Amicus Curiae Brief — Pegram v. Herdrich

Supreme Ulu.

FIL _—

1999

In the OFFICE OF THE

No. 98-1949

CLERK

i

Supreme Court of the Gnited States

LORI PEGRAM, M.D., CARLE CLINIC ASSOCIATION,

AND HEALTH ALLIANCE MEDICAL PLANS, INC.,

Petitioners,

CYNTHIA HERDRICH,

Respondent.

On Writ of Certiorari to the United States

Court of Appeals for the Seventh Circuit

BRIEF OF AMICUS CURIAE AMERICAN

MEDICAL ASSOCIATION IN SUPPORT OF

PETITIONER LORI PEGRAM, M.D.

MICHAEL L. ILE

ANNE M. MURPHY

LEONARD A. NELSON

AMERICAN MEDICAL

ASSOCIATION

515 North State Street

Chicago, Illinois 60610

(312) 464-5000

GARY W. HOWELL

Counsel of Record

L. EDWARD BRYANT, JR.

THOMAS CAMPBELL

JAMES M. JACOBSON

GARDNER, CARTON & DOUGLAS

Quaker Tower

321 North Clark Street

Chicago, Illinois 60610

(312) 644-3000

Attorneys for Amicus Curiae

American Medical Association

Midwest Law Printing Company/Photex — Chicago — (312) 321-0220

oi

i

TABLE OF CONTENTS

ral decisions, for a patient who is a

participant in an ERISA plan, the

physician is not acting as a fiduciary

ysician’s compensation agree-

ment with a managed care organiza-

tion, under which he or she is paid

for performing clinical services for

patients who are ERISA plan partici-

pants, does not cause the physician

to become a fiduciary to the ERISA

ii

TABLE OF AUTHORITIES

CASES PAGE(S)

Amato v. Western Union Int'l Inc.,

773 F.2d 1402 (2nd Cir. 1985),

cert. dismissed, 474 U.S. 1113 (1986) ........ 9

American Drug Stores, Inc. v. Harvard

Pilgrim Health Care, Inc., 973 F. Supp.

GO (Oe Maes. SF) os vccetnddaeaeeas 12-13

Beddall v. State Street Bank and Trust Co.,

137 F.3d 12 (ist Cir. 19006) .....ccccccvecs y

Buckley Dement, Inc. v. Travelers Plan

Adm’rs of Ill., Inc., 39 F.3d 784

(7G Cle. SEDGE) 2 sb cske teen ee ee 10

Curcio v. John Hancock Mut. Life Ins. Co.,

33 F.3d 226 (8rd Cir. 1994) ............... 9

Dukes v. U.S. Healthcare, Inc.,

57 F.3d 350 (3rd Cir.), cert. denied,

516 U.S. 1009 (1995) ............... 14, 16, 22

FMC Corp. v. Holliday, 498 U.S. 52 (1990) ..... 12

Fort Halifax Packing Co. v. Coyne,

468 US. 1 CGR) 0. ncbe nace cece 7, 12, 16

Goldfarb v. Virginia State Bar,

481 UD. Tee CRB0E 0 kc ccwces bdo yeteeee 22

Herdrich v. Pegram, 154 F.3d 362 (7th Cir.

1998), reh’g and reh’g en banc denied,

170 F.3d 683 (7th Cir. 1999) .......... passim

iii

Herrera v. Lovelace Health Sys., Inc.,

35 F. Supp.2d 1327 (D.N.M. 1999) .........

Hillsborough County v. Automated Medical

Laboratories, Inc., 471 U.S. 707 (1985) .....

Hughes Aircraft Co. v. Jacobson, 119 S. Ct.

EE ey ed ee

In re U.S. Healthcare, Inc., No. 98-5222, 1999

U.S. App. LEXIS 22464 (3rd Cir. Sept.

Ce ee eee esece 12,

DPR SGMORS Ee ewe esecdedecccrcccces

LoPresti v. Terwilliger, 126 F.3d 34

EEE EEE SE re

Mertens v. Hewitt Assocs., 508 U.S. 248

EEE re

Metropolitan Life Ins. Co. v. Taylor,

PCE i v6 d's 6 os 0 6.0 600 0-0 14,

N.Y. State Conference of Blue Cross

& Blue Shield Plans v. Travelers

Insurance Co., 514 U.S. 645 (1995) ........

Neade v. Portes, 710 N.E.2d 418 (Ill. App.

1999), appeal docketed, No. 87445

ECS. cc ceasvescecccecccs

Nealy v. U.S. Healthcare HMO, 711 N.E.2d

| A rT ree ee ee ee ee

iv

Pacificare of Oklahoma, Inc. v. Burrage,

59 F.3d 151 (10th Cir. 1995) ............. 14

Payonk v. HMW Indus. Inc., 883 F.2d 221

Ga Gan, BE: ou caved ec tuned cwdeets cute 9

Phommyvong v. Muniz, No. 3:98-CV-0070-L,

1999 U.S. Dist. LEXIS 3101 (N.D. Tex.

Bes De. ED aes ove odGb ee bed Sas Wes 14

Pilot Life Insurance Co. v. Dedeaux,

Ga Ws GS Gee. bk co 0 be Seu bee tale bees 21

Reich v. Continental Cas. Co., 33 F.3d

Tt, 4 & ££ So aor 10

Reich v. Rowe, 20 F.3d 25 (1st Cir. 1994) ...... 10

Rice v. Panchal, 65 F.3d 637 (7th Cir. 1995) .... 14

Rice v. Santa Fe Elevator Corp., 331 U.S.

SEB GHEE ec ccndeds 60d eanekdens bees 29

Semler v. Oregon State Board of Dental

Examiners, 294 U.S. 608 (1935) ........... 22

Siskind v. Sperry Retirement Program,

Unisys, 47 F.3d 498 (1995) ...........4.. 9-10

Swafford v. Harris, 967 S.W.2d 319

. Free eee a 28

Terry v. Bayer Corp., 145 F.3d 28

+o: | errr r Tete Te 10

Varity Corp. v. Howe, 516 U.S. 489 (1996) ....... 8

v

Walling v. Brady, 125 F.3d 114 (3rd Cir. 1997) ... 9

Washington Physicians Service Association

v. Gregoire, 147 F.3d 1039 (9th Cir. 1998),

cert. denied, 119 S. Ct. 1033 (1999) ........ 24

STATUTES AND REGULATIONS

Pe es OE, hcccicdesdac cess passim

ey es I Si co ceevic du vieseee 18

42 U.S.C. § 1113R%(aX INC) ................. 20

Se a ee OO nc ccd cess nck eweecis 20

Se UR aa web ochdbev eb aeceuss 18, 19

Fla. Stat. Ann. ch. 458.331

ES SIS, ia duie'e Cee bee Qe 18

225 Ill. Comp. Stat. 60/1 et seq.

DLC shebiséakeens ¢hbes ous 17, 18

Ky. Rev. Stat. Ann. § 311.597(4)

