Amicus Curiae Brief — Aetna Health Inc. v. Davila

rieuiw

JD 21 Jan 22 204

No. 03-83 02 - —

A

~s

IN THE

Supreme Court of the Anited States

CIGNA HEALTHCARE OF TEXAS, INC.,

Petitioner,

We

RuBY R. CALAD, ef al.,

Respondents.

On Writ of Certiorari to the

United States Court of Appeals

for the Fifth Circuit

BRIEF OF THE COUNCIL OF STATE

GOVERNMENTS, NATIONAL CONFERENCE OF

STATE LEGISLATURES, NATIONAL ASSOCIATION

OF COUNTIES, AND INTERNATIONAL

CITY/COUNTY MANAGEMENT ASSOCIATION

AS AMICI CURIAE SUPPORTING RESPONDENTS

RICHARD RUDA *

Chief Counsel

JAMES I. CROWLEY

STATE AND LOCAL LEGAL CENTER

444 North Capitol Street, N.W.

Suite 345

Washington, D.C. 20001

(202) 434-4850

* Counsel of Record for the

Amici Curiae

WILSON-EPES PRINTING CO., INC. — (202) 789-0096 - WASHINGTON, D. C. 20001

QUESTION PRESENTED

Whether § 502(a) of ERISA preempts negligent treatment

claims filed under the Texas Health Care Liability Act.

- —<—_ oe —

TABLE OF CONTENTS

Page

i _ een i

DARE Oe FFT URIee 8 MD ccccccccccecccesecesovesscsssevssssosecs iv

INTEREST OF THE AMICI CURIAE .........cc0cccccceecees l

SUMMARY OF ARGUMENT.................cccccsecseseeeeeees 2

eee 4

ERISA SECTION 502(a) DOES NOT PREEMPT

NEGLIGENT TREATMENT CLAIMS FILED

UNDER THE TEXAS HEALTH CARE LIA-

ee 4

A. Neither Section 502(a) Nor ERISA’s Statutory

Purpose Manifest Congress's Intent To Pre-

empt State-Created Causes Of Action Against

HMOs, MCOs, and UROs For Failing To

Exercise Ordinary Care In Making Health

Care Treatment Decisions ..............::0ccccceeeeeeeees 6

B. CIGNA’s Policy Arguments Are Unper-

suasive And Do Not Justify Immunizing

HMOs, MCOs, and UROs From Liability

For Negligent Medical Decisions....................++. 19

TT icertetiacentcontnsenncensncensevecsecsoveceesceece 25

(iii)

IV

TABLE OF AUTHORITIES

Cases Page

Allis-Chalmers Corp. v. Lueck, 471 U.S. 202

ee Seca ne Ie re ee 17

Cicio v. Does, 321 F.3d 83 (2d Cir.), petition for

cert. filed, No. 03-69 (July 11, 2003) ................ 22-23

De Buono v. NYSA-ILA Med. & Clinical Servs.

Fund, $20 U.S. 806 (1997) .........00.00.000.00000000000e 5, 6, 6-7

DiFelice v. Aetna U.S. Healthcare, 346 F.3d 442

eB ea oe rere de 15, 19, 20, 21

Franchise Tax Bd. v. Constr. Laborers Vacation

Bt ene 17

Hillsborough County v. Automated Med. Labs.,

ef Eee 6

Isaac v. Seabury & Smith, Inc., 2002 WL

gf eee 14, 23

Kentucky Ass'n of Health Plans, Inc. v. Miller,

es BE iccciniinternsinisiattictetiiiadirasianiiatiaiaeiaae 7

Land v. CIGNA Healthcare of Fla., 339 F.3d

1286 (11th Cir.), petition for cert. filed, No.

SS-GED CGE. ZB, BOGS) ccccccccccccccscescsssecseses 12, 12-13, 13

Medtronic, Inc. v. Lohr, 518 U.S. 470 (1996)....16, 18-19

Metropolitan Life Ins. Co. v. Massachusetts, 471

es SURI cicrstnrictiliniasnaiianiniincgtaindaiaeaicas 6

New York State Conf. of Blue Cross & Blue

Shield Plans v. Travelers Ins. Co., 514 U.S.

ere nesnsocesictionisinnduniinnmmnsiiinieiiietaiaiapiipaiipenaiaaiciieas 7

Nguven v. Healthguard of Lancaster, Inc., 282 F.

Supp.2d 296 (E.D. Pa. 2003).............ccscccesseeee 19, 20

Pegram v. Herdrich, 530 U.S. 211 (2000) ............ passim

Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41

GOIN Prvecenensessnscummemnienmameensmmenimeniits passim

Pryzbowski v. U.S. Healthcare, Inc., 245 F.3d

al SUPT sccmannicnansessennmanemanniiinediiians 10

SF Al

‘

Vv

TABLE OF AUTHORITIES—Continued

Page

Roark v. Humana, Inc., 307 F.3d 298 (Sth Cir.

| REENATTEE RAR REM E oeeoten tone One Leoni n emt 13,14

Rush Prudential HMO, Inc. v. Moran, 536 U.S.

FREES REERERT EET Siclceremvonmrenreneena rere 6

Shaw v. Delta Air Lines, Inc., 463 U.S. 85 (1983) 16

Silkwood v. Kerr-McGee Corp., 464 U.S. 238

ee ccitcnneniiniinenineeninnsinieanineneiannanenmmateien 16

United Constr. Workers v. Laburnum Constr.

Corp., 347 U.S. 656 (1954) ....cccccccceeeeeeeee 16, 16-17, 17

Statutes and Regulations

a> Oe ceretertencetninnenrinsctneninnis 18

8 Re 10

Employee Retirement Income Security Act, 29

U.S.C. § 1001 ef seq.

ie SETI nicicneicihentamnanemainasiiineenendinmmmiataiiens 3,19

i) SER cissniscnciiceintcipuintienneinicaniidsidinitanndasiniiita 6

i et scnaresestiinnstenshaisiatuntntiieindennitiaiineniniannineiia 4

I OE nnincnininsiassinennnianbionnimamadibniiits 5

Lo ee 4,15

Oe I ccinresanemnesemtnmnstnssomsenteiionnnes 7

Labor Management Relations Act of 1947

FR ES dl eee 16

Texas Health Care Liability Act (THCLA), Tex.

