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Managed Care Lawsuit Watch - August 2003


This summary of key lawsuits affecting managed care is provided by the Health Care Group of Crowell & Moring LLP. If you have questions or need assistance on managed care law matters, please contact those listed below or any member of the health law group.

Please click to view the full Crowell & Moring Managed Care Lawsuit Watch archive.

Cases in this issue:

Abbott v. Blue Cross and Blue Shield of Texas, et al.
Tx. Ct. App., 3d Div. at Austin No. 03-98-00558-cv (7/30/03)

The Texas Court of Appeals ruled against the state's Attorney General finding that Blue Cross Blue Shield of Texas was not a charitable organization prior to its merger with Health Care Service Corporation in 1998. The Attorney General brought suit aiming to halt the proposed merger between the two companies on the grounds that Blue Cross of Texas was a charity and, as such, the merger would be prohibited by the Texas Non-Profit Corporation Act. The Attorney General invoked the doctrine of cy pres, arguing that the statute that created Blue Cross of Texas compelled it to be a common-law charity. The Attorney General further argued that the District Court erred in considering the company's current operations and lack of tax-exempt status in reaching its decision. The Court of Appeals maintained that the company never acquired its assets from donors who intended to make donations to contribute to the public benefit. Further, the House Bill creating the company did not address charitable purposes.

Arana v. Ochsner Health Plan
5th Cir. No. 01-30922 (7/10/03)

The Fifth Circuit, in a rehearing en banc, held that only complete preemption of a claim under ERISA § 502(a) is required for removal, and that conflict preemption under ERISA §514 is not also required. The Court characterized Arana's claim as one to either recover benefits or to enforce his rights, each of which would qualify for complete preemption by ERISA. Arana, sued Ochsner Health Plan in Louisiana state court seeking a declaration that he was entitled to retain settlement money that he received after sustaining injuries in a car accident. Oschner Health Plan sought to exercise a right to subrogation and removed the case to Federal court seeking reimbursement for benefits it previously paid to Arana. The District Court granted summary judgment for Arana and a panel of the Fifth Circuit reversed the judgment, holding that the District Court lacked subject matter jurisdiction.

Land v. Cigna
11th Cir. No. 02-00470-cv-J-20 (7/30/03)

The Eleventh Circuit held that Land's state law malpractice claim against its HMO was not preempted by ERISA. Land suffered injuries from an animal bite and was treated by an ER doctor and his primary care physician before seeking additional care from a Cigna-approval nurse. After enduring several surgeries and an amputated finger, Land sued Cigna for negligent care. In discussing the preemption issue, the Eleventh Circuit relied upon the Supreme Court's decision in Pegram v. Herdrich regarding classification of decisions as either treatment decisions, eligibility decisions or mixed treatment and eligibility decisions. The Court concluded that the Cigna nurse's decision was a mixed treatment/eligibility decision and that the HMO was not acting as a fiduciary in that context. Rather, Land's claims should remain state law claims against Cigna for failure to properly diagnose and authorize treatment.

Singh v. Prudential Health Care Plan, Inc.
4th Cir. No. 01-1102 (7/3/03)

The Fourth Circuit held that the plaintiff's state law action seeking restitution for money she paid to comply with defendant HMO's subrogation clause was completely preempted by ERISA because it involved a claim that sought return of benefits under the plaintiff's plan. Singh sued Prudential in state court seeking reimbursement of money she paid to Prudential under its subrogation clause after she recovered a personal injury settlement arising from an automobile accident. Singh sued claiming that Prudential's subrogation clause was illegal under the Maryland HMO Act, which was later repealed. The Act precluded HMOs from asserting subrogation claims against their insured. Prudential argued that Singh's claims were preempted by ERISA and, in the alternative, the Maryland HMO Act did not provide Singh with a private right of action to bring the suit. The court held, however, that Maryland's anti-subrogation law was not preempted by ERISA and was saved as an insurance regulation.

Vytra Healthcare v. Cicio
U.S. Sup. Ct. No. 03-69 (Petition filed 7/11/03)
2d Cir. No. 01-9248 (2/11/03)

Vytra Healthcare filed a petition for review with the Supreme Court seeking the Court to reject a February decision of the U.S. Court of Appeals for the Second Circuit that allowed Cicio to bring medical malpractice claims on behalf of herself and her deceased husband. Vytra argued that the Second Circuit erred in holding that ERISA preempted medical malpractice claims made by an HMO engaging in utilization reviews. The Second Circuit held that Vytra's medical director's decision denying one form of treatment as experimental while approving another was both a treatment and an eligibility decision, thus escaping ERISA preemption.


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