I GCG be Save ded 6 eee wast 28

Ohio Rev. Code Ann. § 4731.22(B)\(18)

Ne le ewes 28

OTHER AUTHORITIES

Council on Ethical and Judicial Affairs,

American Medical Association, Code of

Medical Ethics (1998-1999 ed.) ........ passim

Council on Ethical and Judicial Affairs,

American Medical Association, Ethical

Issues in Managed Care, 273 JAMA

SP CHD. cv owecoveceteeeveésne cesses 26

Joel L. Michaels, American Medical Association,

The Regulation of Managed Care

Organizations: A Legal Perspective (1994) ... 17

Joint Commission on Accreditation of

Healthcare Organizations, Accreditation

Manual for Hospitals (1998) ............. 21

Joint Commission on Accreditation of

Healthcare Organizations, The Medical

Staff Handbook: A Guide to Joint

Commission Standards (1999) ............ 21

National Committee for Quality Assurance,

Standards for the Accreditation of Managed

Care Organizations (1999) .............+.. 19

T. Metzloff & F. Sloan, Medical Malpractice:

External Influences and Controls, 60 Law

& Contemp. Probs. 1 & 2(1997) .......... 17

1

INTEREST OF AMICUS CURIAE

With the written consent of the parties, reflected in

letters on file with the Clerk of the Court, the American

Medical Association (“AMA”) submits this brief as

amicus curiae in support of Petitioner Lori Pegram,

M.D., pursuant to Rule 37 of this Court.’

The AMA, the largest association of physicians in the

United States, was founded in 1847 to advance the art

and science of medicine and the betterment of the

health of the American people. It sponsors a vast array

of educational, scientific, and public health programs.

These remain its purposes today. The AMA has promul-

gated “The Principles of Medical Ethics,” a statement of

basic rules for the ethical practice of medicine. Its

Council on Ethical and Judicial Affairs (“CEJA”) issues

opinions which apply the Principles of Medical Ethics

to specific ethical issues in medicine, including fees and

charges, and the relationships and interests among

physicians, patients and managed care organizations

(“MCOs”). These opinions are collected in an AMA

publication, the Code of Medical Ethics.”

‘ Pursuant to Rule 37.6 of the Rules of this Court, amicus

states that no counsel for a party authored this brief in whole

or in part, and that no person or entity other than amicus and

its counsel made any monetary contribution to the preparation

or submission of this brief. Pursuant to Rule 37.3 of the Rules

of this Court, the parties have consented to the filing of this

brief, and the consent letters have been filed with the Clerk of

the Court.

? Council on Ethical and Judicial Affairs, American Medical

Association, Code of Medical Ethics (1998-1999 ed.).

2

The AMA is concerned that, if uncorrected, certain

portions of the opinion in the case before the Court’

might suggest that a physician can become a “fiduciary”

under the Employee Retirement Income Security Act of

1974, 29 U.S.C. § 1001 et seq. (“ERISA”) when he or she

(1) performs clinical services for patients who are par-

ticipants in a plan subject to ERISA, or (2) receives

compensation from an MCO in exchange for performing

clinical services to patients who are participants in an

ERISA plan.

Amicus can assist the Court in its resolution of the

present case by identifying concerns raised by the de-

cision below for the conduct of the practice of medicine,

with reference to case law developments and relevant

portions of the Code of Medical Ethics. Amicus will

focus on the difference between duties of medical dia-

gnosis and treatment and duties in the administration

of employee benefit plans subject to ERISA. Amicus will

suggest that clarification of the necessary elements for

a claim of breach of ERISA fiduciary duty will allow

lower federal courts to avoid the confusion over “fidu-

ciary status” and “fiduciary duty” found in the decision

below.

Amicus believes that a resolution of these matters by

the Court will remove uncertainty over the implications

of the decision below for the practice of medicine and

properly restrict the application of ERISA to the oper-

ation of employee benefit plans, without intruding on

the patient-physician relationship.

’ Herdrich v. Pegram, 154 F.3d 362 (7th Cir. 1998) (“Herd-

rich I’), reh'g Po poe en banc denied, 170 F.3d 683 (7th Cir.)

(“Herdrich II”), cert. granted, 120 S. Ct. 10 (1999).

3

SUMMARY OF ARGUMENT

This case involves an “employee welfare benefit plan”

subject to the Employee Retirement Income Security

Act of 1974 (an “ERISA plan”). Such an ERISA plan is

to be distinguished from the managed care arrange-

ment utilized by the ERISA plan to provide benefits to

the ERISA plan’s participants and their beneficiaries.

The opinion below infers that a physician who performs

clinical services for patients who are participants in an

ERISA plan is a “fiduciary” to the ERISA plan, either

(1) by providing diagnostic, prescriptive, therapeutic or

referral services for those participants, or (2) by receiv-

ing compensation in exchange for providing those ser-

vices. These inferences are contrary to ERISA and

would subject physicians—who are already heavily reg-

ulated within the medical profession and by external

agencies—to tremendous uncertainty as to the legal

standards applicable to their practice of medicine.

Therefore, the Court should clearly reject all inferences

in the opinion below that physicians who are perform-

ing clinical services for ERISA plan participants and

who are being paid for those services are, solely for

those reasons, fiduciaries to an ERISA plan and subject

to ERISA’s fiduciary duty rules in the context of the

patient-physician relationship.

ERISA provides an “operational” test to determine

fiduciary status. One is a fiduciary “to the extent” he or

she performs acts described in the statutory definition.

Further, ERISA’s fiduciary duties apply only to conduct

as a fiduciary. The only act identified as conferring

fiduciary status in the present case was “deciding dis-

puted benefit claims,” which is arguably either exer-

cising discretionary authority or control respecting 4

4

management of an ERISA plan, or having discretionary

authority or responsibility in the administration of an

ERISA plan. This Court has identified specific catego-

ries of actions which constitute administration of an

ERISA plan, and lower federal courts have adopted this

formulation. A physician’s performance of clinical ser-

vices within the patient-physician relationship is quali-

tatively different and clearly distinguishable from the

categories of actions which constitute administration or

management of an ERISA plan.

