The Journal of The DuPage County Bar Association

Back Issues > Vol. 12 (1999-00)

Developments in Managed Care Liability
By Michael B. Levy, J.D. and Gregory W. Hoskins, J.D.

Few areas of public policy have generated the level of fierce public debate that surrounds the issue of health care reform. Against a backdrop of rising health care costs and serious concern about the large segment of our population lacking health insurance, doctors, lawyers, hospitals, insurance companies, and managed care organizations have joined political leaders in pointing fingers. Defining the legal responsibility of health maintenance organizations (HMOs) and other managed care entities for the quality of health care has become a focal point of this debate, and a major part of the national legislative agenda. On October 7, 1999, the U.S. House of Representatives passed a bipartisan bill that would expand the potential liability of managed care entities, which have been substantially insulated from such exposure thanks to the Employee Retirement Income Security Act of 1974’s (ERISA) preemptive effect on State Law causes of action. See H.R. 2723 (proposing the "Bipartisan Consensus Managed Care Improvement Act of 1999").

As this article is being written, it remains to be seen what type of legislative reform, if any, will ultimately gain approval from Congress and the White House. For the moment, however, this article will focus on judicial responses to the changing landscape of the health care industry, as managed care emerges as the central paradigm for the delivery of health care services. In particular, this article examines significant recent decisions involving Illinois health plans. In Petrovich v. Share Health Plan of Illinois, No. 85726 (Ill., September 30, 1999), the Illinois Supreme Court held that an HMO can be held vicariously liable for medical malpractice based on the medical negligence of its independent-contractor physicians. And in a case accepted for review by the United States Supreme Court, the United States Court of Appeals for the Seventh Circuit recently explored the nature of an Illinois health plan’s fiduciary duty under ERISA to its participants. Herdrich v. Pegram, 154 F.3d 362 (7th Cir. 1998), rehearing denied en banc 170 F.3d 683 (1999), cert. granted ___ U.S. ___, ____ S. Ct.____, ____ L. Ed. 2d ____ (Sept. 28, 1999).

BACKGROUND

Managed care differs dramatically from the traditional fee-for-services model for health coverage. A basic feature of managed care is "prospective review" of medical care, which has been described as follows:

"Systems of prospective and concurrent review, rather than traditional retrospective review, were widely adopted throughout the 1980s as a method of containing the rapidly rising costs of health care. (Citations.) Under the traditional retrospective system (also commonly known as the fee-for-service system), the patient obtained medical treatment and the insurer reviewed the provider’s claims for payment to determine whether they were covered under the plan. Denial of a claim meant that the cost of treatment was absorbed by an entity other than the one designed to spread the risk of medical costs — the insurer.

Congress’ adoption in 1983 of a system under which hospitals are reimbursed for services provided to Medicare patients based upon average cost calculations for patients with particular diagnoses spurred private insurers to institute similar programs in which prospective decisions are made about the appropriate level of care. Although plans vary, the typical prospective review system requires some form of pre-admission certification by a third party (e.g., the HMO if an HMO-associated doctor provides care; an outside organization such as United if an independent physician provides care) before a hospital stay. Concurrent review involves the monitoring of a hospital stay to determine its continuing appropriateness." Corcoran v. United HealthCare, Inc., 965 F.2d 1321 (5th Cir. 1992).

It has thus been observed that medical decision-making has become a "multilevel process" involving health plan administrators in addition to treating physicians. McKee, "Liability of Third-Party Health-Care Payor for Injury Arising From Failure To Authorize Required Treatment," 56 A.L.R. 5th 737, 744 (1998). However, where practicing physicians might be subject to tort liability for improper treatment decisions, decisions made by health plan administrators may find protection under ERISA. ERISA represents a comprehensive Federal scheme regulating employee benefit plans, including employer sponsored health plans, and it explicitly preempts State law on the subject:

"Except as provided in subsection (b) of this section, the provisions of this subchapter and subchapter III of this chapter shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan described in section 1003(a)." (Emphasis added.) ERISA §514(a)(10).

The words "relate to" have been read broadly. In Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 96-97 (1983), the United States Supreme Court indicated that a state law relates to an employee benefit plan when it has "a connection with or reference to such a plan," although it has been suggested that in recent years the Court has softened its stance on the breadth of ERISA preemption. See Hinterlong v. Baldwin, No. 2-98-1194 (Ill. App. Nov. 9, 1999) (citing New York State Conference of Blue Cross & Blue Shield Plans v. Travelers Insurance Co., 514 U.S. 645 (1995) as a retreat from the Court’s prior analysis).

