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As the Florida Legislature convenes again this week at Gov. Jeb Bush’s insistence to consider medical malpractice legislation, managed health care insurers are demanding protection from liability for the alleged negligence of doctors in their networks. But some doctors are at odds with the insurance industry over a little-noticed provision in the House-passed medical malpractice bill that would nullify a controversial Florida Supreme Court decision issued in March. The ruling in Rolando Villazon v. Prudential Healthcare Plan allows patients to sue their health plans on the theory of vicarious liability. It’s one of the few areas in the medical malpractice debate in which doctors share common ground with the plaintiffs’ bar in the malpractice brawl in Tallahassee, Fla. “We’re not terribly happy with that [HMO shield provision],” said Arthur Palamara, a Hollywood, Fla., surgeon who is a former chairman of the board of trustees of the Broward County Medical Association. “Granting immunity to HMOs is inadvisable. Whoever screwed up should have to pay.” The battle over HMO liability is one of a number of sideshows developing in the course of the medical malpractice debate in Tallahassee, as Republican-leaning interest groups have rushed to slip their pet legislative wishes into the complex legislation. Another example is the language restricting insurance bad faith lawsuits in all types of cases, including auto negligence. “I can’t say what this provision has to do with lowering medical malpractice premiums,” acknowledged Troy Tippett, a Pensacola neurosurgeon who is vice president of the Florida Medical Association. “Unfortunately, many things are put in bills which really don’t directly pertain to the issue.” Tippett was reluctant to criticize the provision directly, given his group’s alliance with the insurance industry on the doctors’ key issue of capping noneconomic damages at $250,000. Immediately after the March 27 state Supreme Court ruling in Rolando Villazon v. Prudential Healthcare Plan, the health insurance industry drafted language to circumvent the decision and shield health plans from liability. That language made it into Gov. Jeb Bush’s malpractice bill as well as the House Republican leadership bill, which passed June 18. The Senate, however, refused to include this language in the medical malpractice bill it passed last month. Senate President Jim King, R-Jacksonville, told the Daily Business Review that he and his colleagues support a provision that would permit patients to sue their health plans — but only if the plan controlled or directed the doctor’s action which led to the patient injury. In a June 27 letter to King, Gov. Bush blasted the state Supreme Court’s ruling in Villazon, saying that “if not fixed legislatively, [the precedent] will create an entirely new deep pocket for trial lawyers. Because insurance companies will simply pass along these increased costs, the real losers will be Florida’s small businesses and their employees.” But King, who along with his Senate colleagues is at loggerheads with the governor over the malpractice issue, counterattacked. “This is all about Jeb protecting the insurance industry,” he told the Daily Business Review. “There seems to be hatred against the trial bar.” INDEPENDENT DOCTORS Vicarious liability is the common law theory under which a party is held responsible for the actions of another party due to a controlling relationship such as employer-employee or principal-agent. In the managed care context, it involves holding a health plan liable for the malpractice of the doctors it employs or contracts. Plaintiffs’ lawyers argue that managed care plans should bear liability when they direct the actions of doctors that cause injury to patients, such as refusing requests for needed procedures or tests, or referrals to needed medical specialists. But health plans argue that doctors are independent contractors, not employees, and that they should not be held legally responsible for their contractors’ negligence. They say plaintiffs’ lawyers who file vicarious liability claims are simply looking for deep pockets. Steven M. Ziegler, a Hollywood, Fla., insurance industry lawyer who helped draft the managed care shield provision, said the Florida Supreme Court ruling would have brought about the rapid demise of the managed care industry due to a glut of lawsuits brought by medical malpractice plaintiffs. “Plaintiff lawyers were drooling,” he said. “This ruling was a gold mine for them.” But Miami lawyer Neal Roth, who co-chairs the medical malpractice committee of the Academy of Florida Trial Lawyers, said Bush and House Republicans are making a serious political mistake in trying to shield health plans from liability. “It’s political suicide for the governor to support this,” Roth said. “There is strong public sentiment that HMOs need to be more accountable.” The issue arose from a 1999 lawsuit filed in Miami-Dade Circuit Court by Miami resident Rolando Villazon. He sued several local doctors and Prudential after his wife, Susan, died of tongue cancer in 1997; PruCare was his wife’s employer-provided health plan. Villazon alleged that her condition went untreated due to misdiagnosis, and that PruCare had a nondelegable duty to provide his wife with quality health care, was responsible for any negligence by its network doctors, and that his wife died as the result of negligence by the plan’s agents. He argued that the health plan exercised significant control over the medical care provided by its doctors, who were independent contractors and not employees of the plan. The trial judge summarily dismissed the suit on the grounds that the federal Employee Retirement Income Security Act (ERISA) barred Villazon from suing Prudential. ERISA generally has been interpreted to bar state lawsuits by employees against their employer-provided health insurance plans regarding