Therefore, the physician’s performance of clinical

services for patients who happen to be ERISA plan

participants is not a fiduciary act under ERISA and is

consequently not subject to ERISA’s fiduciary duty

rules. Moreover, there is no need to apply ERISA in

order to regulate the patient-physician relationship,

given the extensive regulation of the practice of medi-

cine under State and federal law, as well as under

internal mechanisms established by the AMA and other

organizations within the medical profession, including

State and local medical societies. Further, any implica-

tion that ERISA does apply to the patient-physician

relationship would raise questions of preemption of

relevant State laws, and would be inconsistent with the

Court’s recent ERISA preemption jurisprudence.

With respect to a physician’s receipt of compensation

under a managed care arrangement in exchange for

treating patients who are participants in an ERISA

plan, analysis also focuses on the physician’s role with

respect to the ERISA plan. Status as an ERISA fiducia-

ry depends on the performance of actions described in

the statutory definition of the term “fiduciary.” The

physician, in performing clinical services within the

5

patient-physician relationship, is engaged in acts which

are qualitatively different and distinguishable from the

actions which constitute administration or management

of an ERISA plan, and is therefore not a fiduciary to an

ERISA plan. The fact that the physician is being paid

in no way changes the non-fiduciary character of the

performance of clinical services; therefore, the receipt

or ability to receive compensation for performing those

clinical services does not impose fiduciary status or

fiduciary duty on the physician. The public interest

would not be served by using ERISA to regulate the

compensation of physicians in the managed care en-

vironment. Physician arrangements with MCOs are

subject to extensive State and federal regulation and

scrutiny; in addition, the AMA has promulgated strict

ethical guidelines relating to a physician’s obligations

in a managed care setting. Finally, any implication that

ERISA regulates the compensation of physicians in the

managed care environment would be wholly inconsis-

tent with the Court’s recent jurisprudence on ERISA

preemption as well as its longstanding view that the

regulation of matters of health and safety is a local

concern.

For these reasons, the Court should also reject all

inferences that physicians who are performing clinical

services for ERISA plan participants and who are being

paid for those services are, solely on that basis, fiducia-

ries to an ERISA plan and subject to ERISA’s fiduciary

duty rules in the context of the patient-physician re-

lationship.

6

ARGUMENT

I. When a physician performs clinical services, in-

cluding making diagnostic, prescriptive, thera-

peutic or referral decisions, for a patient who is

a participant in an ERISA plan, the physician is

not acting as a fiduciary to the ERISA plan.

Determining whether a person is a fiduciary under

ERISA is a straightforward exercise in statutory con-

struction. First, one must focus on the meaning of

“plan” under ERISA. The statute defines a “plan” (or

“employee benefit plan”) to include an “employee wel-

fare benefit plan,” an “employee pension benefit plan”

or a plan that is both. 29 U.S.C. § 1002(3).

The present case does not involve an employee pen-

sion benefit plan or a hybrid welfare benefit-pension

benefit plan. It involves an “employee welfare benefit

plan,” which is defined in the statute as follows:

The terms “employee welfare benefit plan” and

“welfare plan” mean any plan, fund, or program

which was heretofore or is hereafter j

or maintained by an employer or by an employ-

ee organization, or by both, to the extent that

such plan, fund, or program was established or

is maintained for the purpose of providing for

its participants or their beneficiaries, me y

A -

ihe _santpate seas, yy ital ae or

benefits in the event of sickness, accident, dis-

ability, death or unemployment, or vacation

benefits, apprenticeship or other training pro-

grams, or day care centers, scholarship funds, or

prepaid legal services, or (B) any benefit de-

scribed in section 186(c) of this title (other than

pensions on retirement or death, and insurance

to provide such pensions).

29 U.S.C. § 1002(1) (emphasis added).

. 7

Thus, a medical benefit plan subject to ERISA: (1) is

established or maintained by an employer (or employee

organization, or both),* (2) to provide medical, surgical

or hospital benefits, (3) to plan participants and benefi-

ciaries, (4) through the purchase of insurance or other-

wise. In the case before the Court, a medical benefit

plan was (1) maintained by State Farm, as an em-

ployer, (2) to provide medical benefits, (3) to partici-

pants and beneficiaries, including Respondent, (4)

through CarleCare HMO, “a product of Health Alliance

Medical Plans, Inc.” Record at 93a.

A medical benefit plan established by an employer is

the true “ERISA plan,” and will be referred to as such

herein. It is to be distinguished from products offered

by health maintenance organizations (“HMOs”), pre-

ferred provider organizations (“PPOs”), provider-spon-

sored organizations (“PSOs”) and other MCOs, such as

the HMO utilized by State Farm’s ERISA plan. These

are not ERISA plans; rather, they are commercial

products of an MCO which are sold to ERISA plans.

Sometimes these MCO products use the term “plan” or

“health plan” in their name, but they are not ERISA

plans—they are, instead, means through which benefits

of an ERISA plan can be provided.®

* Hereinafter, the term “employer” will include, where rele-

vant, an employee organization or combination of employer

and employee organization, to refer to the entity that estab-

lishes or maintains the plan.

° “The words ‘benefit’ and ‘plan’ are used separately through-

out ERISA, and nowhere in the statute are they treated as the

equivalent of one another.” Fort Halifax Packing Co. v. Coyne,

482 U.S. 1, 8 (1987).

8

To be a “fiduciary” under ERISA, one must have one

of the statutorily-specified relationships to an ERISA

plan:

[A] person is a fiduciary with respect to a plan

to the extent (i) he exercises any discretionary

authority or discretionary control respecting

management of such plan or exercises any au-

thority or control respecting management or dis-

position of its assets, (ii) he renders investment

advice for a fee or other compensation, direct or

indirect, with respect to any moneys or other

property of such plan, or has any authority or

responsibility to do so, or (iii) he has any discre-

tionary authority or discretionary responsibility

in the administration of such plan.

29 U.S.C. § 1002(21)(A) (emphasis added).

The phrase “to the extent” is critical. One is a fidu-

ciary to an ERISA plan only to the extent that person

engages in one of the acts described in the statute, with

respect to an ERISA plan.

In Varity Corp. v. Howe, this Court recognized the im-

portance of the “to the extent” limitation contained in

the statute:

In relevant part, the statute says that a “person

is a fiduciary with respect to a plan,” and there-

fore subject to ERISA fiduciary duties, “to the

extent” that he or she “exercises any discre-

tionary authority or discretionary control re-

specting management” of the plan, or “has any

discretionary authority or discretionary respon-

sibility in the administration” of the plan.

Varity was both an employer and the benefit

plan’s administrator, as ERISA permits... .

9

But, obviously, not all of Varity’s business activ-

ities involved plan management or administra-

tion.

516 U.S. 489, 498 (1996) (citations omitted, emphasis in

original).® See also Herdrich II, 170 F.3d at 685 (Easter-

brook, J., dissenting).

