Texas has a reputation for doing everything big, and the way it has chosen to ackle the issue of HMO liability is no exception.
Last fall it became the first state to grant patients the right to sue HMOs for medical malpractice. The new law and a number of recent lawsuits against Texas HMOs have placed the bulk of the debate over managed-care responsibility and liability firmly in the Texas courts.
Known as the managed-care accountability law, the measure took effect Sept. 1, 1997. Under the law, a managed-care plan can be sued for malpractice if a patient believes utilization review has resulted in a harmful denial of care. Patients also have the option to try first to resolve disputes with an independent mediator appointed by the Texas Department of Insurance.
Supporters of the new law, including the Texas Medical Association and small-group practitioners, say it is long overdue as it will finally hold HMOs liable for their treatment decisions. Critics, including the Texas HMO Association and large multispecialty groups, say the law will clog the legal system with a rash of new lawsuits and trial attorneys seeking exorbitant settlements.
No case has been filed as yet under the statute, but the nation's 49 other states, many of which have introduced or are in the process of introducing similar legislation, are keeping a close eye on Texas. The battle over the law as well as whatever happens next in Texas will likely indicate the future liability of HMOs and physician-health plan relations across the country.
"Texas (may be somewhat) extreme, but it serves as a bellwether for the rest of the country," says David O'Grady, spokesman for Kaiser Permanente of Texas.
Aetna Health Plans of Texas, which insures about one million Texans in managed-care programs, is challenging the law, claiming it preempts the Employee Retirement Income Security Act. The Aetna suit, filed in U.S. District Court in Houston, says the new law is "unnecessary, since sufficient protection for patients challenging coverage determinations already exists (under ERISA, and that the new law) is harmful because it will drive up healthcare costs, thereby denying access to healthcare to many in Texas."
Supporters of the law claim Aetna's position is groundless and that the company is simply hiding behind ERISA. Phil Berry Jr., M.D., president of the Texas Medical Association, says: "Responsibility for healthcare is something we take very seriously. We feel that this (law) is a fair thing and that it is going to make a big difference in the decisionmaking process of managed-care companies." The 35,000-member TMA was the bill's primary supporter.
Similar legislation is under consideration in Ohio, where the Ohio State Medical Association is its main backer. Tim Maglione, director of legislation for the association, has met with TMA representatives to discuss the potential bill.
"This isn't a backlash against managed care," Maglione says. "What it is is a leveling of the playing field on accountability. What we're saying is if HMOs are making decisions that affect people's lives, then they ought to be held accountable for those decisions, in the same way that doctors are held accountable when they practice medicine."
Both associations refute charges that such laws will clog the legal system or undo any progress made in tort reform. There won't be more lawsuits, they say, just added responsibility.
Yet some Texas newspapers are already running newspaper advertisements asking, "Do you believe you have been harmed by an HMO?" says Texas HMO Association Executive Director Geoff Wurzel. The state completed major tort reform in the 1995 legislative session, Wurzel says, and all parties agreed malpractice laws needed a serious overhaul.
"After making so much progress (in 1995), it's a shame to take a big step back," says former state HMO association President Donald Gessler, M.D. "Creating another way to sue managed-care groups and doctors will benefit only one group -- personal injury lawyers."
Maglione counters that the action is not inconsistent with tort reform. "In tort reform we talk about personal responsibility," he says. "People ought to be responsible for their actions, and if somebody is injured as a result of those actions, they should be compensated fairly but not excessively."
Anti-managed-care sentiment, however, is high, and Texas juries seem willing to award large punitive damages. In December, a large north Texas HMO agreed to pay $5.4 million to settle a medical malpractice lawsuit, but only after a test jury reportedly said it would award the plaintiffs more than $60 million if the case went to trial. The HMO, Kaiser Permanente of North Texas, was not sued under the new law because it is a closed-model HMO, which means its physicians are full-time, contracted employees. Any malpractice suits involving Kaiser physicians automatically involve the company.
Despite the fact that the new law wasn't relevant to the case, the case is still an example of damages that could be awarded under the statute, says Michael Millenson, a member of the healthcare and group benefits consulting practice of William M. Mercer in Chicago.
"HMOs have a lot to worry about," Millenson says. "Regardless of whether they are fully liable for everything they are accused of, emotions are running high, so they face a very good chance of being judged guilty by a jury."
HMOs' credibility ranks just "a little higher than used-car salesmen" with the public, says Austin, Texas, attorney David Hilgers. "Anti-managed care may be too strong of a phrase," he says, but limitations on patient choice and providers are "being felt for the first time in a big way."
In 1997, 4.4 million Texans were enrolled in HMOs, up from an estimated 338,000 in 1983, according to the Texas HMO association. Just how many of those Texans are angry enough to sue, however, is unclear.
Hilgers says the public is ambivalent. In HMO surveys, they say they are satisfied with their plan, but when something happens they don't like, they are quick to say they were not treated right.
And it's not just HMOs that could come under attack, Hilgers says. Large group practices and independent practice associations that have risk contracts also could be liable under the new law. Two of Texas' largest multispecialty group practices -- Kelsey-Seybold Clinic in Houston and Austin Regional Clinic -- fought the legislation.
In a letter to Texas legislators sent during the debate on the law, Spencer Berthelsen, M.D., the medical director for managed care at Kelsey-Seybold, wrote, "When health plans and other managed-care entities such as group practices are held directly responsible for the individual medical decisions of all affiliated providers, the consequences will be to restrict the network of providers, ultimately reducing patient choice."
In another letter, Austin Regional President and Chief Executive Officer Norman Chenven, M.D., urged Gov. George W. Bush to veto the legislation: "Our medical group has invested extensive physical, financial, intellectual and emotional resources in developing high-quality systems to conduct our own utilization review rather than relying on managed-care plans. (The bill) will both punish and stifle this type of innovation by opening physician-led organizations . . . to new causes of actions beyond our current liability."
With the law officially on the books, consultant Millenson says group practices and plans should prepare for eventual lawsuits. "In this country we do not let anyone have immunity from legal suits or from being held accountable for their actions in a court of law."