warning of their intentions. 83% of the patients had contact with a health care provider within a month of their suicide attempt, however the majority stated they had not been asked about their emotional state or if they were suicidal at the time. Concluding, the authors state using incorrect or outmoded criteria can have dangerous outcomes for suicidal patients.

1.) On-line Coverage from the 70th Annual Scientific Sessions of the American Heart Association http://www.harp.org/4-casale.htm

2.) Every,N., Fihn, S., Maynard, et al. “Resource Utilization in Treatment of Acute Myocardial Infarction: Staff Model Health Maintenance Organization Versus Fee-For-Service Hospitals” Journal American College Of Cardiology 1995; 26: 401-6

3.) Erickson, LC., Torchiana DF., et al. “The Relationship Between Managed Care Insurance and Use of Lower Mortality Hospitals for CABG Surgery” JAMA 2000; 283: 1976-82

4.) Kanter, M., Glynn, RJ. & Avorn, J. “Variability in Length of Hospitalization for Stroke: Role of Managed Care in an Elderly Population” Archives Neurology 1996 Sep; 53 (9): 875-80

5.) Lai, L., Poblet, M. & Bello, C. “Are Patients With Hyperlipidemia Being Treated? Investigations of Cholesterol Treatment Practices in an HMO Primary Care Setting” Southern Medical Journal 2000 93 (3): 283-6

6.) Ware, J., Baylis, M. et al. “ Differences in a 4-Year Health Outcomes for Elderly and Poor, Chronically Ill Patients Treated in HMO and Fee-For-Service Systems” JAMA 1996; 276:1039-47

7.) Mitnick, J., Vasquez, M. et al. “Malpractice Litigation Involving Patients With Carcinoma of the Breast” Journal American College of Surgery 1995; 181(4): 315-21

8.) Standford,R., Okamoto, L. & McLaughlin, T. “Rates of Hospitalization for Asthma by Insurance Status” http://www.GeneralMedicine/journal/2000/v.../pnt-mgmg0124.stan.htm

9.) Hall,RC, Platt, DE. “Suicide Risk Assessment: A Review of Risk Factors for Suicide in 100 Patients Who Made Severe Suicide Attempts. Evaluation of Suicide Risk in a Time of Managed Care” Psychosomatics 1999; 40:18-27