Civ. Prac. & Rem. Code

Oe Ge II cnrcccessnsccenensonenennessnsensseenn 2,4

BD eG Pcaccenceccnececessnttnenscnsscssscnnsmsmnscemes 18

BD I cc nesentnnenenemncsnnseccsenennmenmsesenenention 18

DBE cenmrenesncssencesensncsussacesesenatnsnemmumenienee 7

i eccesccssascsnecssssrsessenssasinaneumssannesnaents 2, 18

DR ccnsncsssenscscnsecsnsssenserssmemnnnmnennines 2-3, 18

v1

TABLE OF AUTHORITIES—Continued

Other Authorities

Dan Christensen, /n Doctors’ National HMO

Suits, Aetna and Cigna Decide To Settle, Palm

Beach Daily Bus. Rev., Dec. 15, 2003, at 10...

Coopers & Lybrand, L.L.P., /mpact of Potential

Changes to ERISA: Litigation and Appeal

Experience of CalPERS, Other Large Public

Employers and a Large California Health

Jonathan J. Frankel, Note, Medical Malpractice

Law and Health Care Cost Containment:

Lessons for Reformers from the Clash of

Cultures, 103 Yale L.J. 1297 (1994) 000.

Tom Graham, Docs Feel Hassled, Too, Wash.

Bs A: i

Carole Roan Gresenz, ef al., A Flood of

Litigation? Predicting the Consequences of

Changing Legal Remedies Available to ERISA

Beneficiaries (1999), available at http://www.

rand.org/publications/IP/IP184/index.htm! .......

Harvard Medical Practice Study, Patients,

Doctors, and Lawyers: Medical Injury, Mal-

practice Litigation, and Patient Compensation

NI ices netic cinta

Jeffrey E. Shuren, Legal Accountability for

Utilization Review in ERISA Health Plans, 77

et RR RE rere 11,

Temple University Hospital, Patient Informa-

tion—Information for Day Surgery Patients,

available at http://www.health.temple.edu/tuh/

General_Information/day_of_procedure.html

RI eI, Wis Ge iseenneevenitnentneticnseninnennmenteess

Page

10

21, 22

11,12

10

23

23

11-12

Vii

TABLE OF AUTHORITIES—Continued

Veterans Administration Medical Center Hous-

ton Texas, Outpatient Surgery Handbook-

Discharge Planning, available at http://www.

houston.med.va.gov/handbooks/op_surgery/re

covery.html (visited Jan. 19, 2004) 0.0000...

Page

INTEREST OF THE AMICI CURIAE

Amici are organizations whose members include state,

county, and municipal governments and officials throughout

the United States.’ Amici have a compelling interest in the

issue in this case: whether ERISA preempts state laws

regulating the medical treatment decisions of HMOs and

Utilization Review Organizations (URQOs).

The States have long protected the health and safety of

their citizens by regulating the practice of medicine through

both licensing requirements and tort liability. Under tradi-

tional systems of health care financing, insurers either paid or

denied payment for completed medical procedures. Over the

last thirty years, however, the provision of health care has

become predominately subject to cost-control mechanisms

such as utilization review. HMOs and UROs now routinely

assert both the expertise and authority to override physicians’

decisions as to the appropriate course of medical care while a

patient’s treatment is ongoing. These HMO and URO

decisions can have a dramatic impact on patients’ health with

at times fatal results. States such as Texas have accordingly

recognized the practical reality that utilization review

frequently involves the practice of medicine, and that HMOs

and UROs should be accountable for their negligent medical

decisions.

CIGNA’s broad reading of ERISA section 502(a) would

create a regulatory void by rendering HMOs and UROs

unaccountable for negligent treatment decisions. It would also

impose on patients and their survivors the costs of injuries

caused by the negligent treatment decisions of HMOs and

' The parties have consented to the filing of amicus briefs in this case

and have filed blanket consent letters with the Clerk of the Court. This

brief was not authored in whole or in part by counsel for a party, and no

person or entity, other than amici or their members, has made a monetary

contribution to the preparation or submission of this brief.

2

UROs. Because such conduct is clearly outside the scope of

ERISA, but squarely within the regulatory authority of the

States, amici submit this brief to assist the ‘Court in its

resolution of this case.

SUMMARY OF ARGUMENT

|. The Court has repeatedly recognized the States’ long-

standing authority to protect the health and safety of their

citizens by regulating health care. The Court has made clear

that ‘in the field of health care, a subject of traditional state

regulation, there is no ERISA preemption without clear mani-

festation of congressional purpose.” Pegram v. Herdrich, 530

U.S. 211, 237 (2000). Thus, there is a strong presumption that

ERISA does not preempt the Texas Health Care Liability Act

(THCLA), Tex. Civ. Prac. & Rem. Code §§ 88.001-88.003.

Contrary to CIGNA’s contention, ERISA section 502(a)

does not overcome this presumption. Congress enacted the

remedies of section 502 to address benefit denials under the

then-predominate fee-for-service system. Under that system,

insurers either paid or denied payment for completed medical

procedures. Most significantly, utilization review organiza-

tions did not assert authority—as they do now—to override

physicians’ decisions as to the appropriate course of medical

care while treatment was ongoing.

It is entirely appropriate for Texas to exercise its police

powers to protect the health of its citizens by recognizing that

utilization review decisions frequently involve the practice of

medicine. The Texas act addresses the diffusion of authority

for medical treatment decisions that has occurred with the

widespread adoption of utilization review.

THCLA imposes liability on an HMO only for failing “to

exercise ordinary care when making health care treatment

decisions.” Tex. Civ. Prac. & Rem. Code § 88.002(a). The

Act does not impose any obligation on an HMO “to pro-

vide . . . treatment which is not covered by the health

3

care plan.” /d. § 88.002(d). Calad’s THCLA claim does not

present a dispute over the terms of the plan. Her claim is not

for “improper processing of a claim for benefits,” Pilot Life

Ins. Co. v. Dedeaux, 481 U.S. 41, 57 (1987), but rather for the

independent tort which occurred when (as she alleges)

CIGNA overrode her treating physician’s decision, sub-

stituted its own judgment as to the course of necessary

medical treatment, and caused her injury.

Neither ERISA nor DOL’s regulations impose any

substantive standard of conduct applicable to HMOs and

UROs in making treatment decisions. See Pegram, 530 U.S.

at 232-37. CIGNA’s position would thus create a regulatory

void with the perverse result that those patients who defer to

an HMO’s supposed medical expertise and do not challenge

its treatment decision are remediless when that decision

causes them injury. The Court should reject CIGNA’s

attempt to transfer accountability for, and the costs of, its

negligent medical decisions onto its patients. Such a result is

irreconcilable with ERISA’s policy “to protect the interests of

participants in employee benefit plans and their bene-

ficiaries.” 29 U.S.C. § 1001(b).

