HMOs and Malpractice Legal Basis

While an individual can sue or make a claim that his or her benefits were illegally denied, the “decision of the plan administrator may often be reversed only if it was found to have been arbitrary and capricious, a very difficult standard to meet. Even if that is proven, ERISA limits damages [ensuring] the HMO will not be punished” in a substantive fashion (ERISA, 2004, HARP).

However, some state courts, despite ERISA have held HMOs directly liable for negligent treatment of their members, such as when an HMO refused to grant a patient the 30 days of inpatient psychiatric care his doctor said he required and only covered 10 days. The California court “ruled that an organization, such as the patients HMO, that substantially shaped the course of patient care could be held liable for the quality of the care actually delivered a Pennsylvania court also held that an HMO could be held liable for injuries to its members as a result of its hiring incompetent physicians” (HMO malpractice, 2009, Mega Justice). In these instances, the HMO was held directly responsible for denying coverage or the actions of member physicians.

Some have also suggested that being able to sue HMOs under the concept of enterprise liability would be helpful in curtailing costs: “Under the enterprise liability theory, responsibility and liability for medical malpractice shifts from the individual physician to the health maintenance organization (HMO) and effectively provides immunity to individual physicians from medical malpractice actions”(Leone 1993).

These would consolidate lawsuits against physicians and also hold HMOs accountable for their action as the ostensible or de facto agency making the decisions for a patients healthcare. While greater liability would act as an incentive for HMOs to act more like healthcare entities rather than business organizations with a focus on cutting costs, legislation has been slow to pass to relax the restrictions of ERISA. But on a state-by-state basis “there has been an increasing number of lawsuits brought against HMOs and won, including a record $16 million suit brought against Prudential in 1992 and a $600,000 suit brought in 1992 against a neurosurgeon whose failure to properly diagnose a medical condition left the plaintiff a quadriplegic”(Hawn 2004).


Armon, Bruce D. & Howard A. Miller. (2001 July). Building a successful IPA. Physician News.

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Hawn, Daniel. (2004, December 8). HMO Malpractice. Retrieved October 3, 2010 at

Health Administration Responsibility Project: ERISA Outline. (2004). Health Administration

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Leone, Armand. (1993, November 8). ADR and enterprise liability. New Jersey Law Journal.

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Medical malpractice. (2009). Mega Justice. Lexus-Nexis. Retrieved October 3, 2010 at

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