The decision of the United States Court of Appeals for the Fifth Circuit in Corcoran v. United HealthCare, Inc., 965 F.2d 1321 (5th Cir. 1992), illustrates the impact of ERISA’s preemption provision in the managed care setting. In Corcoran, the plaintiff brought suit against an organization which had contracted with plaintiff’s health plan to perform "utilization review" services for the plan. The defendant refused to approve hospitalization for the plaintiff who was in the midst of a high-risk pregnancy. When the unborn child died, plaintiff brought a wrongful death action under Louisiana law. The defendant responded that the action was preempted by ERISA. The crux of the dispute was how to characterize the defendant’s utilization review function. Plaintiff contended that defendant made medical determinations for which it could be held liable in tort, notwithstanding ERISA. The defendant countered that it made benefit determinations. The court concluded that the defendant performed a hybrid function: "United makes medical decisions—indeed, United gives medical advice—but it does so in the context of making a determination about the availability of benefits under the plan." Corcoran, 965 F. 2d at 1331. In holding that the defendant’s utilization review function included medical decision-making, the court relied on health plan literature indicating that the defendant’s staff included doctors, nurses and other medical professionals, and that defendant assessed the need for hospitalization and the appropriate length of stay, and discussed treatment plans with treating doctors.

It is also noteworthy that the Corcoran court flatly rejected the defendant’s argument that the prospective determinations it made were no different than the traditional retrospective review. The defendant contended that in either case the question was what the health plan would pay for based on the patient’s clinical information and nationally accepted guidelines for treatment of the patient’s condition. The court disagreed, reasoning that treatment decisions were far more likely to be influenced by prospective review determinations than by the risk that retrospective review would result in the disallowance of medical costs already incurred. Ultimately, however, the court agreed with the defendant that the review function it performed was within the ambit of ERISA’s preemption clause:

"Although we disagree with [defendant’s] position that no part of its actions involves medical decisions, we cannot agree with the [plaintiffs] that no part of [Defendant’s] actions involves benefit determinations. In our view, [defendant] makes medical decisions as part and parcel of its mandate to decide what benefits are available under the . . . plan. As [certain plan literature] concisely puts it, [defendant] decides ‘what the medical plan will pay for.’ When [defendant’s] actions are viewed from this perspective, it becomes apparent that the [plaintiffs] are attempting to recover for a tort allegedly committed in the course of handling a benefit determination." (Emphasis added.) Corcoran, 965 F. 2d at 1332.

The court stated that "[t]he principle . . . that ERISA pre-empts state-law claims alleging improper handling of benefit claims is broad enough to cover the cause of action asserted here." Corcoran, 965 F. 2d at 1332. See also Kuhl v. Lincoln National Health Plan of Kansas City, Inc., 999 F.2d 298 (8th Cir. 1993) (ERISA preempted state law claims based on HMO’s refusal to precertify life-saving procedure); Jass v. Prudential Health Care Plan, Inc., 88 F. 3d 1482 (7th Cir. 1996) (State-law claim based on conduct of registered nurse employed by insurer as utilization review administrator was subject to "complete" preemption under ERISA). 1

Does Corcoran apply to a claim brought against a health plan administrator based not on utilization review or a similar administrative determination but on the quality of care provided by a medical practitioner who is alleged to be an agent or employee of the plan? Would ERISA bar a medical malpractice claim against an HMO based on negligence of one of its doctors? The issue is particularly timely in light of the Illinois Supreme Court’s decision in Petrovich v. Share Health Plan of Illinois, No. 85726 (Ill., September 30, 1999), which is examined in detail later in this article. Petrovich considered the applicability of vicarious liability principles in the managed care setting, but did not address ERISA issues.

Jass v. Prudential Health Care Plan, Inc., 88 F. 3d 1482 (7th Cir. 1996), held that both the utilization review and vicarious liability malpractice claims in that case were preempted by ERISA. 2 The court reasoned that any agency relationship between the physician and administrator of the plaintiff’s health plan would exist solely as a result of the plan. Accordingly, in the court’s view, a claim based on agency principles would "relate" to plan for preemption purposes. Jass, 88 F. 3d at 1493. In contrast, however, a recent decision of the Illinois Appellate Court, Second District, permitted a vicarious liability claim to proceed notwithstanding an ERISA preemption challenge. In Hinterlong v. Baldwin, No. 2-98-1194 (Ill. App. Nov. 9, 1999), the court noted that in New York State Conference of Blue Cross & Blue Shield Plans v. Travelers Insurance Co., 514 U.S. 645 (1995), the United States Supreme Court adopted a narrower view of the scope of ERISA preemption. The Hinterlong court concluded that state laws of general applicability do not run afoul of ERISA’s preemption scheme merely because such laws have an incidental effect on the administration of an ERISA plan. In support of its holding, Hinterlong cited a number of state and federal decisions subsequent to Travelers holding that medical negligence claims against an HMO do not "relate" to an ERISA plan.