A corollary to the rule that one has fiduciary status

only “to the extent” one’s actions are described in 29

U.S.C. § 1002(21)A), is that ERISA’s fiduciary duty

rules’ are only applicable to the extent that one is act-

ing as a fiduciary. In Lockheed Corp. v. Spink, this

Court said: “only when fulfilling certain defined func-

tions . . . does a person become a fiduciary under

§ 3(21)(A),” and “because [the] defined functions [in the

definition of fiduciary] do not include plan design, an

employer may decide to amend an employee benefit

plan without being subject to fiduciary review.” 517

U.S. 882, 890 (1996) (citing Siskind v. Sperry Retire-

5 See also Beddail v. State Street Bank and Trust Co., 137

F.3d 12 (1st Cir. 1998); Payonk v. HMW Indus. Inc., 883 F.2d

221, 225 (3rd Cir. 1989) (“[Wjhen employers wear ‘two hats’ as

employers and administrators, ‘they assume fiduciary status

only when and to the extent that they function in their ca-

pacity as plan administrators, not when they conduct business

that is not regulated by ERISA.’”) (quoting Amato v. Western

Union Int'l Inc., 773 F.2d 1402, 1416-17 (2nd Cir. 1985), cert.

dismissed, 474 U.S. 1113 (1986)) (internal quotations omitted).

Accord LoPresti v. Terwilliger, 126 F.3d 34, 40 (2nd Cir. 1997);

Walling v. Brady, 125 F.3d 114, 119 (3rd Cir. 1997); Curcio v.

John Hancock Mut. Life Ins. Co., 33 F.3d 226, 234 n.10 (3rd

Cir. 1994).

7 29 U.S.C. § 1104.

10

ment Program, Unisys, 47 F.3d 498, 505 (1995)) (inter-

nal quotations omitted) (brackets in original).®

Applying these rules to the fiduciary status of treat-

ing physicians, it is clear that nothing in ERISA could

be read to indicate that Dr. Pegram, acting as a treat-

ing physician, was a fiduciary to State Farm’s ERISA

plan. Indeed, while the Seventh Circuit clearly held

that Petitioners other than Dr. Pegram were fiducia-

ries, it is not clear whether Dr. Pegram was held to be

a fiduciary to State Farm’s ERISA plan:

We can reasonably infer that Carle and HAMP

were plan fiduciaries due to their discretionary

authority in deciding disputed claims.

Herdrich I, 154 F.3d at 370 (emphasis added). Dr.

Pegram was not named in Count III of Respondent’s

Complaint;’ so, as a procedural matter, the decisions

below should not apply to her or to other individual

physicians.

8 See also Hughes Aircraft Co. v. Jacobson, 119 S. Ct. 755, 763

(1999) (holding that respondent’s fiduciary duty claims were

“directly foreclosed by Spink’s holding that without exception,

‘{p]lan sponsors who alter the terms of a plan do not fall into

the category of fiduciaries.’”) (citing Spink); Mertens v. Hewitt

Assocs., 508 U.S. 248 (1993) (holding that ERISA does not

authorize suits for money damages against a non-fiduciary for

the non-fiduciary’s participation in a of fiduciary duty);

Terry v. Bayer Corp., 145 F.3d 28, 35 (1st Cir. 1998); Buckley

Dement, Inc. v. Travelers Plan Adm’rs of Ill., Inc., 39 F.3d 784,

789-90 (7th Cir. 1994); Reich v. Continental Cas. Co., 33 F.3d

754, 757-58 (7th Cir. 1994); Reich v. Rowe, 20 F.3d 25, 29-32

(1st Cir. 1994) (all holding, generally, that ERISA does not

authorize suits for breach of fiduciary duty against non-

fiduciaries).

° Herdrich I, 154 F.3d at 366 & 367 n.3.

11

However, the opinion arguably implies, in several

places, that individual physicians acted as ERISA fidu-

ciaries:

(I}t is not unrealistic to assume that the doctors

rendering care under the Plan were swayed to

be most frugal when exercising their discretion-

- authority to the detriment of their member-

ip.

154 F.3d at 372 (emphasis added).

(I]ncentives can rise to the level of a breach

where, as pleaded here, the fiduciary trust be-

tween plan participants and plan fiduciaries no

longer exists (i.e., where physicians delay pro-

viding necessary treatment to, or withhold ad-

ministering proper care to, plan beneficiaries for

the sole purpose of increasing their bonuses).

Id. at 373 (emphasis added).

(Tjolerance of dual loyalties does not extend to

the situation like the case before us where a

fiduciary jettisons his responsibility to the

physical well-being of beneficiaries in favor of

“loyalty” to his own financial interests.

Id.

(I}t is more likely than not that an incentive

existed for the Carle doctors to abuse the dual

loyalties that they observed in administering

the Plan. ...

Id. at 379 (emphasis added).

Despite these implications, the opinion never says

that individual physicians were “deciding disputed

claims” under State Farm’s ERISA plan, which is the

only type of discretion the Seventh Circuit identified as

12

conferring fiduciary status.'® By contrast, the physician

acts described in the opinion involved treatment of

patients. These clinical decisions are qualitatively very

different from the decisions of ERISA fiduciaries in the

administration or management of employee benefit

plans. In the context of the Seventh Circuit opinion,

though, physician decisions about the treatment of

patients who are covered by an ERISA plan could be

construed as involving ERISA plan administration. Any

implication or suggestion to this effect should not be

allowed to stand.

This Court has described the “administration” of em-

ployee benefit plans to include “obligations, such as de-

termining the eligibility of claimants, calculating bene-

fit levels, making disbursements, monitoring the avail-

ability of funds for benefit payments, and keeping ap-

propriate records in order to comply with applicable

reporting requirements.” Fort Halifax, 482 U.S. at 9.

The Court of Appeals for the Third Circuit recently

stated that:

[A]dministrative responsibilities over the ele-

ments of the plan [include] determining eligibili-

ty for benefits, calculating those benefits, dis-

bursing them to the participant, monitoring

available funds, and keeping records.

In re U.S. Healthcare, Inc., No. 98-5222, 1999 U.S. App.

LEXIS 22464, at *23 (3rd Cir. Sept. 16, 1999).""

