HMOs do not have a duty under ERISA to disclose whatever financial "incentives" they pay to primary care doctors to limit referrals to specialists, a federal judge in Pennsylvania has ruled.
The Legal Intelligencer reports that the decision came in Horvath v. Keystone Health Plan East.
U.S. District Judge Ronald Buckwalter found that plaintiff Donna Horvath's suit was fatally flawed because her complaints about Keystone Health Plan's non-disclosures fall "outside the scope of any fiduciary relationship that may have existed between Keystone and Ms. Horvath."
The law of the jurisdiction involved, the 3rd U.S. Circuit Court of Appeals, "generally holds that one who may have attained a fiduciary status does not have an obligation to disclose all details of its personnel decisions that may somehow impact upon the course of dealings with a beneficiary/client."
Instead, Buckwalter said, the 3rd Circuit has held that "a fiduciary has a legal duty to disclose to the beneficiary only those material facts, known to the fiduciary but unknown to the beneficiary, which the beneficiary must know for its own protection."
In analyzing a line of 3rd Circuit decisions, Buckwalter observed that the appellate court has held that "a breach of fiduciary duty occurs when harm results from information not disclosed to the beneficiary that is material."
The judge found that Horvath failed the test for several reasons.
For one, Horvath couldn't show that she asked for information about the incentives and was denied access to it, Buckwalter found. She also couldn't show that she paid higher rates than she would have been willing to pay since her employer paid for the plan, Buckwalter noted.
And since Horvath's employer didn't offer any other health plan, Buckwalter found that the information about physician incentives could not be considered legally material to her decision.
Buckwalter found that under the general scheme of managed health care, HMOs use primary-care doctors as "gatekeepers" who direct patients to more expensive specialists only when necessary.
Typically, Buckwalter said, HMOs enter into contracts with their physicians and pay member doctors a set amount every month for each patient in the program under the doctor's care, regardless of how much care the physician provides to the patient.
Quoting from the U.S. Supreme Court's decision in Pegram v. Herdrich, Buckwalter found that primary-care doctors often receive financial incentives or bonuses "rewarding them for decreasing utilization of health care services, and penalizing them for what may be found to be excessive treatment."
HMOs contend that physician incentives are cost-controlling measures kept in check by the physicians' "professional obligation to provide covered services with a reasonable degree of skill and judgment in the patient's interest," Buckwalter wrote.
To view the Legal Intelligencer article, via Law.com, click here.