plan administration and benefits. But federal and state courts increasingly are allowing state suits relating to the quality of care provided by ERISA-protected health plans. The judge also ruled that under state law, HMOs have no vicarious liability for independent contractors. In 2001, the state’s 3rd District Court of Appeal upheld the lower court’s dismissal. But the Florida Supreme Court reversed the dismissal by a 6-0 vote, ordering the trial court to examine the facts of the case to determine whether Villazon’s claims against his wife’s health plan were meritorious. Citing U.S. Supreme Court and other precedents, the justices held that Villazon’s vicarious liability claim was not pre-empted by ERISA because it was clearly based on allegations of medical negligence, not on issues relating to plan administration. On the state law issue of vicarious liability, the high court found that it was not conclusively established that there were no genuine issues of material fact, and that summary dismissal was therefore inappropriate. The justices said that the record showed “significant indicia of PruCare’s right to control the means by which medical services were rendered by Member Physicians to Member Patients.” They added that that “while physicians of the past … may have constituted distinct independent entities … that model has been dramatically altered through the HMO concept in a significant manner which a legal system cannot simply ignore.” Under current conditions, “independent contractors may indeed become agents depending on the totality of the circumstances.” That ruling stunned the managed care industry and delighted plaintiffs’ lawyers around the state, who long have been frustrated by the ERISA barrier to suing health plans. Since the ruling, said Ziegler, whose Hollywood firm Stephen M. Ziegler, P.A., in Hollywood represents a number of managed care insurers in Florida, his clients have had 20 medical malpractice lawsuits filed against them on vicarious liability grounds. Most of the lawsuits have cited the state Supreme Court ruling in their notice of intent. Before the ruling, his firm saw about 25 lawsuits a year on the issue, he said. Ziegler and other insurance industry lawyers quickly drafted language to insert into the malpractice bills to address vicarious liability. That language stated that plans could only be sued on medical malpractice grounds for the actions of doctors who are their employees. There are a very small number of doctors in Florida who are paid employees of managed care plans and work in the plans’ clinics. In most managed care plans, independent doctors provide services under contract. The managed care shield language made it into comprehensive malpractice bills offered by the governor and House Republican leaders. House Bill 63B, which contained the controversial $250,000 noneconomic damage caps as well as the HMO shield provision, passed June 18. But House Democrats blasted the provision, and it was eventually separated out in an amendment. It eventually passed as part of the final med mal package. “The HMOs have failed to make their case for this extreme remedy that will rewrite Florida’s agency law,” state Rep. Dan Gelber, D-Miami Beach, told the Review. “The issue is properly a fact-driven inquiry that ought not be supplanted by some legislative frolic.” State Rep. Ron Greenstein, D-Coconut Creek, wrote a letter to doctors in his district, arguing that the managed care shield provision would hurt them by exposing them as the sole liability target in cases where managed care interference caused the problem. He sent the letter to the 96 doctors in his district, explaining that he voted against the House medical malpractice bill mainly because of the provision. “The content of HB 63B gives HMO companies one of the greatest gifts in legislative history: doctors, such as yourself, would assume full liability for any mistakes — even if those mistakes were caused because an HMO denied care!” he stated. “It is my belief that Florida doctors should not be forced to bear the brunt of HMO company mistakes.” In an interview, Greenstein criticized the HMO provision because it was quietly slipped into the bill without proper notice and debate. “The doctors are being used,” he said. “This is not government in the sunshine.” Sen. King said he and his colleagues favor a modified version of the House HMO liability provision that would maintain the spirit of the Supreme Court ruling and make it possible to still sue HMOs if they “were responsible for the conduct that caused the injury.” He added that “it’s the right thing to do.” King’s position appears consistent with the position of the Florida Medical Association’s Tippett. “If the HMO is trying to practice medicine, restricting what a doctor can do when the doctor thinks it’s in the best interest of the patient, we’re opposed to the HMO doing that and they would become liable at that point,” he said. On the other hand, he added, “we don’t feel that expanding HMOs’ liability when they’ve done the appropriate thing is necessary.” Tippett was unable to say how the appropriateness of the health plan’s actions would be determined if the trial court, under the House bill, were precluded from considering the facts. “I don’t have a solution for that particular aspect,” he said. But Senate leaders may put off revising their medical malpractice bill, which did not include either noneconomic damage caps or the managed care shield provision. That’s because many senators, including King, are furious about a letter the governor sent Monday to 38,000 Republican donors on the issue. In that letter, Bush called the medical malpractice issue “the worst crisis our state has faced” and assailed Republican senators, urging supporters of med mal damage caps to call them and let them know “if they don’t support our plan, we’ll hold them accountable.”

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