FIDUCIARY DUTY CLAIMS: HERDRICH v. PEGRAM

Herdrich v. Pegram, 154 F.3d 362 (7th Cir. 1998), rehearing denied en banc 170 F.3d 683 (1999), cert. granted ___ U.S. ___, ____ S. Ct.____, ____ L. Ed. 2d ____(Sept. 28, 1999) represents another approach to curbing perceived abuses in the managed care setting. Cynthia Herdrich suffered a ruptured appendix after her HMO doctor associated with Carle Clinic Association, P.C. ("Carle") delayed a diagnostic procedure so that it could be performed at a Carle facility in Urbana, rather than at Herdrich’s local hospital. In addition to claiming medical malpractice, Herdrich brought suit against the HMO operators, Carle and Health Alliance Medical Plans, Inc. (HAMP), alleging that they had violated their fiduciary duties under ERISA by skimping on expensive diagnostic tests and referrals to non-Carle physicians in order to boost the income of Carle physicians. According to the complaint HAMP, which ostensibly administered the HMO, was controlled by Carle physicians who served as HAMP’s officers and directors.

ERISA provides, in pertinent part that, "a person is a fiduciary with respect to a plan to the extent (i) he exercises any discretionary authority of discretionary control respecting management of such plan or exercises any authority of control respecting management or disposition of its assets . . . or (iii) he has any discretionary authority or discretionary responsibility in the administration of such plan." 29 U.S.C. §1002(21)(A). The majority opinion in Herdrich concluded that the plaintiff’s allegations were sufficient to show a fiduciary duty:

"The defendant-physicians managed the Plan, including the doctor referral process, the nature and duration of patient treatment, and the extent to which participants were required to use Carle-owned facilities. In fact, the board of directors consisted exclusively of the Plan physicians who were thus in control of each and every aspect of the HMO’s governance, including their own year-end bonuses. And . . . Herdrich pleaded that the defendants had the exclusive right to decide all disputed and non-routine claims. In our view, this level of control satisfies ERISA’s requirement that a fiduciary maintain ‘discretionary control and authority.’ We can reasonably infer that Carle and HAMP were plan fiduciaries due to their discretionary authority in deciding disputed claims." (Emphasis in original.) Herdrich, 154 F.3d at 370.

The majority further held that the financial incentives to cut the costs of patient care gave rise to a breach of fiduciary duty:

"The Plan dictated that the very same HMO administrators vested with the authority to determine whether health care claims would be paid, and the type, nature, and duration of care to be given, were those physicians who became eligible to receive year-end bonuses as a result of cost-savings. Because the physician/administrators’ year-end bonuses were based on the difference between total plan costs (i.e., the costs of providing medical services) and revenues (i.e., payments by plan beneficiaries), an incentive existed for them to limit treatment and, in turn, HMO costs so as to ensure larger bonuses. With a jaundiced eye focused firmly on year-end bonuses, it is not unrealistic to assume that the doctors rendering care under the Plan were swayed to be most frugal when exercising their discretionary authority to the detriment of their membership." (Emphasis in original) Herdrich, 154 F.3d at 372.

The majority observed that Herdrich had alleged a "‘serious flaw’ that springs from the authority of physician/owners of Carle to simultaneously control the care of their patients and reap the profits generated by the HMO through the limited use of tests and referrals. Under the terms of ERISA, Herdrich most certainly has raised the specter that the self-dealing physician/owners in this appeal were not acting ‘solely in the interest of the participants’ of the Plan." (Emphasis in original.) Herdrich, 154 F. 3d at 362.