154 F.3d at 370.

“ See also American Drug my v. Harvard Pilgrim

Health Care, Inc., "979 F.Supp. 60 61 D . Mass. 1997) (noting

that Fort Halifax and FMC Corp Holliday, 498 U.S. 52

(1990) “recognize a limited range of administrative functions

13

A physician’s diagnostic, prescriptive, therapeutic or

referral decisions (referred to herein as “clinical ser-

vices”) are entirely different from the duties of plan

administration identified in Fort Halifax. The physician

is not determining the patient’s eligibility under the

ERISA plan; the physician is treating a patient who

has come for care. The physician is not calculating or

determining benefit levels; the physician is determining

which of the medical procedures available is best suited

to the patient’s specific condition. Neither is the physi-

cian making disbursements, calculating the level of

funds for benefit payments or keeping records for

ERISA plan reporting. Thus, the physician, in perform-

ing clinical services for patients, is not performing any

act of ERISA plan administration or management, and

therefore cannot be a fiduciary to the ERISA plan:

A surgeon exercises a great deal of discretion

when deciding how (if at all) to perform an

operation, but the fact that an ERISA welfare

plan pays for the medical procedure does not

make the physician a “fiduciary” of the patient

Herdrich II, 170 F.3d at 685 (Easterbrook, J., dissent-

ing).

Numerous lower federal court decisions have recog-

nized the qualitative and fundamental distinction be-

tween the practice of medicine and ERISA plan admin-

istration functions. These decisions have been made in

cases which considered whether State court actions

' (continued)

which are of operating an benefit -

bility determinations, benefit poe Let

monitoring [and] recordkeeping.”).

14

based on, for example, negligence or wrongful death, in

the treatment of an ERISA plan participant are pre-

empted by ERISA. (The preemption argument in such

cases may be based on 29 U.S.C. § 1132(a), as inter-

preted by this Court in Metropolitan Life Ins. Co. v.

Taylor, 481 U.S. 58 (1987), on 29 U.S.C. § 1144, or on

both provisions.) These cases distinguish between a

claim based on the “quantity of care” an ERISA plan

participant seeks and one based on the “quality of care”

the participant receives. State law claims of the first

type have been held to implicate ERISA plan adminis-

tration (eligibility for benefits, level of benefits) and,

therefore, to be preempted. The second type of State

law claim, however, has been held to implicate medical

decisions, or the implementation of those decisions and,

therefore, has been found not to be preempted.’

This distinction is clearly articulated in a recent

decision of the Court of Appeals for the Third Circuit:

Thus, it is the HMO’s

8 essentially medical deter-

mination of the appropriate level of care that

the Baumans claim contributed to the death of

their daughter. This is not a claim that a cer-

tain benefit was requested and denied.

In re U.S. Healthcare, No. 98-5222, 1999 U.S. App.

LEXIS 22464, at *25 (3rd Cir. 1999) (emphasis added).

2 See, e.g., Rice v. Panchal, 65 F.3d 637, 645 (7th Cir. 1995);

Pacificare of Oklahoma, Inc. v. Burrage, 59 F.3d 151, 154-55

(10th Cir. 1995); Dukes v. U.S. Healthcare, Inc., 57 F.3d 350,

355-57 (3rd Cir.), cert. denied, 516 U.S. 1009 (1995); Phom-

myvong v. Muniz, No. 3:98-CV-0070-L, 1999 U.S. Dist. LEXIS

3101, at *7-8 (N.D. Tex. March 11, 1999); Herrera v. Lovelace

Health Sys., Inc., 35 F. Supp.2d 1327, 1330-32 (D.N.M. 1999);

Nealy v. U.S. Healthcare HMO, 711 N.E.2d 621, 625 (N.Y.

1999).

15

This distinction between the performance of clinical

services and the administration of an ERISA plan

resolves the physician’s ERISA fiduciary status. In

performing clinical services for patients who happen to

be ERISA plan participants or beneficiaries, the physi-

cian is not engaged in an act described in 29 U.S.C.

§ 1102(21)A). Applying Fort Halifax, a physician would

be engaged in ERISA plan administration, which can

trigger fiduciary status, only to the extext he or she

determines eligibility, calculates benefits, makes dis-

bursements, monitors funds or keeps records for an

ERISA plan.”

Absent fiduciary activity of the kinds described in the

statute, ERISA’s fiduciary duty rules are inapplicable.

Failure to heed this principle led to the confusion in the

opinion below. That opinion identifies a fiduciary act—

“deciding disputed claims.” Herdrich I, 154 F.3d at 370.

However, the physician conduct which the Seventh Cir-

cuit described did not involve deciding disputed claims.

In order to avoid such confusion, this Court should

reiterate that, to properly state a claim for breach of

fiduciary duty under ERISA, a plaintiff must allege

that: (1) defendants have engaged in conduct described

in 29 U.S.C. § 1002(21A) with respect to a plan

covered by ERISA; (2) in the course of that conduct

they breached their fiduciary duties; and (3) a cogniza-

ble loss resulted from that breach.

'S An individual physician could certainly become a fiduciary

ee he es te cea ne cama. be a

member of the administration committee at the hospital

decisions regarding eligibility of an employee or the level of

benefits to which a participant is entitled. There is no allega-

tion that Dr. Pegram played such a role in this case.

16

Under this formulation, which is consistent with the

statute and prior decisions of this Court, the allegation

that a person performed some fiduciary function for an

ERISA plan will not imply that other, non-fiduciary

conduct is subject to ERISA’s fiduciary duty. Thus, a

physician making a diagnostic decision concerning a

patient covered by an ERISA plan (such as Dr.

Pegram’s decision that Respondent’s condition did not

warrant an immediate ultrasound) will not, by making

such a diagnosis, be converted into an ERISA fiduciary:

Lori Pegram, a physician employed by Carle,

scheduled Herdrich for an ultrasound examina-

tion in Urbana on one day rather than in

Bloomington on another; that does not sound

like an exercise of discretion “in the administra-

tion of [the] plan.”

Herdrich II, 170 F.3d at 685 (Easterbrook, J., dissent-

ing).

To convert a physician performing clinical services

into an ERISA fiduciary makes his or her clinical con-

duct subject to ERISA rules and standards, but ERISA

was never intended to regulate the practice of medicine:

The focus of [ERISA] thus is on the administra-

tive integrity of benefit plans... .

Fort Halifax, 482 U.S. at 15.

When Congress enacted ERISA it was concerned

in large part with the various mechanisms and

institutions involved in the funding and pay-

ment of plan benefits.

Dukes v. U.S. Healthcare, Inc., 57 F.3d 350, 357 (3rd

Cir.), cert. denied, 516 U.S. 1009 (1995).

This is not to say that physicians should—or would—

be unregulated in making medical decisions if those de-

17

cisions are not regulated by ERISA. For example, pro-

fessional liability claims may be brought under State

law whenever a patient believes the physician has vio-

lated any duties in the patient-physician relationship."*

Respondent, in fact, prevailed in such a claim:

Herdrich has recovered $35,000 in damages for

medical malpractice. She wants more... .

