Cynthia Herdrich may gain little financially if she wins the first major battle against a health maintenance organization (HMO) to unfold in the U.S. Supreme Court. But the nation’s managed care industry warns that her victory would be a loss that could threaten its continued existence.
The high court will hear arguments on Feb. 23 in Pegram v. Herdrich, No. 98-1949, a challenge involving the scope of the broadly worded definition of “fiduciary” in the Employee Retirement Income Security Act (ERISA). The justices will decide whether physician-owners of an HMO that gives its physicians financial incentives — in addition to their salaries — to contain costs are fiduciaries that have breached their duty of loyalty to patients under the 1974 act.
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