2. None of CIGNA’s policy arguments support extending

ERISA preemption to immunize HMOs and UROs from

liability for their negligent treatment decisions. Contrary to

CIGNA’s assertion, ERISA section 502(a)’s remedies of a

suit for reimbursement or a suit for injunctive relief are not

always effective. Most patients typically do not have the

financial means to pay for a procedure in advance. Indeed,

that is why they join their employer’s health plan. Similarly,

whether a particular medical treatment is medically necessary

is a highly complex and fact-intensive issue. Thus, the costs

of litigating a suit for injunctive relief are likely to be

substantial. Just as most people lack the financial resources

to pay for treatment in advance, they also cannot underwrite a

suit for injunctive relief. Moreover, while under ERISA, the

4

court, “in its discretion may” award attorney’s fees “to either

party,” 29 U.S.C. § 1132(g)(1), few attorneys will undertake

such a costly and time-consuming litigation given that if they

do not prevail, they will receive no compensation for their

time and expenses. Finally, ERISA’s remedies are totally

inadequate where a patient defers to the .HMO/URO’s

decision regarding appropriate treatment and subsequently

suffers injury.

Finally, CIGNA and its amici refute their own contention

that subjecting HMOs and UROs to tort liability for their

negligent treatment decisions “will vastly increase the costs

of providing benefits” and result in a reduction in health care

coverage for workers. CIGNA Br. 48. As CIGNA and its

amici acknowledge, only a very small percentage of claim

denials involve the issue of whether treatment was medically

necessary. Beyond the fact that the number of potential law-

suit-triggering decisions is low, not every wrongful denial of

medically necessary treatment will result in a lawsuit. Not-

withstanding an HMO/URO’s negligent treatment decision, a

patient may not suffer an injury and even those who are

injured will not necessarily sue. Finally, the litigation experi-

ence of several large non-ERISA plans suggests that such

lawsuits will have only a minimal impact on plans’ costs.

ARGUMENT

ERISA SECTION 502(a) DOES NOT PREEMPT

NEGLIGENT TREATMENT CLAIMS FILED

UNDER THE TEXAS HEALTH CARE LIABILITY

ACT

The court of appeals properly rejected CIGNA’s contention

that ERISA section 502(a), 29 U.S.C. § 1132(a), completely

preempts claims brought under the Texas Health Care

Liability Act (THCLA), Tex. Civ. Prac. & Rem. Code

§$§ 88.001—88.003 (reproduced in CIGNA Pet. App. 56a-

63a). As this Court has recognized, health insurers—whether

health maintenance organizations (HMOs), managed care

5

organizations (MCOs), or utilization review organization

(UROs)—frequently do far more than make simple benefit

eligibility determinations. See Pegram v. Herdrich, 530 U.S.

211, 228-29 (2000).

“[A] great many and possibly most coverage questions are

not simple yes-or-no questions, like whether appendicitis is a

covered condition. ...” /d. at 228 (emphasis added). Rather,

they involve the “when-and-how question” of “whether one

treatment option is so superior to another under the circum-

stances, and needed so promptly, that a decision to proceed

with it would meet the medical necessity requirement that

conditions the HMO’s obligation to provide or pay for that

particular procedure at that time in that case.” /d. at 229. In

short, they are medical judgments which are well beyond the

scope of Congress’s regulatory purpose in enacting ERISA.

See id. at 236 (“ERISA was not enacted .. . in order to

federalize malpractice litigation’).

As explained below, Texas’s creation of a statutory cause

of action for persons injured by a medical insurer’s neg-

ligence in overriding a physician’s judgment as to the

required course of treatment and prescribing different and

inadequate treatment, is not a suit “to recover benefits” or “to

enforce [one’s] rights under the terms of [a] plan.” 29 U.S.C.

§ 1132(a)(1)(B). Such a suit does not challenge an ERISA

administrator’s interpretation of the plan, but rather its medi-

cal judgment regarding the course of required treatment.

Because this case involves an exercise of the State’s

historic powers to regulate the practice of medicine and the

insurance industry, ERISA no more preempts Calad’s state-

law claims than it does state regulations requiring that HMOs

and MCOs employ properly credentialed physicians and

nurses in providing health care. Cf. De Buono v. NYSA-ILA

Med. & Clinical Servs. Fund, 520 U.S. 806 (1997). Indeed,

adoption of CIGNA’s position would create the perverse

result that HMOs, MCOs, UROs, and insurers are immunized

6

from damages liability for injuries caused by their negligence

in making medical decisions in administering an ERISA

medical plan, but not when they administer employee benefit

plans that are not subject to ERISA, see 29 U.S.C. § 1003(b),

or when they administer a health insurance contract generally.

The judgment of the court of appeals should therefore

be affirmed.

A. Neither Section 502(a) Nor ERISA’s Statutory

Purpose Manifest Congress’s Intent To Preempt

State-Created Causes Of Action Against HMOs,

MCOs, and UROs For Failing To Exercise

Ordinary Care In Making Health Care Treatment

Decisions

The Court has repeatedly held that “the historic police

powers of the State include the regulation of matters of health

and safety.” De Buono, 520 U.S. at 814 (citing Hillsborough

County v. Automated Med. Labs., Inc., 471 U.S. 707, 715

(1985)). See also Rush Prudential HMO, Inc. v. Moran, 536

U.S. 355, 387 (2002) (upholding state independent re-

view statute against ERISA _ preemption challenge).

Moreover, the Court has further recognized that a State can

“regulate insurance as one way to regulate the practice of

medicine” and that such regulation is “permissible under

ERISA.” /d. (citing Metropolitan Life Ins. Co. v. Massa-

chusetts, 471 U.S. 724, 741 (1985)). Indeed, the Court has

explained “that regulating insurance tied to what is medically

necessary is probably inseparable from enforcing the

quintessentially state-law standards of reasonable medical

care.” /d. (citing Pegram, 530 U.S. at 236).

This Court has thus made clear that “in the field of health

care, a subject of traditional state regulation, there is no

ERISA preemption without clear manifestation of con-

gressional purpose.” Pegram, 530 U.S. at 237. CIGNA thus

“bear[s] the considerable burden of overcoming ‘the starting

presumption that Congress does not intend to supplant state

7

law.’” De Buono, 520 U.S. at 814 (quoting New York State

Conf. of Blue Cross & Blue Shield Plans v. Travelers Ins.

Co., 514 U.S. 645, 654 (1995)). That burden is even greater

where, as here, a state law also regulates the practices of

insurers, see Tex. Civ. Prac. & Rem. Code § 88.002, an area

which ERISA expressly saves from preemption. See 29

U.S.C. § 1144(b)(2)(A) (“nothing in [ERISA] shall be con-

strued to exempt or relieve any person from any law of any

State which regulates insurance”); Kentucky Ass'n of Health

Plans, Inc. v. Miller, 538 U.S. 329 (2003).