Herdrich IT, 170 F.3d 683 (7th Cir. 1999) (Easterbrook,

J., dissenting).

Professional liability is only one of many forms of reg-

ulation of physician conduct. Indeed, amicus believes

that, between the external regulation of the practice of

medicine under State and federal law, and the medical

profession’s own self-policing, no other profession is as

extensively regulated as the medical profession.

The laws of each State define what constitutes the

practice of medicine. They also define the criteria for

licensure of physicians, establish a process for admit-

ting physicians to practice, and set forth procedures for

determining when they may no longer practice. Physi-

cians are subject to disciplinary action (including fines,

censure, reprimand, and loss of license) under the laws

of every State if they fail to conform their services to

national and local standards of care. See, e.g., Illinois

Medical Practice Act of 1987, 225 Ill. Comp. Stat. 60/1

et seq. (West 1999).

‘* See generally T. Metzloff & F. Sloan, Medical Malpractice:

External Influences and Controls, 60 Law & Contemp. Probs.

1 & 2 (1997). See also Joel L. Michaels, American Medical

Association, The Regulation of Managed Care Organizations:

A Legal Perspective (1994).

18

Moreover, physicians who are disciplined by State

medical boards or found liable in tort cases are, more

and more frequently, listed in State databases and on

agency websites for review by the appropriate regula-

tory body. Physician licensing and disciplinary codes,

regulations, and board of medicine opinions in most

States are complex and precise, covering physician con-

duct in every area of practice. Many States’ disciplinary

codes permit or require State medical licensure boards

to exact penalties where physicians fail to adhere to

broad standards regarding the quantity, type, method,

or setting of diagnostic or treatment services or sup-

plies, referrals, or medical management services. See,

e.g., Illinois Medical Practice Act of 1987, 225 Ill. Comp.

Stat. 60/1 et seq. (West 1999); Florida Medical Practice

Act, Fla. Stat. Ann. ch. 458.331 (West Supp. 1999); New

York Medical Practice Act, N.Y. Educ. Law § 6509

(McKinney 1999).

Physicians are also subject to multiple laws and

guidelines that mandate conformance with rigorous

quality and performance measures. For example, the

Health Care Quality Improvement Act of 1986, 42

U.S.C. § 11101 et seq. (“HCQIA”) and its implementing

regulations impose a system of comprehensive scrutiny

of physician quality. See 45 C.F.R. Part 60, National

Practitioner Data Bank for Adverse Information on Phy-

sicians and Other Health Care Practitioners (“NPDB”).

Under HCQIA, each State medical board must report

to the NPDB specific information whenever it takes any

action against a physician for reasons relating to a phy-

sician’s professional competence, qualifications, conduct,

or performance, which revokes or suspends licensure,

censures or reprimands a physician or places him or

19

her on probation. HCQIA requires or permits reporting

of adverse clinical privileges actions taken by health

care entities and adverse professional membership ac-

tions taken by professional societies. 45 C.F.R. § 60.9

(1999). This requirement covers all settlements and

judgments concerning professional liability (whether re-

ported by professional liability insurers or hospital co-

defendants) and corrective actions or discharges from

hospital medical staffs. It further requires hospitals and

permits other entities to query the NPDB in enumer-

ated circumstances, such as when a physician applies

for membership on a hospital’s medical staff; when an

MCO or other health care entity wishes to hire or con-

tract with a physician, or comply with its own accredi-

tation criteria; and for professional review activities.

45 C.F.R. § 60.10 (1999); 45 C.F.R. § 60.11 (1999).

Physicians are subject to extensive direct and indirect

scrutiny and certification standards by private third-

party accrediting bodies. For example, the National

Committee for Quality Assurance (“NCQA”) accredits

physician organizations, requiring them to maintain

high standards and rigorous quality measures in the fol-

lowing areas: administrative policies and procedures,

MCO contracting capabilities, “Quality Management

and Improvement,” “Utilization Management,” “Mem-

bers’ Rights and Responsibilities,” “Preventive Health

Services,” “Credentialing and Recredentialing,” and

“Medical Records.” National Committee for Quality As-

surance, Standards for the Accreditation of Managed

Care Organizations (1999). Within these categories of

standards, individual criteria require compliance with

specific dictates, such as making services accessible to

patients, ensuring member satisfaction, providing

chronic disease management and prevention services,

20

and conducting research to ensure efficacy of treat-

ments. Increasingly, physician organizations will be un-

able to obtain MCO contracts without compliance with

such third-party quality and care delivery standards.

Moreover, even if physician organizations do not seek

voluntary third-party accreditation from organizations

such as NCQA, most MCOs do seek such accreditation,

which typically requires the MCO to ensure compliance

with these criteria in its contracts with physicians.

National Committee for Quality Assurance, Surveyor for

the Certification of Physician Organizations (1999).

In addition to these external restrictions on physician

behavior, organized medicine imposes its own scheme

of regulation of professional conduct. Physicians police

themselves rigorously through professional certification

and peer review. Physician societies, associations, hos-

pital medical staffs, institutional review boards, spe-

cialty boards, and hospital committees all strictly regu-

late individual physician qualifications and service

quality. Highly-developed peer review activities occur in

hospitals and medical centers in which physicians

undertake to evaluate each other. Such peer review has

been granted credence in Medicare, Medicaid and other

governmental programs for decades. 42 C.F.R. § 462.1

et seq. The AMA’s Council on Ethical and Judicial Af-

fairs may censure, suspend, or expel AMA members for

a violation of the Principles of Medical Ethics or for

other unethical or illegal conduct. AMA Bylaws, § 1.60.

Other medical societies have similar disciplinary

powers. Such disciplinary actions are reported to the

NPDB, pursuant to 42 U.S.C. § 11133(a)(1\(C).

The majority of acute care institutional health care

organizations implement organizational and governance

21

standards through voluntary accreditation by the Joint

Commission on Accreditation of Healthcare Organiza-

tions (“JCAHO”), a quality oversight body for health-

care organizations and managed care entities. JCAHO

accreditation provides organizational and quality stan-

dards for medical staffs.‘° Additionally, JCAHO per-

forms routine inspections of accredited medical staffs to

confirm adherence to its standards. Compliance with

JCAHO requirements generally assures compliance

with applicable federal and state requirements concern-

ing the governance of medical staffs. Compliance with

JCAHO standards also assures compliance with Medi-

care certification standards. Moreover, compliance with

JCAHO standards provides another layer of external

review and oversight over physicians’ conduct.

