Academic journal article Journal of Risk and Insurance

Pennsylvania Supreme Court, after Remand from U.S. Supreme Court, Reaffirms Decision That Actions against HMOs. (Recent Court Decisions)

Academic journal article Journal of Risk and Insurance

Pennsylvania Supreme Court, after Remand from U.S. Supreme Court, Reaffirms Decision That Actions against HMOs. (Recent Court Decisions)

Article excerpt

PENNSYLVANIA SUPREME COURT, AFTER REMAND FROM U.S. SUPREME COURT, REAFFIRMS DECISION THAT ACTIONS AGAINST HMOS FOR NEGLIGENT FAILURE TO AUTHORIZE TREATMENT ARE NOT PREEMPTED BY ERISA, BUT FEDERAL APPEALS COURT SITTING IN PHILADELPHIA REACHES OPPOSITE CONCLUSION IN CASE WITH SIMILAR FACTS.

Pappas v. Asbel, 564 Pa. 407, 768 A.2d 1089 (Pennsylvania Supreme Court--April 3, 2001)

Pryzbowski v. U.S. Healthcare, Inc., 245 F.3d 266 (U.S. Court of Appeal, Third Circuit--March 27, 2001).

In a decision reconsidered because of an intervening U.S. Supreme Court decision, the Pennsylvania Supreme Court held that a claim against a health maintenance organization (HMO) for failing to authorize treatment of a patient could be maintained under state law. At 11 a.m. on May 21, 1991, Basil Pappas was admitted to Haverford Community Hospital in the Philadelphia suburbs and diagnosed with an epidural abscess creating pressure on his spinal cord.

The treating physician regarded this as a neurological emergency and recommended that Pappas be immediately transferred to Jefferson University Hospital in Philadelphia. An ambulance arrived at 12:40 p.m. But at that point, U.S. Healthcare, the HMO that insured Pappas, denied authorization for treatment at Jefferson, apparently because it was not a participating hospital in Pappas's U.S. Healthcare plan. The doctor protested and by 1:05 p.m., U.S. Healthcare responded, continuing to deny treatment at Jefferson but to permit transfer of the patient to either Hahnemann or Temple University hospitals. Pappas was eventually taken to Hahnemann by 3:30 p.m. The pressure on his spinal cord caused permanent quadriplegia, prompting Pappas to sue both his primary doctor for medical malpractice and Haverford for inordinate delay in treatment.

Haverford brought U.S. Healthcare into the action with a third-party complaint, alleging that the HMO's refusal to authorize the original planned referral to Jefferson Hospital was a significant part of the delay that in significant part led to the tragedy. U.S. Healthcare raised the defense of ERISA preemption, arguing that it could not be sued under state tort law because Pappas was covered pursuant to an employee benefits plan that was subject to ERISA preemption. U.S. Healthcare argued that ERISA's broad preemption clause stating that any law "relating to" a plan was preempted barred the Pappas action.

The Pennsylvania Supreme Court rejected the preemption defense in its first opinion. See Pappas v. Asbel , 555 Pa. 342,724 A.2d 889 (Pa. 1998). U.S. Healthcare, by now part of Aetna, sought review by the U.S. Supreme Court. The High Court remanded the case to Pennsylvania for reconsideration in light of Pegram v. Herdrich, 530 U.S. 211,120 S.Ct. 2143, 147 L.Ed.2d 164 (June 12, 2000). In Pegram, the Court held that HMOs making medical treatment decisions or "mixed" decisions regarding coverage and treatment were not "fiduciaries" under ERISA and hence were not subject to the fiduciary liability sections of ERISA. However, the Pegram Court did strongly suggest that HMOs acting in this capacity were also outside the protection provided by ERISA's preemption provisions.

Certainly, this was the view of the Pappas Court, which reaffirmed its earlier ruling after discussing Pegram. See 768 A.2d at 415. The Pappas Court also reviewed the U.S. Supreme Court's ERISA preemption jurisprudence, which it continued to regard as moving away from the earlier ERISA jurisprudence of extremely broad preemption toward more traditional, restrained notions of preemption. See 768 A.2d at 1092-93.

The Pappas Court was aware that plaintiff Herdrich in the Pegram case has been permitted to pursue a medical malpractice action in Illinois state court, where the claim arose, and that the Pegram v. Herdrich facts were analogous to those of Pappas. Herdrich was receiving treatment for abdominal pains but was required to wait for treatment and to go to a hospital selected by the HMO. …

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