CIGNA nonetheless argues that Section 502(a), ERISA’s

civil enforcement provision, completely preempts Calad’s

claim under THCLA because it provides the exclusive

remedial scheme for the participants and beneficiaries of

ERISA plans to challenge benefit denials. See CIGNA Br.

11-15 (citing Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41

(1987)). See Pilot Life, 481 U.S. at 52 (holding that section

502 is “the exclusive vehicle for actions by ERISA-plan

participants and beneficiaries asserting the improper proc-

essing of a claim for benefits”)). According to CIGNA,

“(t]he real question is whether [Calad’s] THCLA claim seeks

to remediate the violation of a right already protected by

ERISA.” CIGNA Br. 24.

Most troubling, CIGNA asserts that the “the injuries

[Calad] seeks to remedy follow only from the fact that

CIGNA, she says, improperly refused to cover the expenses

of the additional time in the hospital.” /d. According to

CIGNA, because “[i]t is undeniable that Calad could have

brought a § 502(a)(1)(B) action to obtain exactly what her

THCLA claim asserts was wrongfully denied her—the

payment of the expenses of the additional hospital stay,” her

claim “seeks additional remedies for an assertedly improper

denial of her hospital stay benefit, [and] is completely

preempted under Pilot Life.” Id. at 24-25.

8

The Court should reject CIGNA’s attempt to immunize

itself from accountability when it overrides a_ treating

physician’s judgment and substitutes it own negligently made

medical decision as to the appropriate course of a patient’s

medical care. True enough, some claims that arise out of

benefit disputes—such as the refusal to pay a submitted claim

or authorize a procedure in advance—are properly deemed to

be within the scope of section 502(a)(1)(B). But many

disputes between patients or survivors and HMOs/UROs are

not susceptible to resolution under section 502(a)(1)(B),

especially where, as here, HMOs and UROs assert the

medical expertise and authority to make medical treatment

decisions. Because ERISA provides no substantive standard

applicable to medical treatment decisions, Pilot Life, which

holds only that a state law claim “asserting improper

processing of a claim for benefits” is preempted, 481 U.S. at

52, is not controlling.

As a general matter, CIGNA’s approach creates the para-

doxical result that patients such as Calad who accept an

HMO’s judgment as to the course of appropriate treatment

are left utterly remediless for the injuries they suffer when

that judgment turns out to have been negligently made.

Moreover, CIGNA’s view takes no account of the reality that

most patients lack the requisite knowledge and training in

medicine to challenge an HMO’s determination of medical

necessity. As CIGNA’s amici acknowledge, “[a]t a moment

of need an insured patient, while the ultimate ‘consumer’ of

the care, typically lacks . . . the expertise to make informed

decisions for himself.” Br. Am. Cur. AAHP-HIAA et al. 9.

Yet under CIGNA’s view, these same patients are denied any

remedy for their injury when they rely on their HMO’s

judgment that a particular course of treatment is not

medically necessary, while HMOs, MCOs and UROs, which

assert the expertise to override the judgments of treating

physicians, are shielded from liability for the harm caused by

their negligent medical decisions.

9

The foregoing acknowledgement of CIGNA’s amici is

especially relevant to Calad’s case. As anyone who has

undergone major surgery knows, following the procedure a

patient is prescribed pain medication that affects their

decision-making ability. Indeed, discharge instructions com-

monly advise the patient against making any important

business or legal decisions following surgery. See, e.g.,

Veterans Administration Medical Center, Houston, Texas,

Outpatient Surgery Handbook—Discharge Planning, avail-

able at http://www.houston.med.va.gov/handbooks/op_sur-

gery/recovery.html (visited Jan. 19, 2004) (“you should not

... make important decisions until at least one day following

surgery or longer”); Temple University Hospital, Patient

Information—Information for Day Surgery Patients, avail-

able at http://www.health.temple.edu/tuh/General_Informa-

tion/day_of_procedure.html (visited January 7, 2004) (“You

should not . . . make any legal decisions for 24-48 hours

following your discharge.”). A patient is thus typically in no

condition to evaluate the correctness of a benefits denial that

results in a discharge and to determine whether to pursue an

immediate administrative appeal of a denial of a longer

hospital stay.” Nor for that matter is a patient then capable of

> CIGNA argues that Calad had available several remedies to appeal

CIGNA’s discharge order. See CIGNA Br. 42-44. CIGNA emphasizes

Calad’s failure to invoke these remedies upon being informed by CIGNA

in pre-authorization that absent certain symptoms she was entitled to only

a one-day stay in the hospital under its discharge protocol. See id.

at 43-44.

These arguments are unpersuasive for several reasons. First, surgery is

an extremely stressful event for the patient. Prior to surgery, most

patients are under too much stress to do battle with their HMO. Second, a

patient has no basis for knowing before the procedure whether they will

have post-operative symptoms warranting a longer stay.

Moreover, following a major procedure a patient is in no condition to

make a reasoned decision as to whether to challenge a discharge deter-

mination. Nor, even assuming that Calad was in sufficient condition to

challenge t' discharge, is it clear that an appeal of CIGNA’s discharge

10

making a rational decision as to whether to stay in the

hospital, pay for the additional days out of their own pocket,

and later bring a suit for reimbursement under section

§02(a\(1)(B).’ See Pet. Br. 43. Again under CIGNA’s view,

that patient is barred from any remedy when CIGNA has

overridden a physician’s judgment as to the course of appro-

priate treatment and thereby caused injury to the patient.

CIGNA’s argument is undercut by the fact that Congress

enacted the remedies of section 502 in 1973 to address benefit

denials under the then-predominate “fee-for-service” system.

Cf. Pegram, 530 U.S. at 218. Under that system, insurers

determination could have been adjudicated in a timely fashion prior to her

discharge. See CIGNA Br. 42-43 (discussing DOL regulations which

were not in existence at time of Calad’s procedure).

* That DOL’s regulations require a plan to allow the patient’s physician

to represent the patient in an appeal of an adverse benefits determination,

see 29 C.F.R. § 2560.503-1(b)(4), does not support a contrary conclusion.

It is unclear whether a physician has a legal “‘duty to advocate’ with a

patient's health care plan when it denies or delays treatment the physician

has requested.” Pryzhowski v. U.S. Healthcare, Inc., 245 F.3d 266, 281

(3d Cir. 2001). In Prvzhowski, the Medical Society of New Jersey filed

an amicus brief arguing that physicians have no such duty, and the court

of appeals expressly noted “that physicians, under existing New Jersey

law, have no duty to advocate on behalf of their patients to an HMO or

any health insurance plan for the timely approval of benefits.” /d. at 282.

