Targeting insurers’ deep pockets

By Steve Kanigher

Friday, Dec. 18, 2009 | 2 a.m.

HMOs and health insurance companies have a reputation for being immune to patients’ lawsuits, but an avalanche of court cases has been filed against them in connection with a hepatitis outbreak in Southern Nevada.

Health maintenance organizations and health insurance companies must be held accountable for telling people which doctors they must use, say the attorneys of people who contracted or were exposed to hepatitis C at Dr. Dipak Desai’s Las Vegas Valley endoscopy clinics. Their lawsuits allege the HMOs and affiliated insurers neglected to make sure the clinics provided safe, quality health care for insured patients.

If the lawsuits succeed, attorneys say they will create the first Nevada case law compelling HMOs to thoroughly scrutinize doctors and medical clinics before sending insured patients to those providers.

At the heart of the lawsuits is a state law regarding the conduct of managed care organizations. The law requires annual reports be filed with the state insurance commissioner and the Nevada Board of Health spelling out the methods the HMOs and insurance companies use to review the quality of health care provided to their members. The law calls for insurers to establish quality assurance programs that analyze the outcomes of health care services provided to patients. They are also required to establish remedial actions that should be taken when problems related to the quality of care are identified.

The statutes cited in the lawsuits don’t denote any penalties for noncompliance, however.

Las Vegas attorney Gerald Gillock, one of the attorneys suing the HMOs, says the courts are left to provide teeth for the law. Judges and juries need to take up the slack and make insurance companies pay for not following the law, Gillock and Las Vegas lawyer Robert Cottle say.

“The only way to weed out bad doctors” is for insurers to audit the medical providers and check all consumer complaints against them, Cottle says.

The attorneys have set out to prove their point by going after the state’s most powerful HMOs. The bulk of litigation filed names defendants tied to insurance behemoth United Healthcare and related companies, including Sierra Health Services, Health Plan of Nevada and PacifiCare of Nevada.

Gillock, of the law firm Gillock, Markley & Killebrew, filed the first case in September 2008 and has since filed 21 more. Cottle’s law firm, Mainor Eglet Cottle, has filed three and anticipates 21 more.

There could be many more lawsuits against HMOs before April, when the first trials in cases tied to Desai, his shuttered Endoscopy Center of Southern Nevada and affiliated clinics are set to begin. The Southern Nevada Health District found that the Endoscopy Center exposed patients to dangerous blood-borne pathogens through unsafe medical practices, including reused syringes and reuse of single-use medication vials for multiple patients.

The Health District has linked nine hepatitis C cases to Desai’s facilities, but said 105 other patients may have been infected.

The attorneys know they cannot get much money out of Desai and the clinics because of limits on their malpractice insurance, especially considering an estimated 5,000 former patients have filed lawsuits because of the outbreak. The clinics have filed for Chapter 7 bankruptcy protection and have reported having only $100,000 in cash.

So HMOs have considerably deeper pockets, and that makes them an inviting target.

And, Gillock contends, “It is inconceivable that HMOs couldn’t have found out about the procedures at the clinic if they had done inspections.”

Jack Kim, a Las Vegas lobbyist for these companies as well as for the Nevada Association of Health Plans, declined to comment because of the pending litigation.

The HMOs and affiliated companies’ responses to the lawsuits have taken a variety of approaches depending on the type of insurance plan the patient was using. A common thread, though, is the argument that federal law governing managed health care trumps state law.

The national Employee Retirement Income Security Act of 1974, or ERISA, limits consumers’ ability to sue if they are insured through private-sector employers.

But plaintiffs’ attorneys have so far been successful in arguing that ERISA doesn’t apply in the endoscopy cases. Cottle and Gillock say federal law does not shield HMOs from liability if they send their customers to clinics or doctors that perform substandard care.

“ERISA is specific about what it controls and what it leaves for the states to govern,” Gillock says. “Issues involving malpractice are issues left up to the states.”

But UNLV Boyd Law School professor Jeffrey Stempel, whose specialties include insurance law, said these types of lawsuits against insurers are usually “long shots” in cases where the practitioners — in this case doctors and clinics — were licensed and in good standing before problems surface.

“I’m not aware of anybody who would hold HMOs liable for the quality of care in their network,” Stempel said.

He said, though, that the attorneys could have a good case if they can prove the HMOs were aware of problems at the clinics and did nothing to stop them.

“If HMOs have information that there’s a quality problem, they have an obligation to do something about it,” Stempel said.