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ERISA protection gone for HMOs in PA

By Renee Martin, J.D., R.N.

The Pennsylvania Supreme Court recently handed down a decision which will have a significant impact on medical malpractice litigation in Pennsylvania. In Pappas v. Asbel, the Court determined that tort claims against health maintenance organizations under state law are not barred by ERISA.

The ruling affirms the lower court’s decision permitting Haverford Community Hospital to proceed against U.S. Healthcare on claims that U.S. Healthcare was at fault for not approving an immediate transfer of Basile Pappas from Haverford’s emergency room to a tertiary care hospital.

Case Background

Pappas was admitted to Haverford’s emergency room at 11:00 a.m. on May 21, 1991, complaining of paralysis and numbness in his extremities. He was insured by a health maintenance organization operated by U.S. Healthcare.

The emergency room physician determined that an epidural abscess was compressing Pappas’ spinal column. After consulting with both a neurologist and neurosurgeon, the emergency room physician determined the situation constituted a neurologic emergency. The Haverford physicians decided that Pappas needed to be transferred to a university hospital and made arrangements to transfer him to Thomas Jefferson University Hospital.

When the ambulance arrived at Haverford, at approximately 12:40 p.m. to transfer Pappas, the emergency room doctors were informed that U.S. Healthcare had denied authorization for treatment at Jefferson. For the next hour, the emergency room physicians contacted U.S. Healthcare and received authorization to transfer Pappas to three other alternative facilities. However, it was not immediately possible to transfer Mr. Pappas to these facilities and it was not until 3:30 p.m. that day that Mr. Pappas was transferred to the Medical College of Pennsylvania for definitive treatment. As a result of the compression to his spine, Pappas was rendered a permanent quadriplegic.

Thereafter, Pappas sued his primary physician and Haverford claiming medical malpractice in delaying his transfer. Haverford then filed a third party complaint against U.S. Healthcare, joining it as a defendant “for its refusal to authorize the transfer of Pappas to a hospital selected by the Haverford physicians.”

U.S. Healthcare filed a motion with the court seeking to dismiss Haverford’s claim against it arguing that it was preempted by ERISA.

The trial court granted U.S. Healthcare’s motion, but the Superior Court reversed, concluding that there was no ERISA preemption.

The Recent Court Ruling

The Pennsylvania Supreme Court affirmed the Superior Court. The Court based its rulings on recent decisions by the U.S. Supreme Court which have significantly narrowed that Court’s reading of ERISA preemption, although not in the context of a medical malpractice claim. The Court acknowledged that the U.S. Supreme Court has yet to squarely address the issue of whether a negligence claim against an HMO “relates to” an ERISA plan.

However, the Pennsylvania Supreme Court noted that the U.S. Supreme Court had “noticeably changed tact” in its approach to ERISA preemption since 1995 and that this trend has been repeated in other Supreme Court ERISA decisions issued after 1995.

The Pennsylvania Supreme Court then determined that, based upon its interpretation of these recent U.S. Supreme Court cases, negligence claims against an HMO do not “relate to” an ERISA plan. The Court found that ERISA preemption was unjustified in any medical malpractice action against an HMO. The Court stated that Congress could not have intended to preempt state laws which govern the provision of safe medical care: “Claims that an HMO was negligent when it provided contractually-guaranteed medical benefits in such a dilatory fashion that the patient was injured indisputedly are intertwined with the provision of safe medical care. We believe that it would be highly questionable for us to find that these claims were preempted when the United States Supreme Court has stated that there is no intent on the part of Congress to preempt state laws concerning the regulation of the provision of safe medical care.”

Implications of the Recent Ruling

Pappas is significant. Prior to this decision, if an HMO was not successful in raising a preemption defense in federal court, the case would be remanded to state court. Once there, the HMO could again raise the preemption issue and have the state court determine whether ERISA preempted the malpractice claims.

While federal courts (including the Eastern District of Pennsylvania) have increasingly found that ERISA preemption exists for malpractice cases, determination of this issue by Pennsylvania’s highest court remained an open question.

Pappas conclusively closes this door for HMOs in Pennsylvania state courts. Now, when a Pennsylvania physician and HMO are named in a malpractice suit in state court for the negligent provision of medical care under an ERISA managed care plan, he or she can expect that the managed care plan will remain in the case as a co-defendant.

Renee Martin, J.D., R.N., is an associate with the health care law firm of Kalogredis, Tsoules and Sweeney Ltd. in Wayne, Pa.

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