Nor given the workload of physicians, and the view of some physicians

that certain insurance companies systematically and unreasonably deny

claims, is it surprising that physicians would oppose the creation of any

such obligation. Cf Tom Graham, Docs Feel Hassled, Too, Washington

Post, Dec. 23, 2003, at HE2 (noting that “‘less than honorable patterns of

paying claims’ . . . recently led insurance giants Actna and Cigna to settle

federal class actions suits filed by doctors”); Dan Christensen, /n Doctors’

National HMO Suits, Aetna and Cigna Decide To Settle, Palm Beach

Daily Bus. Rev., Dec. 15, 2003, at 10 (noting doctors’ allegation that

“under the banner of cost containment, ... Aetna, . . . Cigna and

other managed care companies conspired to cheat them out of billions

of dollars by denying or manipulating claims to wrongly reduce or

delay payments”).

either paid or denied payment for completed medical

procedures. And utilization review organizations did not

assert authority—as they do now—to override physicians’

decisions as to the appropriate course of medical care while

treatment was ongoing. C/. Jonathan J. Frankel, Note,

Medical Malpractice Law and Health Care Cost Contain-

ment: Lessons for Reformers from the Clash of Cultures, 103

Yale L.J. 1297, 1303 (1994); see also Jeffrey E. Shuren,

Legal Accountability for Utilization Review in ERISA Health

Plans, 77 N.C. L. Rev. 731, 742 (1999) (“Between 1982 and

1985, twenty-seven percent of U.S. companies introduced

utilization review into their health plans. . . . In 1996,

approximately ninety percent of employers used some type of

utilization review in their health plans.”).

Contrary to CIGNA’s views, it is entirely appropriate for

Texas to exercise its police powers to protect the health of its

citizens by recognizing that utilization review decisions

frequently involve the practice of medicine. Texas has acted

to address the diffusion of authority for medical treatment

decisions that has occurred with the wide-spread adoption of

utilization review systems. As one commentator explains:

Although third-party payers claim that their decisions

are benefits determinations and not medical decisions,

the effect of their decisions is to determine what treat-

ment a patient should receive. Because most patients

cannot afford treatment without reimbursement from the

plan and most physicians cannot afford to provide care

without reimbursement, a determination that treatment is

not appropriate and, therefore, will not be paid for by the

plan, is in effect a decision not to provide care or to

provide alternative care. A UR decision is, therefore,

akin to and frequently has the effect of a medical

decision by a treating physician. This similarity is

highlighted by the fact that UROs use health care

providers, such as physicians and nurses, to make UR

determinations and to design UR guidelines.

* * *

12

Not only are UROs interposing themselves into medi-

cal decisionmaking by determining what is medically

necessary, they are also changing the physician standard -

of care by affecting physician decisionmaking and,

therefore, physician practice. UROs evaluate a treating

physician’s plan of care using their own medical experts.

Moreover, they “recommend” alternative courses of

treatment with the knowledge that most patients will

follow their directions. The arrangements between third-

party payers, UROs, and physicians, therefore, distribute

medical authority among several actors.

Shuren, supra, at 747-48.*

It is true, as the Court recognized in Pegram, that many

utilization review decisions do not involve the practice of

medicine and are thus properly characterized as simple

benefits determinations. See 530 U.S. at 228-29. But as

Pegram further recognized, some UR decisions clearly do

involve the practice of medicine. This is amply demonstrated

in various cases where HMOs and UROs have overridden the

treating physician’s diagnosis and plan of care and substituted

their own opinion of what constitutes necessary medical

treatment in a given case. See id. at 229.

For example, in Land v. CIGNA Healthcare of Fla., 339

F.3d 1286 (11th Cir.), petition for cert. filed, No. 03-649

(Oct. 28, 2003), the treating physicians diagnosed a CIGNA

HMO member as having a serious non-localized infection,

which required hospitalization “for aggressive intravenous

‘Another authority likewise explains:

[T}hird party payors, in the context of managed-care arrangements,

often make decisions that we would normally consider to be

medical ones. Utilization review companies evaluate a treating

physician's plan of care using their independent medical expertise:

in addition, they suggest alternative courses of treatment with the

knowledge and expectation that most patients will follow their

prescriptions.

Frankel, supra, at 1320 (emphasis added).

13

antibiotic treatment and constant monitoring and assessment

of his infection to determine whether surgery or modified

antibiotic treatment would be necessary.” /d. at 1288.

Shortly after the patient was admitted, a CIGNA approval

nurse reviewed the treating physicians’ plan of care. See id.

While the CIGNA nurse agreed with the physicians’

prescription of intravenous antibiotic therapy, she reached a

contrary conclusion as to treatment, deciding that Land had “a

localized infection that did not require hospitalization.” /d.

She therefore disapproved Land’s hospitalization and he was

discharged. See id. Following his discharge, Land’s con-

dition deteriorated; he subsequently underwent multiple

surgeries and ultimately had his index finger amputated. See

id. at 1288-89.

In CIGNA’s view, its reviewing nurse’s action was merely

a determination of Land’s benefits under his health insurance

plan. See id. at 1290. According to CIGNA, Land has no

remedy against it notwithstanding that its reviewing nurse

clearly made a medical error when she substituted her own

diagnosis of a localized infection for the treating physicians’

conclusion that Land had a more serious infection that

required inpatient monitoring.

Likewise, in Roark v. Humana, Inc., a patient required

continued use of a vacuum-assisted closure device (VAC) and -

daily home nursing care to treat a leg wound. See 307 F.3d

298, 303 (Sth Cir. 2002). Notwithstanding that the patient’s

primary care physician had informed the HMO “that without

the VAC and home nursing care, Roark could lose her

leg,” the HMO “periodically delayed VAC and home nurs-

ing treatment” and eventually “cancelled home nursing

altogether.” Id2

* According to the Fifth Circuit, Roark had repeatedly challenged the

HMO’s attempts to terminate VAC treatment and home nursing care. /d.

at 303. Her pursuit of these remedies did not deter the HMO from its

determination to terminate medically necessary treatment.

14

Within three months, Roark “developed a serious infec-

tion” that resulted in the amputation of her leg. /d. at 303-04.

Following the procedure, the HMO “again denied [Roark]

VAC treatment that may have helped heal the amputa-

tion wound.” /d. at 304. Less than a year later, Roark was

forced to undergo “an additional amputation treatment on her

leg.” Id.

Again, under CIGNA’s view, Congress has immunized the

HMO from liability in Roark’s case notwithstanding the

serious injury she incurred as a result of its decision to

override the medical treatment prescribed by her treating

physician. And again, the HMO is unaccountable for its

medical decision notwithstanding that it asserted both

expertise and authority to override a treating physician's

prescription of a course of medically necessary treatment.