The Herdrich majority also leveled a harsh indictment at the managed care industry in general. For instance, the majority observed that "‘[t]he shift to profit-driven care is at a gallop. For nurses and physicians, the space for good work in a bad system rapidly narrows. For the public, who are mostly healthy and use little care, awareness of the degradation of medicine builds slowly; it is mainly those who are expensively ill who encounter the dark side of market-driven health care.’" Herdrich, 154 F 3d at 375, quoting For Our Patients, Not For Profits: A Call to Action, Journal of the American Medical Association, Dec. 3, 1997, at 1773. The majority also cited commentary that "‘American "market theology" is being invoked as an excuse for the downgrading of patient care and the growing absence of compassion in health care.’ " Herdrich, 154 F. 3d at 375, quoting LeBow, Nation Needs to Take Control of Health Care System For Patients, Not Profits, Idaho Statesman, Dec. 2, 1997, at 6A.

Notably, the plaintiff, as an individual plan beneficiary, could not personally recover a money judgment under ERISA. But the plan fiduciaries could be held personally liable under ERISA to make good to the plan, for losses resulting from the breach of fiduciary duties. Thus, the Herdrich majority’s recognition of a cause of action under these circumstances represents a potentially powerful tool for health plan beneficiaries.

Judge Flaum dissented. While agreeing with the majority that the plaintiff’s allegations established that the defendants had a profit incentive to limit treatment, Judge Flaum noted that ERISA fiduciaries are not necessarily held to the same standard imposed on fiduciaries by the common law, and that ERISA tolerates some conflicting interest on the part of fiduciaries. As an example, Judge Flaum observed that ERISA authorizes an officer or agent of an employer to serve as a fiduciary of a plan sponsored by that employer. Judge Flaum pointed out that:

"[o]ne justification for this departure from the common-law tradition is that allowing a plan sponsor to designate its own agent as a fiduciary reassures the sponsor that, in devoting its assets to the plan, it has not relinquished all ability to ensure that the plan’s resources are used wisely. This reassurance in turn encourages more employers and other sponsors to establish benefits plans." Herdrich 154 F. 3d at 381 (Flaum, J., dissenting).

Judge Flaum further explained that general business considerations should act as a check upon the defendants’ incentive to unreasonably limit treatment:

"The [employer/]sponsor of the plaintiff’s plan . . . is a sophisticated, experienced player in the market for health benefits. The defendants do have a financial interest in denying coverage. . . . But [the employer/sponsor] has an interest in ensuring that its employees are satisfied with their fringe benefits, and the defendants have an interest in ensuring that [employer/sponsor] is satisfied with the defendants’ performance in delivering health care to the beneficiaries. In this sense, the interests of the administrator align with the interests of the beneficiaries and the sponsor. I recognize, of course, that monitoring of plan administrators by sponsors and beneficiaries is sometimes imperfect, and there is no guarantee that a sponsor will be able to find satisfactory alternatives in the marketplace. The plaintiff’s complaint, however, alleges only that an incentive to deny coverage exists, which in my view is not enough to support an inference that market forces have failed in this case to protect the interests of beneficiaries." Herdrich, 154 F. 3d at 382 (Flaum, J., dissenting).

Judge Flaum acknowledged the legitimacy of concerns over the incentive structure of managed care arrangements, but advocated a limited judicial role in the matter, noting that "[t]he task of identifying appropriate limits for incentives is an important item on the legislative and regulatory agenda." Herdrich, 154 F. 3d at 383 (Flaum, J., dissenting). See also Turner v. Fallon Community Health Plan, Inc., 127 F. 3d 196, 200 (1st Cir. 1997) ("whether Congress ever thought about the impact on health care in particular when it wrote ERISA’s remedies and preemption provision, Congress is well equipped to revisit the issue and alter the statutory language that now stands as a bar"). Judge Flaum allowed however, that while courts should not regulate financial incentives in the managed care setting, plan sponsors and beneficiaries were entitled to know about those incentives and the failure to disclose could form the basis for a claim of breach of fiduciary duty. Herdrich, 154 F. 3d at 383 (Flaum, J., dissenting); see also Shea v. Esensten, 107 F.3d 625 (8th Cir. 1997) (holding that plaintiff stated a cause of action under ERISA for breach of fiduciary duty based on HMO’s failure to disclose financial incentive scheme affecting its doctors’ referral practices). 3 But Judge Flaum concluded that the allegations in Herdrich did not support such a theory. Herdrich, 154 F. 3d at 384 (Flaum, J., dissenting).