Finally, amicus notes that the failure to distinguish

physicians’ clinical services from ERISA plan admin-

istration may create an inference that ERISA would

preempt application of State regulation of the practice

of medicine. The argument would be that, if physicians

can be held to be acting as ERISA fiduciaries in per-

forming clinical services to ERISA plan participants,

ERISA provides a remedy for breaches of fiduciary

duty,'* and that remedy preempts a State law cause of

action arising out of the same conduct. See Pilot Life

Insurance Co. v. Dedeaux, 481 U.S. 41, 47-48 (1987) and

Metropolitan Life Insurance Co. v. Taylor, 481 U.S. 58,

63-67 (1987).

‘8 JCAHO, Accreditation Manual for Hospitals (1998); see also

JCAHO, The Medical Staff Handbook: A Guide to Joint

Commission Standards (1999).

6 See 29 U.S.C. §§ 1109, 1132(1), (2) and (3).

22

Such a result would be contrary to the statute and to

prior decisions of this Court:

[Njothing in the language of [ERISA] or the

context of its passage indicates that Congress

chose to displace general health care regulation,

which historically has been a matter of local

concern. ...

N.Y. State Conference of Blue Cross & Blue Shield

Plans v. Travelers Insurance Co., 514 U.S. 645, 661

(1995) (citations omitted).

We find nothing in the legislative history sug-

gesting that [ERISA] § 502 was intended as a

part of a federal scheme to control the quality of

the benefits received by plan participants.

Dukes v. U.S. Healthcare, Inc., 57 F.3d at 357.

We recognize that the States have a compelling

interest in the practice of professions within

their boundaries, and that as part of their

power to protect the public health, safety, and

other valid interests they have broad power to

establish standards for licensing practitioners

and regulating the practice of professions.

Goldfarb v. Virginia State Bar, 421 U.S. 773, 792

(1975). See also Semler v. Oregon State Board of Dental

Examiners, 294 U.S. 608, 611 (1935).

Nonetheless, such preemption claims could be made,

if any implication were to remain that performing clini-

cal services for patients who are ERISA plan partici-

pants is a matter of ERISA plan administration, subject

to ERISA’s fiduciary duty rules. Such an implication

should not exist—nothing in the language or legislative

history of ERISA suggests that it was ever intended to

create a code for the practice of medicine.

- Soe Fe

23

For these reasons, amicus urges the Court to clearly

reiterate the necessary elements of a claim for breach

of fiduciary duty under ERISA and, in doing so, elimi-

nate any implication that a physician making diag-

nostic and treatment decisions is acting as an ERISA

fiduciary.

II. A physician’s compensation agreement with a

managed care organization, under which he or

she is paid for performing clinical services for

patients who are ERISA plan participants, does

not cause the physician to become a fiduciary to

the ERISA plan.

An employer may provide the benefits available under

an ERISA plan “through the purchase of insurance or

otherwise.” 29 U.S.C. § 1002(1). Many employers pro-

vide the benefits available under an ERISA plan

through a contract with an MCO. This is what State

Farm did in the case before the Court.

An MCO puts together and markets managed care

products (whose features typically include covered ser-

vices, designated providers and compensation of pro-

viders) which can be utilized by ERISA plans or

non-ERISA plans to provide benefits. These MCO

products are not the ERISA plan. They are products

purchased by ERISA plans. An ERISA plan can switch

from one MCO product to another, or it can choose to

provide benefits in a different way, such as through a

group health insurance contract. The ERISA plan is

still the ERISA plan, as distinguished from any product

it uses to provide benefits.

This distinction was articulated in a 1998 decision of

the Court of Appeals for the Ninth Circuit in a case

24

which considered whether ERISA preempted a Wash-

ington State statute which regulated the structure of

MCO provider networks:

[Tlhe Act . . . does not have anything to do with

employee benefit plans in particular. It is mere-

ly one of many state laws that regulates one of

many products that an employee benefit plan

might choose to buy.... The mere fact that

many ERISA plans choose to buy health insur-

ance for their plan members does not cause a

regulation of health insurance automatically to

“relate to” an employee benefit plan—just as a

plan’s decision to buy an apple a day for every

employee, or to offer employees a gym mem-

bership, does not cause all state regulation of

apples and gyms to “relate to” employee benefit

plans. After Travelers, ERISA plans no longer

have a Midas touch that allows them to deregu-

late every product they choose to buy as part of

their employee benefit plan... .

Accordingly, the mere fact that the Act regu-

lates a product that ERISA plans often choose

to buy does not mean that it “relates to” an

ERISA plan.

Washington Physicians Service Association v. Gregoire,

147 F.3d 1039, 1044-45 (9th Cir. 1998), cert. denied,

119 S. Ct. 1033 (1999)."”

When an ERISA plan uses an MCO’s product to pro-

vide benefits, the employer may pay the MCO, or the

MCO may be paid out of ERISA plan assets. The MCO,

in turn, compensates its providers, including physi-

cians.

‘7 See also Herdrich II, 170 F.3d at 686 (Easterbrook, J., dis-

senting).

25

As discussed at pages 6-23 of this brief, when a phy-

sician performs clinical services for a patient, the fact

that the patient is a participant in an ERISA plan does

not turn those clinical services into plan administra-

tion.

As discussed at page 8 of this brief, there is no

fiduciary duty where there is no fiduciary act. Since the

physician, performing clinical services, is not acting as

a fiduciary to an ERISA plan, he or she cannot breach

any ERISA fiduciary duty by being paid for performing

those non-fiduciary services. The ERISA plan pays the

agreed-upon price for the MCO product and, for that

consideration, the MCO’s physicians provide clinical

services to participants in the ERISA plan. The physi-

cians are paid for performing those clinical services. If

a patient/participant is dissatisfied with the clinical

services provided, there are ample means to seek

redress.” If the ERISA plan (or its employer sponsor)

is dissatisfied with the services the MCO provides, it

can switch to another MCO or some other means of pro-

viding benefits.'* Within this framework, nothing sup-

ports an inference that paying a physician for perform-

ing clinical services to ERISA plan participants makes

the physician an ERISA fiduciary.” The opinion below,

to the extent that it contairs any implication to the

contrary, must be rejected.

A physician’s potential conflict of interest under some

MCO compensation arrangements should not and would

'* See pages 16-21, supra.

'’ Herdrich I, 154 F.3d at 382 (Flaum, J., dissenting).

* Amicus does not address whether this analysis would be the

same where a physician is also an owner of an MCO.

26

not be unregulated as a result of the statutory limita-

tions of ERISA. As described in the following para-

graphs, the AMA has provided detailed guidance on a

physician’s ethical obligations regarding MCO compen-

sation arrangements. This guidance is widely accepted,

both under state law and in the medical profession’s

own self-regulation procedures.