Similarly, in /saac v. Seabury & Smith, Inc., 2002 WL

1461710 (S.D. Ind. 2002), a patient being treated at the M.D.

Anderson Cancer Center, one of the nation’s leading cancer

facilities, was diagnosed by her oncologist as having chronic

myelogenous leukemia. The oncologist contacted the URO

seeking “Urgent Review” of the patient’s need for a bone

marrow transplant. /d. at *1. In his written diagnosis, the

oncologist stated that the patient’s condition was “unstable.”

Id. The oncologist further concluded that neither chemo-

therapy nor radiation was likely to cure the patient's illness

and that “‘[t}he only documented therapy capable of curing

this disease is bone marrow transplantation from a_ histo-

compatible donor.” /d. (citation omitted).

Nonetheless, the URO denied coverage on the ground that

the prescribed procedure was not “medically necessary.” /d.

Although four weeks later the URO modified the denial and

gave “conditional approval” for the procedure, id. at 2, the

patient died two weeks later before the transplant could be

performed. See id.

15

CIGNA’s position is that an ERISA plan patient should,

upon being denied necessary treatment, pursue an admin-

istrative appeal and, if it is denied, “arrange to pay for the

procedure outside the plan, and then file a § 502(a)(1)(B)

action seeking reimbursement for the expenses.” CIGNA Br.

43. Alternatively, CIGNA maintains that the patient can sue

under § 502 for an injunction to enforce plan terms. See id. at

27-31, 42-44. For most patients, neither choice provides an

effective remedy.

Few patients have the financial means to pay for a bone

marrow transplant or the treatments necessary to cure other

serious illnesses and conditions. Indeed, that is why people

purchase health insurance or join their employer’s health plan

in the first place.

Nor, in most cases, does a suit for an injunction provide a

realistic remedy. Given the “highly fact-intensive” nature of

the issues, with the likely need for expert testimony on what

care is medically necessary and complies with the prevailing

standard of care, “{t]he costs of such suits are likely to be

immense.” DiFelice v. Aetna U.S. Healthcare, 346 F.3d 442,

459, 458 (3d Cir. 2003) (Becker, J., concurring). While under

ERISA “the court in its discretion may allow a reasonable

attorney’s fee and costs of action to either party,” see 29

U.S.C. § 1132(g)(1), it does so “if at all, only after the action

concludes.” DiFelice, 346 F.3d at 458 (Becker, J., con-

curring). Just as most people lack the financial resources to

pay for treatment in advance, they also cannot underwrite a

suit for injunctive relief. And few attorneys will undertake

such costly and time-consuming litigation given that if they

do not prevail, they will receive no compensation for their

time and expenses. Thus, in most instances involving

treatment decisions, section 502°s remedies are, as Judge

Becker concluded, “entirely illusory.” /d. at 459 (Becker, J.,

concurring).

16

CIGNA’s contention is thus simply an attempt to transfer

accountability for, and the costs caused by, its negligent

medical decisionmaking from itself onto its patients.

Acceptance of this view would lead to the perverse result that

those patients who defer to an HMO’s supposed medical

expertise and do not challenge the HMO’s decision regard-

ing appropriate treatment—that is, “most patients,” Shuren,

supra, at 748—are left without a remedy when that decision

causes them injury. The Court should reject this inequitable

contention, which is totally contrary to ERISA’s core purpose

of protecting “the interest of employees and their benefi-

ciaries in employee benefit plans.” Shaw v. Delta Air Lines,

Inc., 463 U.S. 85, 90 (1983).

Indeed, the Court has frequently dismissed similar asser-

tions that federal law preempts state law where, as here, doing

so would result in the denial of any effective remedy. The

Court has rejected the proposition “that Congress would,

without comment, remove all means of judicial recourse for

those injured by illegal conduct.” Si/kwood v. Kerr-McGee

Corp., 464 U.S. 238, 251 (1984); cf. Medtronic, Inc. v. Lohr,

518 U.S. 470, 487 (1996) (rejecting preemption claim that

would “have the perverse effect of granting complete

immunity from design defect liability to an entire industry

that, in the judgment of Congress, needed more stringent

regulation” to protect health and safety).

To similar effect is United Constr. Workers v. Laburnum

Constr. Corp., 347 U.S. 656 (1954). There the Court dis-

missed the contention that federal law preempted a state tort

action based on conduct that also constituted an unfair labor

practice under the LMRA, 29 U.S.C. § 187. While acknowl-

edging that Congress had authorized preventive relief against

unfair labor practices, as well as a limited damages remedy

for illegal secondary boycotts, the Court declined to hold state

tort actions preempted. It reasoned that “[t]o do so will, in

17

effect, grant petitioners immunity from liability for their

tortious conduct.” 347 U.S. at 664.

The Court explained that “[t]o the extent that Congress

prescribed preventive procedure against unfair labor practices

... the [LMRA] excluded conflicting state procedure to the

same end.” /d. at 665. The Court held, however, that “[t]o

the extent . . . Congress has not prescribed procedure for

dealing with the consequences of tortious conduct already

committed, there is no ground for concluding that existing

criminal penalties or liabilities for tortious conduct have been

eliminated.” /d. The Court concluded that to hold state law

preempted would “mean that where the federal preventive . . .

procedures are impotent or inadequate, the offenders, by

coercion of the type found here, may destroy property without

liability for the damage done.” /d. at 669.

The Court’s LMRA jurisprudence is particularly instructive

given that Ҥ 502(a) [of ERISA] was modeled on the

exclusive remedy provided by § 301 of the [LMRA].” Pilot

Life, 48; U.S. at 52. Although United Construction Workers

did not involve § 301, “even under § 301 [the Court has]

never intimated that any action merely relating to a contract

within the coverage of § 301 arises exclusively under that

section.” Franchise Tax Bd. v. Constr. Laborers Vacation

Trust, 463 U.S. 1, 25 n.28 (1983). As the Court further

stated, “a state battery suit growing out of a violent strike

would not arise under § 301 simply because the strike may

have been a violation of an employer-union contract.” /d.

(citation omitted).

Rather, what section 301 preempts is a “state-law claim

[whose resolution} is substantially dependent upon the

analysis of the terms of an agreement made between the

parties in a labor contract.” Allis-Chalmers Corp. v. Lueck,

471 U.S. 202, 220 (1985) (quoted in Pilot Life, 481 U.S. at

55) (emphasis added). But like a battery claim that arises in

the context of a labor dispute, Calad’s claim for negligent

18

medical treatment is not “substantially dependent upon the

analysis of the terms” of her health care benefit plan.

THCLA imposes liability only for failing “to exercise

ordinary care when making health care treatment decisions.”

