Med Mal News

Supreme Court allows Medical
Malpractice suit against HMO

In a breakthrough decision, the Pennsylvania Supreme Court says it will allow a lawsuit against an HMO. The Court affirmed its 1998 decision in Pappas v. Asbel, saying a state medical negligence law was not preempted by the Employee Retirement Income Security Act (ERISA) of 1974.

The Court cited the New York State Conference of Blue Cross and Blue Shield Plans v. Travelers Insurance Co. decision, saying, “Travelers instructs that ERISA does not preempt state law that regulates the provision of adequate medical treatment.” The Court also referred to the decision of Pegram v. Hendrich, which “instructs that an HMO’s mixed eligibility and treatment decision implicates a state law claim for medical malpractice, not an ERISA cause of action for fiduciary breach.”

Joseph Melillo, an attorney in the Harrisburg firm of Angino & Rovner, P.C., participated as amicus curiae on behalf of PaTLA and wrote the amicus brief to the Pennsylvania Supreme Court. Melillo said that although it is likely to be appealed to the U.S. Supreme Court, the state Court’s decision is significant because it may be the first time that a jurisdiction’s highest court has held that ERISA does not preempt state law negligence claims against HMOs. “I believe that injured plaintiffs have won a victory in Pappas,” said Melillo.

The Pennsylvania Supreme Court ruled that since the third-party claim against U.S. Healthcare arose out of a mixed eligibility and treatment decision, it is subject to the state medical malpractice law, not preempted by ERISA. This opens the door for the CAT Fund and PHICO, working in interest of Haverford Community Hospital, to prove at trial that the HMO was negligent.

The suit came after Basile Pappas was admitted to Haverford Hospital for treatment of numbness and paralysis in his extremities. Pappas’s allegations can be briefly summarized. Attending doctors determined that Pappas had an epidural abscess and needed immediate neurological attention. The doctor then referred Pappas to Jefferson University Hospital, which has a spinal trauma center. U.S. Healthcare refused to admit Pappas to Jefferson because it was not covered under their plan. As a result, it took several hours for Pappas to be transferred, causing permanent quadripligia. Pappas sued Haverford for negligence. Haverford in turn is suing U.S. Healthcare.

Under Pegram, the Court says, there are two guiding principles. The first is that physicians play two roles, one as a healthcare plan administrator and the other as a healthcare provider, making the best decisions for the patient.

The second principle is that HMOs make three types of decisions: eligibility decisions, treatment decisions and mixed decisions. In the Pappas case, the Court found that “the undisputed facts in this case, and the inferences drawn from them, establish the sort of mixed eligibility and treatment decision that Pegram discussed.”

The mixed eligibility decisions were found to be exempt from the ERISA laws. The Court remanded the matter to trial court for further proceedings.

In the dissenting opinion, Justice Saylor wrote that the majority interpreted ERISA preemption too narrowly:

…state laws having general application and relating to areas traditionally subject to state regulation are more likely to survive preemption challenges. I am not as certain, however, that the Supreme Court would confine the possibility of preemption solely to those cases involving pure eligibility determinations, and I believe that the reasoning of Pegram II contains at least inferential evidence to the contrary.

Saylor also says he believes the preemption laws need to be evolved, especially when it comes to HMOs.

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