Since 1986, CEJA has issued a number of opinions

relating to ethical concerns that have been raised in

connection with MCO arrangements.” These opinions

recognize that the fundamental ethical obligation of a

physician is, at all times, to deal honestly with patients

and not to place the physician’s own financial interests

above the welfare of his or her patients.” The relation-

ship of trust between a physician and a patient for

whom he or she is providing clinical services creates an

affirmative ethical obligation for the physician to dis-

close any prohibition on referral sources for diagnostic

or therapeutic services the physician believes the pa-

tient’s condition warrants, so that a patient can decide

whether to incur out-of-pocket expenses or accept the

referral sources covered by the MCO arrangement.”

The physician has an ethical obligation to assure the

disclosure of medically appropriate treatment alterna-

tives, regardless of cost. Neither the promise of finan-

cial reward nor the threat of financial penalties alters

*! See generally CEJA Ops. 8.13, 8.132, 8.135 and 8.137, Code

of Medical Ethics at 143-49; Council on Ethical and Judicial

Affairs, American Medical Association, Ethical Issues in Man-

aged Care, 273 JAMA 330 (1995).

* CEJA Op. 8.13(1), Code of Medical Ethics at 143.

*’ CEJA Op. 8.132, Code of Medical Ethics at 147.

i OI ce

27

these ethical disclosure obligations, where failure to

disclose would deny a patient access to appropriate

medical services.”

When physicians are employed by or reimbursed by

managed care plans that offer financial incentives to

limit care, potential conflicts are created between the

physicians’ personal financial interests and the needs

of their patients. The AMA’s ethical guidelines warn

physicians of financial incentives that extend beyond

the permissible goal of promoting cost-effective delivery

of health care and can result in the withholding of med-

ically necessary care.” Physicians have an ethical obli-

gation to assure disclosure of any financial inducements

that may tend to limit the diagnostic and therapeutic

alternatives that are offered to patients or that may

tend to limit patients’ overall access to care.” The

ethical guideline specifies that physicians can satisfy

this ethical obligation by assuring that the “managed

care plan” provides adegate disclosure to patients en-

rolled in the “plan.” The ethical guideline, then, ac-

knowledges the reality that physicians are often not in

the best position to provide information regarding MCO

financial arrangements. A typical physician sees pa-

tients covered by numerous MCO arrangements, all

with different, and usually complex, rules. Such disclo-

- &.

* CEJA Op. 8.13(3), Code of Medical Ethics at 144.

*® Id. See Neade v. Portes, 710 N.E.2d 418, 427 (Ill. App.

1999), appeal docketed, No. 87445 (Ill. Oct. 6, 1999) (citing

CEJA Op. 8.132).

Id.

28

sures are most effectively provided by the MCO, either

directly or through the ERISA plan.”

If a particular procedure is not covered by an MCO

product or if the MCO declines to authorize a procedure

recommended by the physician, the physician has an

ethical obligation to advocate for care he or she believes

will materially benefit the patient, regardless of such

restrictions.” These obligations are fundamental ele-

ments of the patient-physician relationship, regardless

of whether the patient is an ERISA plan participant.

Every State requires that physicians maintain ac-

cepted standards of professional behavior. Such stan-

dards are frequently embodied in State licensing stat-

utes and regulations as well as court decisions. The

AMA’s ethical guidelines are commonly recognized as

an element of those professional standards. See Code

of Medical Ethics (1998-1999 ed.). Ohio and Kentucky

have explicitly required, by statute, that physicians

practicing in those States conform to the AMA’s Code

of Medical Ethics. Ohio Rev. Code Ann. § 4731.22

(B\ 18) (Baldwin 1999); Ky. Rev. Stat. Ann. § 311.597(4)

(Baldwin 1998). Similarly, Tennessee has adopted the

Code of Medical Ethics by regulatory policy. Swafford

v. Harris, 967 S.W.2d 319 (Tenn. 1998). Even in those

States that have not specifically adopted the AMA’s

ethical policies, its Code of Medical Ethics is persuasive

authority that guides the judgments of individual phy-

sicians, courts, and regulatory agencies.

** CEJA Op. 8.132, Code of Medical Ethics at 147.

* CEJA Op. 8.13(2\b), Code of Medical Ethics at 143.

Therefore, there is no public interest in stretching

ERISA beyond its statutory limits in order to regulate

how a physician is paid for performing clinical services

for patients. Moreover, the implication in the Seventh

Circuit opinion that ERISA applies to MCO compen-

sation of physicians for performing clinical services

might support arguments that existing regulation un-

der “State law,” as defined in 29 U.S.C. § 1144(c\(1),

would be preempted by ERISA, even though such

claims could not withstand scrutiny under this Court’s

recent preemption jurisprudence. See pages 21-22 of

this brief. Indeed, this Court has long recognized that

the regulation of the practice of medicine is essentially

a State concern:

[Tjhe regulation of health and safety matters is

primarily, and historically, a matter of local

concern.

Hillsborough County v. Automated Medical Laborato-

ries, Inc., 471 U.S. 707, 719 (1985) (citing Rice v. Santa

Fe Elevator Corp., 331 U.S. 218 (1947)).

For these reasons, amicus urges the Court to specif-

ically reject any implication in the decision below that

a physician’s compensation arrangement with an MCO,

under which he or she is paid for performing clinical

services with respect to patients who are ERISA plan

participants, causes the physician to become a fiduciary

to the ERISA plan.

CONCLUSION

For the foregoing reasons, amicus urges the Court,

first, to clearly reiterate the necessary elements of a

claim for breach of fiduciary duty under ERISA and, in

30

doing so, eliminate any implication in the decision

below that a physician making diagnostic and treat-

iment decisions is engaged in the administration of an

ERISA plan. Amicus also urges the Court to specifi-

cally reject any implication in the decision below that

a physician’s compensation arrangement with an MCO,

under which he or she is paid for performing clinical

services with respect to patients who are ERISA plan

participants, could cause the physician to become a

fiduciary to the ERISA plan.

Respectfully submitted,

MICHAEL L. ILE GARY W. HOWELL

ANNE M. MURPHY Counsel of Record

LEONARD A. NELSON L. EDWARD BRYANT, JR.

THOMAS CAMPBELL

AMERICAN MEDICAL JAMES M. JACOBSON

ASSOCIATION

515 North State Street GARDNER, CARTON & DOUGLAS

Chicago, Illinois 60610 Quaker Tower

(312) 464-5000 321 North Clark Street

Chicago, Illinois 60€10

(312) 644-3000

Attorneys for Amicus Curiae

American Medical Association

6)