Texas is First to Allow Patients to Sue MCOs

    Similar Bill is Introduced in Congress

In a landmark decision with huge implications for managed care
organizations and their patients, Texas Governor George W. Bush
Jr. signed Senate Bill 386 into law May 22, giving patients the
right to sue managed care organizations (MCOs) for medical 
malpractice if a decision to deny or delay treatment causes them
harm.  Texas is the first state to adopt such a law.

The new law, which goes into effect September 1, 1997, holds 
MCOs and the physicians that work for them liable for damages 
for health care treatment decisions, failure to exercise 
"ordinary care," or for failing to administer care that another
health care professional outside the MCO would normally provide.

What is "ordinary care?"  The bill vaguely defines it as "that
degree of care that a person of ordinary prudence in the same
profession, specialty, or area of practice as such person would
use in the same or similar circumstances."

The bill also declares void any indemnification clauses that 
exist in contracts between physicians and managed care 
organizations.  Such clauses are typically used by MCOs to clear
themselves of any wrongdoings should the participating physician
be found guilty of malpractice or other violations (Editor's 
note: a complete text of the bill and its history are available 
at www.capitol.state.tx.us).

Almost Killed Before it Had a Chance

SB 386 was opposed by many business interests, and of course by
managed care organizations.  The MCOs feared, with some 
justification, that making them subject to civil lawsuits for 
medical negligence would drive up health care costs and greatly
increase the number of lawsuits against doctors and health care
providers.  Governor Bush also expressed concerns along those 
lines.

Joining the lobbying efforts in support of the bill were the 
Texas Medical Association, the Texas Chiropractic Association, 
and a number of consumer groups.  Passage of the bill was also 
aided by a number of medical horror stories that were offered 
as testimony to the legislators.  One such example was the story
of a woman who died from a brain tumor two years after 
complaining of headaches and seizures.  They were dismissed as 
"anxiety attacks."  Another story told of a man who died of a 
heart attack after his insurer denied coverage for him to see a 
cardiac specialist.

In signing the bill into law, Governor Bush commented, "Given 
the choice between doing nothing and doing something to address
a significant problem that impacts the health of thousands of 
Texans, I have concluded the potential for good outweighs the 
potential for harm in Senate Bill 386."

There are 3.7 million Texans currently enrolled in managed care
plans.

Just the Tip of the Iceberg

Passage of Senate Bill 386 into law is paving the way for more 
legislation regarding the operation of managed care organizations.
SB 386 was only one of a number of bills related to MCOs making 
their way through the Texas legislation.

* Senate Bill 383 sets definitions between a point of service 
plan, a preferred provider option, and a health maintenance 
organization.

* Senate Bill 384, which has already been passed by the House 
and Senate, defines responsibilities surrounding utilization and
benefits reviews.

* Senate Bill 385, which currently awaits the governor's 
signature, allows consumers the same access to benefit 
information about HMOs as their employers.

The Key Players Speak

State Senator David Sibley of Waco, a sponsor of SB 386, said
that Texas will lead the nation in making HMOs and other managed
care organizations responsible for the medical decisions they 
make.  "It is only right that managed care organizations be 
treated like any other profit-making business in Texas," he 
asserted.

The Texas HMO Association had a curt response to the bill's 
passage, calling it "a step backward in the state's efforts to
promote tort reform."  Governor Bush is more optimistic.  He 
averred that it "will send a signal that HMOs must be more 
sensitive and responsive to the health car concerns of their 
customers.

Managed Care Plan Accountability Act Introduced into Congress

At the federal level, bay area Congressman Pete Stark (D-Hayward)
has introduced the Managed Care Plan Accountability Act (HR 1479) 
into the House of Representatives to close what he sees as 
loopholes used by MCOs to avoid liability.  That loophole occurs 
when a managed care patient sues a doctor for malpractice, and 
the doctor claims important tests or treatment were denied by 
administrators of the MCO.  When the patient then attempts to 
sue the health plan, the MCO claims federal exemptions under 
ERISA.

The courts have not reached a consensus on MCOs who hide behind 
ERISA. The Stark bill would circumvent that confusion by 
allowing, as in Texas, the patient to directly sue the MCO.

The Stark bill has been referred to the Ways and Means Committee
and the Education and Workforce Committee.  Representative 
Stark's e-mail address is: petemail@hr.house.gov.  The text of 
HR 1479 and related material can be found by accessing 
http://thomas.loc.gov and then entering a search for "HR 1749."

References:

1. Texas to allow medical malpractice. Associated Press, May
   22, 1997.
2. Bush signs off on HMO liability bill.  United Press 
   International, May 22, 1997.

Dynamic Chiropractic 06-30-97