Tex. Civ. Prac. & Rem. Code § 88.002(a). The statute

defines a “health care treatment decision” in relevant part as

“a decision which affects the quality of the diagnosis, care, or

treatment provided to the plan’s insureds or enrollees.” /d.

§ 88.001(5). Furthermore, the statute expressly states that it

“create[s] no obligation on the part of the . . . [HMO] to pro-

vide to an insured or enrolled treatment which is not covered

by the health care plan of the entity.” /d. § 88.002(d).

Calad’s THCLA claim does not present a dispute over the

terms of the plan. She was entitled to remain in the hospital

as long as the stay was medically necessary. See CIGNA

Br. 3. The underlying dispute is whether, in jight of Calad’s

post-operative condition, CIGNA’s decision that she be

discharged one day after major surgery complied with the

“duty to exercise ordinary care” as defined by “the prevailing

practices and standards of the medical profession and

community.” Tex. Civ. Prac. & Rem. Code §§ 88.002(a);

88.001(1). Her claim is not one for the “improper processing

of a claim for benefits,” Pilot Life, 481 U.S. at 52, but rather

for the independent tort which occurred when (as she alleges)

CIGNA overrode her treating physician’s decision, substi-

tuted its own judgment as to the course of necessary medical

treatment, and caused her injury.

Neither ERISA nor DOL’s regulations impose any sub-

stantive standard of conduct applicable to HMOs and UROs

in making treatment decisions. See Pegram, 530 U.S. at 232,

236; 29 C.F.R. § 2560.503-1. It is thus implausible to suggest

that ERISA section 502 should be construed to completely

preempt Calad’s claim and thereby create a regulatory void.

Indeed, acceptance of CIGNA’s contention would “have the

perverse effect of granting complete immunity” from mal-

19

practice liability when a patient’s health care is provided by

an ERISA plan but not when a patient’s care is provided by a

plan that is not subject to the statute. See Medtronic, 518

U.S. at 487. Given ERISA’s purpose of protecting plan

participants and beneficiaries, see 29 U.S.C. § 1001(b), it

would be an especially problematic to leave ERISA plan

members who have been injured by the negligent treatment

decisions of HMOs and UROs worse off than persons

covered by non-ERISA plans. As there is no evidence that

this was Congress’ intent, the Court should reject CIGNA’s

preemption argument.

B. CIGNA’s Policy Arguments Are Unpersuasive

And Do Not Justify Immunizing HMOs, MCOs

and UROs From Liability For Negligently Made

Medical Decisions

In their effort to extend ERISA preemption to immunize

themselves from the consequences of negligent medical

decisions, CIGNA and its amici make several policy argu-

ments. See CIGNA. Br. 42-49; Br. Am. Cur. AAHP-HIAA at

19-26. To believe CIGNA and its amici, allowing patients to

bring tort suits against HMOs and UROs would have dire

consequences for the employer-based system of health care.

As explained below, these contentions do not withstand

scrutiny. Moreover, they are patently insufficient to justify

“insulat{ing}] HMOs from liability for even the most egre-

gious acts of dereliction committed against plan benefic-

iaries.” DiFelice, 346 F.3d at 453 (Becker, J., concurring).

First, CIGNA contends that ERISA already “provides

numerous protections for ERISA plan beneficiaries’ rights.”

CIGNA Br. 42. But as explained at pp. 15-16, supra,

those remedies are not always meaningful.° Most signifi-

° Nguyen v. Healthguard of Lancaster, Inc., 282 F. Supp.2d 296 (E.D.

Pa. 2003), demonstrates the erroneousness of petitioner’s regime. There,

a URO rejected the recommendations of four different physicians that

20

cantly, those remedies are totally inadequate where a patient

defers to the HMO/URO’s decision regarding appropriate

treatment and subsequently suffers injury. It is perverse to

transfer the costs of negligent treatment decisions from

entities that assert the expertise to override medical

judgments onto patients who typically lack such expertise.

See Br. Am. Cur. AAHP-HIAA at 9 (“an insured patient . . .

typically lacks . . . the expertise to make informed decisions

for himself”).

Moreover, adoption of CIGNA’s position would “create[] a

monetary incentive for HMOs to mistreat . . . beneficiaries,

who are often in the throes of medical crises and _ entirely

unable to assert what meager rights they possess.” DiFelice,

346 F.3d at 453-54 (Becker, J., concurring). Under CIGNA’s

proposed scheme, “if an HMO wrongly denies a participant's

claim even in bad faith, the greatest cost it could face is being

compelled to cover the procedure, the very cost it would have

faced had it acted in good faith.” /d. at 459. As Judge

Becker has further explained, “[a]ny rational HMO will

recognize that if it acts in good faith, it will pay for far more

procedures than if it acts otherwise, and punitive damages,

which might otherwise guard against such profiteering, are no

obstacle at all.” /d.’ Indeed, not even the prospect of paying

Nguyen needed a particular procedure. /d. at 299-300. While Nguyen

pursued several administrative appeals, the URO repeatedly failed to

forward to the reviewer critical evidence (CT scan films) which supported

Nguyen’s need for the procedure. See id. at 300-01. While ultimately,

Nguyen was forced to bring a section 502 claim, the insurer’s bad faith

rendered the administrative appeals meaningless.

’ Contrary to CIGNA’s assertion, see CIGNA Br. 44-46, the fact that in

some instances (such as a self-funded plan) an HMO/URO does not bear

the financial risk of treatment costs does not justify immunizing them

from liability for negligent treatment decisions. Even under these

arrangements the HMO/URO may have a financial incentive to deny

treatment as the HMO/URO’s performance of its contract may be judged

by whether it has held the line on costs. In any event, CIGNA’s market

21

compensatory damages exists to deter HMOs and UROs from

the negligent making of treatment decisions. See id.

CIGNA further asserts that “imposing the medical mal-

practice tort regimes of the various states on employee health

benefit coverage decisions will vastly increase the costs of

providing benefits.” CIGNA Br. 48. Putting aside that

liability under THCLA attaches only to treatment decisions,

see supra p. 18, the litigation experience of non-ERISA plans

amply refutes this contention.

In the late 1990s, the Henry J. Kaiser Family Foundation*

commissioned a study of three large non-ERISA health care

plans: those of the California Public Employees Retirement

System (CalPERS), Los Angeles Unified School District

(LAUSD), and State of Colorado Employee Benefit Plan.” It

found that “{aJll three programs reported very low rates of

litigation ranging from 0.3 to 1.4 cases per 100,000 enrollees

per year.” Coopers & Lybrand, L.L.P., /mpact of Potential

Changes to ERISA: Litigation and Appeal Experience of

CalPERS, Other Large Public Employers and a Large

California Health Plan 5 (Henry J. Kaiser Family Foundation

1998). Based on an assumed “average cost per case for

litigation of $100,000” and CalPERS’s estimated cost of

$10,000 for an administrative hearing, the study found that

“the direct monthly cost per enrollee related to litigation

ranged between $0.03 and of $0.13.” /d. at 6.

incentives approach does not justify imposing on patients the costs of

injury caused by an HMO/URO’s negligent treatment decisions.