The majority opinion encountered further criticism upon denial of a petition for rehearing and suggestion for rehearing en banc. In a dissent joined by Judges Posner, Flaum and Wood, Judge Easterbrook charged that the majority had improperly condemned managed care systems on medical grounds and had relied on its view of good medical practice to conclude that the HMO structure violates ERISA. Herdrich, 170 F. 3d 683 (Easterbrook, J., joined by Posner, C.J., and Flaum and Wood, JJ., dissenting on denial of rehearing). In a lengthy analysis, Judge Easterbrook reached a tentative conclusion that Carle’s exercise of discretion in making medical decisions and in managing its own business did not constitute the exercise of discretion in the administration of the plan, and therefore Carle did not qualify as a fiduciary under ERISA. Herdrich, 170 F. 3d at 683-86 (Easterbrook, J., joined by Posner, C.J., and Flaum and Wood, JJ., dissenting on denial of rehearing).

VICARIOUS LIABILITY: PETROVICH V. SHARE HEALTH PLAN

In Petrovich v. Share Health Plan of Illinois, Inc., No. 85726 (Ill. Sept. 30, 1999), the Illinois Supreme Court determined that an HMO can be held vicariously liable for medical malpractice based on the negligence of a physician affiliated with the HMO as an independent contractor. In this case, after nearly a year of persistent pain and numerous examinations by her HMO doctors, Inga Petrovich was diagnosed as suffering from cancer in the base of her tongue. Petrovich ultimately required surgery to remove portions of her tongue, palate, pharynx, and jaw bone. Subsequently, Petrovich brought a medical malpractice action against her doctors and the HMO, alleging that the doctors were negligent for failing to diagnose her cancer in a timely manner, and that the HMO was vicariously liable for the doctor’s negligence. In the trial court, the defendant HMO filed a motion for summary judgment contending that it could not be held liable for the negligence of the doctors who acted as independent contractors, not as agents of the HMO. The trial court agreed and granted summary judgment in favor of the HMO. Petrovich, slip op. at 1-3.

On appeal to the Illinois Supreme Court, the defendant first argued that public policy considerations should preclude the liability of HMOs for medical malpractice. The defendant contended that to hold otherwise would result in great increases in health care costs, making health care inaccessible to large numbers of people. The court rejected this assertion, determining that holding HMOs accountable for the tortious conduct of their agents was essential to counterbalance the cost-containment goal of HMOs. Petrovich, slip op. at 4.

Turning to the merits of the vicarious liability issue, the Petrovich court initially observed that vicarious liability may be imposed for the negligent actions of independent contractors when an agency relationship is established under either of the doctrines of apparent authority or implied authority. In order to establish apparent authority against an HMO for physician malpractice, the Petrovich court determined a plaintiff must prove that (1) the HMO held itself out as the provider of health care without informing the patient that the care was being given by independent contractors; and (2) the plaintiff justifiably relied upon the conduct of the HMO by looking to the HMO to provide health care services, rather than to a specific physician. Petrovich, slip op. at 5-6, citing Gilbert v. Sycamore Municipal Hospital, 156 Ill. 2d 511, 524 (1993).

Examining the facts of the instant case, the court held that a genuine issue of material fact existed as to both elements. In regard to the "holding out" element, the court determined that the evidence supported the conclusion that the HMO held itself out as the provider of the plaintiff’s health care. The court cited the defendant’s member handbook which stated, among other things, that the HMO would provide "all your healthcare needs." More importantly, the handbook did not identify the physicians as independent contractors, but rather referred to the physicians as defendant’s staff. Petrovich, slip op. at 6-7.

As to the second element, the court determined that the facts were sufficient to raise a reasonable inference that the plaintiff justifiably relied upon the HMO to provide her health care services. In support, the court observed that the plaintiff had no choice of health plans because the defendant HMO was the only plan provided by her employer. In addition, the court observed that the plaintiff had no prior relationship with any of the HMO doctors, but selected them because her health care costs would not be covered if she obtained services from a doctor outside the HMO network. Thus finding sufficient evidence to establish both elements, the Petrovich court concluded that the defendant was not entitled to summary judgment on plaintiff’s apparent authority claim. Petrovich, slip op. at 8-9.

The court next addressed the plaintiff’s claim of implied authority, observing that implied authority may arise when a plaintiff has established that the defendant exerted sufficient control over the alleged agent so as to negate that person’s status as an independent contractor. The court noted that the primary consideration for determining the existence of implied authority is whether the alleged agent retains the right to control the manner of doing the work. Petrovich, slip op. at 10, citing John Gabel Manufacturing Co. v. Murphy, 390 Ill. 455, 461 (1945). The Petrovich court held that, under certain circumstances, an HMO could exert sufficient control over a physician so as to negate that physician’s status as an independent contractor. In so holding, the court relied heavily on the arguments of an amicus, the Illinois State Medical Society ("the Society"). The Society argued that HMOs assert control over physicians by (1) reserving the right to make prospective decisions of medical necessity; (2) delegating cost-containment functions directly to the physicians; and (3) refusing to pay for, or barring a physician from providing, medical care which the HMO perceives to be inappropriate. Petrovich, slip op. at 10-11.

