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  • Taking Chances2:24

          Health Maintenance Organizations (HMOs) are constantly coming under attack by plaintiff’s lawyers for engaging in cost saving measures which have the potential for compromising patient care.  One concern that plaintiffs in medical malpractice suite have with HMOs is the financial incentives that they offer to physicians that may discourage them from formulating more complicated treatment plans.  Patients argue that they have the right to know if their doctor’s medical treatment plans are being impacted by these types of incentives.  Both judiciary challenges and legislative efforts have been underway in a number of jurisdictions to address the patients right to know about how their physician is being compensated. 

            In the case of Neade v. Portes, the Supreme Court of Illinois recently considered whether the wife of a deceased patient could bring a claim against her husband’s treating physician and the practice group he worked at for failing to disclose that they were entitled to financial benefits from her husband’s HMO if they kept the costs of his treatment down.  Anthony Neade, who was a heavy smoker, had a family history of heart disease, and a medical history of hypertension, high cholesterol, and obesity.  In 1990, at the age of 37, he began to experience symptoms of coronary artery blockage which included chest pain extending to his arm and shortness of breath.  On August 10, 1990, Mr. Meade’s primary care physician admitted to the hospital to conduct several tests including a thallium stress test and an EKG.  The these tests where reported as normal and Mr. Meade was diagnosed with hiatal hernia and/or esophagitis. 

            After his discharge from the hospital, Mr. Meade returned to his primary care physician on three occasions within in the next month with complaints of continued chest pain radiating into his neck and arm.  Relying on the tests conducted while Mr. Meade was in the hospital, his primary care physician advised him that his symptoms were not cardiac in nature. 

            In October of 1990, Mr. Meade again returned to his primary care physician’s office and was examined by one of his associates.  The physician who examined Mr. Meade suggested conducting an angiogram, a test which is more specific for diagnosing coronary artery disease.  Despite this recommendation, Mr. Meade’s primary care physician did not order any additional  cardiac testing. 

            When Mr. Meade returned to his doctor’s office in June of 1991 with continued symptoms, another physician suggested an angiogram.  Mr. Meade’s primary care physician did not authorize this procedure and relying on the thalium stress test determined the symptoms were not cardiac in nature. 

            On September 16, 1991, Mr. Meade suffered a massive myocardial infarction caused by coronary artery blockage and died nine days later. 

            Mr. Meade’s widow then filed a wrongful death claim on behalf of her husband’s estate.  In addition to claims of medical negligence, Mrs. Meade claimed that her husband’s primary care physician and his physician group owed her husband a fiduciary duty to disclose the details of the financial benefits they were entitled to gain by keeping the costs of her husband’s care down.  The primary care physician had negotiated an agreement with Mr. Meade’s HMO whereby he and his medical group would be paid an annual fee of $75,000 to cover the costs of Mr. Meade’s medical care.  If there was any money remaining from this fee at the end of the year, the physician group would keep 60 percent of the fee, with the remaining money going back to the HMO.  In the event that the annual fee did not cover Mr. Meade’s medical care costs, the physician group would be responsible to fund the costs of treatment. 

            Mrs. Meade claims that if she had known about the financial incentive arrangement, she would have sought a second opinion from a physician outside of the physician group.  In addition, Mrs. Meade offered expert testimony stating that her husband’s physician had an ethical obligation to disclose his financial interest in withholding care. 

            The defendant doctor moved to dismiss the plaintiff’s claims for breach of fiduciary duty which was granted.  On appeal, Circuit Court of Lake County reversed the dismissal and held that evidence of financial incentives could be relevant to a doctor’s credibility in a medical malpractice case.  The Supreme Court of Illinois reinstated the dismissal of the breach of fiduciary duty claim holding that such a claim was duplicative of the plaintiff’s medical negligence claim.  However, the Supreme Court of Illinois agreed that the evidence of financial incentives may be relevant to the issue of bias if the defendant physician testifies in the medical malpractice case. 

            A number of jurisdictions have also considered the extent to which an HMO has a duty to advise its members of the financial incentives offered to their treating physicians.  A class action suit was filed against Connecticut General Life Insurance Co. in the Eastern District of Pennsylvania arguing that federal law imposed a duty to disclose.  The plaintiffs argued that such information was important for a patient to have when deciding whether to sign up for an HMO.  The District Court of Pennsylvania found that there is no such duty under existing federal law governing employer-sponsored health plans.  As a result, the court held there is no duty for an HMO to disclose this information absent an express request from its insured.  The plaintiffs plan to appeal this decision.  A similar class action suit is now pending in Miami. 

            In some states, the legislature has enacted statutes governing a patient’s right to know about financial incentives.  In Massachusetts, an insurance carrier, upon request, must provide its insured a list of health care providers within the network by specialty and location and the method used to compensate and reimburse such provider.  However, the specific details of the financial arrangement are not required to be disclosed.  The Massachusetts statute also has an anti-gag clause which prevents HMOs from refusing to compensate for covered services solely because a patient’s care provider has in good faith communicated with or advocated on behalf of one or more of their prospective, current or former patients regarding their method of compensation.  However, the HMO can require the health care provider to hold confidential the specific compensation terms.  The Illinois statute has  a similar provision requiring an HMO to provide a description of the financial relationship it has with a patients physician in response to a written patient request.  Again, specific provider reimbursement is not subject to disclosure.  The Illinois statute also has an anti-gag clause which states that an HMO cannot prohibit its providers from discussing the terms and conditions of the patients’ HMO plan and plan policy. 

            Physicians need to be aware of whether their state requires them to discuss the issue of how they are compensated by an HMO when they are faced with such request by a patient.  More importantly, physicians need to determine whether there is any type of gag clause in their provider agreement with the HMO which is legally binding upon them.  In the recently enacted legislation in both Massachusetts and Illinois, HMOs are now prohibited from preventing physicians from providing their patients general information about their compensation agreement with the patient’s HMO.  As this type of legislation gains more notoriety, many patients are likely to become more inquisitive about how their physicians are being compensated.    

            The best practice is to be honest and straightforward with your patients about any financial incentive issues that may be involved with their care.

            The bond of confidence between a physician and patient is very important.  Failure to disclose appropriate and adequate information will only harm that relationship if the patient learns such information from a third party.  There are different ways to ensure disclosure even if the physician does not verbally tell the patient.  The physician could seek assurance that the patient has been adequately informed by the managed care organization.  Also, the physicians practice could provide patients with a brochure that outlines such information.  These approaches would allow the patient to ask informed questions much the same as consent forms provide the basis for medical discussions.  In the end, such conversations will serve to strengthen rather than hinder the physicians relationship with his patients. 

            Regardless of financial issues, the physician remains obligated to make appropriate treatment options known to his patients so that they can make informed decisions about their medical treatment.


Keeper of the Records Ordered to Court

by Attorney Frank E. Reardon

August 2013

Healthcare Law, Litigation & Public Policy   Medical Licensure & Discipline ♦ Employment Board of Registration