* The Henry J. Kaiser Family Foundation is a non-profit private foun-

dation that studies health care issues.

” At the time of the study, CalPERS had about one million members in

its health care plan; the LAUSD had 70,000 members, and Colorado had

30,000. Impact of Potential Changes to ERISA, supra, at 2. Eighty

percent of CalPERS’s and Colorado’s health plan members were enrolled

in managed care; one hundred percent of LAUSD’s members were

enrolled in HMOs or HMO point of service plans. See id.

22

The Kaiser Study also examined the litigation rate of a

large California insurer/HMO before and after the Court’s

Pilot Life decision. See Impact of Potential Changes to

ERISA, supra, at 6-7. Before Pilot Life, the insurer/HMO had

a litigation rate of 3.2 cases per 100,000 enrollees; after Pilot

Life, the litigation rate was 2.4 cases. /d. These figures,

however, included “both group and individual coverage

cases,” the latter not being subject to ERISA. /d. at 7. The

study further determined that even at the higher litigation rate,

and assuming a $100,000 average cost per claim, the

litigation cost would only be “$0.27 per person per month.”

Id. at 8. Thus, contrary to the predictions of CIGNA and its

amic: subjecting HMOs and UROs to liability is not likely to

have 1 ore than a minimal effect on the costs of ERISA plans.

Indeed, CIGNA and its amici refute their own prediction of

“vastly increase[d] . . . cost[s].” CIGNA Br. 48. As amici

AAHP-HIAA acknowledge, “there is no reason to think that

there is a widespread problem of plan participants wrongly

denied coverage for necessary care, and then subjected to bad

medical outcomes . ... MCOs deny only a small percentage

of coverage claims, and only a few of those denials are based

on a failure to meet pre-authorization criteria.” Br. Am. Cur.

AAHP-HIAA 22; see also id. at 22 n.47 (“Of the less than

2% of plan enrollees who are initially denied coverage, only

6% of denials resulted from failure to meet pre-authorization

criteria”) (citation omitted); CIGNA Br. 46 (asserting that the

percentage of “claims denied because they are not medically

necessary represent” is less than “2.8 percent of the total

claims submitted”).

Whether or not these “numbers . . . support assertions that

HMOs pursue profits by denying claims without attention to

their merit,” CIGNA Br. 46,'° they clearly do not support

This contention cannot, of course, be evaluated without knowing the

nature and costs of the treatments being denied. See, e.g., Cicio v. Does,

321 F.3d 83, 88 (2d Cir.) (denying approval of double stem cell transplant

23

CIGNA’s contention that allowing ERISA participants and

beneficiaries to sue HMOs and UROs for negligent treatment

decisions “will vastly increase the costs of providing benefits,

all but guaranteeing” less health care for workers. /d. at 48.

Beyond the fact that the number of potential lawsuit-

triggering decisions is low, not every wrongful denial of

medically necessary treatment will give rise to a lawsuit.

Notwithstanding the HMO/URO’s negligent treatment

decision, a patient may not suffer an injury. And those who

suffer injury because of an HMO’s or URO’s tortious

treatment will not necessarily sue. '' In short, even when

state law remedies such as THCLA are available, the number

of lawsuits is likely to be low and, as the Kaiser Study

for patient with multiple myeloma), petition for cert. filed, No. 03-69

(July 11, 2003); /saac, 2002 WL 1461710, at *1-2 (denying approval of

bone marrow transplant for patient with myelogenous leukemia).

Undoubtedly, many of the denials involve the most costly treatments.

'! There is substantial evidence that many patients injured by medical

malpractice do not sue. See Carole Roan Gresenz, et al., A Flood of

Litigation? Predicting the Consequences of Changing Legal Remedies

Available to ERISA Beneficiaries 5 (1999), available at http://www.

rand.org/publications/IP/IP184/index.html. According to the Harvard

Medical Practice Study, “very few (approximately 3 percent) of the

patients whom physician reviewers deemed to be victims of negligence in

the course of their hospitalizations brought malpractice claims.” /d.

(citing Harvard Medical Practice Study, Patients, Doctors, and Lawyers:

Medical Injury, Malpractice Litigation, and Patient Compensation in New

York (1990)).

While “many of the patients [in the Harvard study] . . . fully recovered

from the injury within six months,” id., another study “found that only 33

percent of patients who were seriously injured by negligent care filed

medical malpractice claims.” /d. (emphasis added) (citing D. M. Studdert,

et al., Suing for Medical Malpractice in Utah and Colorado in 1992

(unpublished manuscript)). Furthermore, because medical malpractice

litigation is typically conducted on a contingency fee basis, “medical

malpractice plaintiff attorneys are highly selective in deciding what claim- .

ants to represent because of the high costs of this specialized litigation and

the risk of not obtaining compensation.” /d.

24

indicates, such lawsuits will have only a minimal effect on

the cost of health care.

CIGNA acknowledges that utilization review systems

“have not been perfected . . . and may never be.” /d. at 47.

Indeed, as long as the only liability an HMO faces if it makes

an erroneous treatment decision is the cost of the care it

should have provided, it will have little incentive to improve

its UR systems to reduce erroneous decisions. Moreover,

where a URO does not bear the cost of care, under CIGNA’s

theory, it will have no incentive to improve its systems.

Finally, whether utilization review systems produce better

health care outcomes overall than do other methods of health

care delivery and financing, see id., that does not justify pre-

empting state law remedies and allowing HMOs and UROs to

shift the costs of their negligent medical treatment decisions

onto patients.

ERISA does not provide a substantive standard applicable

to HMO and URO medical treatment decisions. See Pegram,

530 U.S. at 236. Such regulation is, however, squarely within

the realm of the States’ longstanding authority to protect their

citizens’ health and safety. See id. at 237. The Court should

therefore reject CIGNA’s contention that ERISA preempts

Calad’s state-law medical negligence claim.

25

CONCLUSION

The judgment of the court of appeals should be affirmed.

January 22, 2004

Respectfully submitted,

RICHARD RUDA *

Chief Counsel

JAMES I. CROWLEY

STATE AND LOCAL LEGAL CENTER

444 North Capitol Street, N.W.

Suite 345

Washington, D.C. 20001

(202) 434-4850

* Counsel of Record for the

Amici Curiae