Analyzing the facts here, the court determined that the plaintiff had presented sufficient evidence to raise a triable issue of fact as to her implied authority claim. In support of this finding, the court observed that the defendant’s capitation method of compensating its physicians was a form of control because it punished physicians financially for administering certain medical treatment. In addition, the court cited the defendant’s quality assurance program, whereby physicians risked termination from the HMO for rendering inappropriate and non-profitable medical care. Finally, the court considered the physician’s contractual role as "gatekeeper," which required physicians to approve every patient request for medical care and to assure that every patient referral was to an HMO network specialist. Based on these facts, the court determined that a trier of fact could reasonably infer that the defendant exerted such a system of control over its physicians that the HMO effectively negated the exercise of the physician’s independent medical judgment. Petrovich, slip op. at 12-13. Finding that the plaintiff had presented sufficient evidence to entitle her to trial on whether the HMO was vicariously liable under the doctrines of apparent and implied authority, the Petrovich court determined that the trial court erred in awarding summary judgment to the HMO.

CONCLUSION

Given the changing roles in the health care industry, courts face a difficult task in reconciling common law theories of liability and agency with the federal employee benefits law. The distinction between medical decisions and benefit decisions blurs when administrators participate in treatment decisions, and physicians play a role in cost-containment. If Congress does not act, it is likely Courts will continue to wrestle with these issues in years to come.

1 Recently, Illinois enacted the Managed Care Reform and Patient Rights Act (Pub. Act 91-617, eff. January 1, 2000 (adding 215 ILCS 134/1 et seq.)). Among other things, this statute provides an enrollee of a health care plan the right to submit a denial of medical care to an external independent review process. The provision requires a health care plan to pay for any medical treatment which an external independent reviewer determines is medically appropriate. See Pub. Act 91-617, §45(f). A federal district court recently held a similar Texas statute is preempted by ERISA, finding that an independent review process seeks review of a benefit determination and, therefore, implicates the administrative function which is part of operating an employee benefit plan. See Corporate Health Insurance, Inc. v. Texas Dep’t of Insurance, 12 F. Supp.2d 597, 625 (S.D. Tex. 1998). Although the new Illinois statute omits employee self-insured health benefit plans in its definition of regulated "health care plans," it will be interesting to see whether the Act’s provisions will be deemed preempted when applied to independent HMOs which are offered to employees as health benefits.

2 Jass and an earlier Seventh Circuit decision, Rice v. Panchal, 65 F. 3d 637 (7th Cir. 1995), distinguish between "complete preemption" and "conflict preemption." Complete preemption applies to claims cognizable under ERISA’s civil enforcement provisions which are brought under a state-law label. Complete preemption prevents plaintiffs from using state law causes of action to circumvent the limitations on remedies available under ERISA. "Conflict preemption" refers to State law claims otherwise barred by ERISA. The distinction has procedural implications, particularly for purposes of removal from State to Federal court. A state law claim which is "completely" preempted raises a federal question within the subject matter jurisdiction of the federal courts. On the other hand, "conflict preemption" is merely a defense to a State law claim; under the "well-pleaded complaint" rule it does not give rise to federal question jurisdiction. Jass held that utilization review claims were completely preempted, while vicarious liability malpractice claims were subject to conflict preemption.

3 In Neade v. Portes, 303 Ill. App. 3d 799 (1999), the Illinois Appellate Court, Second District, upheld a breach of fiduciary duty claim against an HMO physician (rather than the HMO itself) based on the failure to disclose financial incentives to limit medical testing and referrals to specialists.

Michael B. Levy is a sole practitioner in Aurora, Illinois. His practice includes consumer bankruptcy, worker’s compensation, litigation and appellate law. Previously, he served as Law Clerk to the Honorable John L. Nickels of the Illinois Supreme Court and the Honorable James F. Quetsch of the Illinois Appellate Court, Second District.

Gregory W. Hoskins is an associate with the law firm of Blood, Boose & Brizuela in St. Charles, Illinois. His practice is concentrated in civil litigation and commercial transactions. Previously, he served as Law Clerk to the Honorable John L. Nickels of the Illinois Supreme Court.


 
 
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