Landmark Lawsuit Still Reverberating In Health Industry (Los Angeles Business Journal)

LOS ANGELES BUSINESS JOURNAL
MAKING MEDICAL HISTORY

Landmark Lawsuit Still Reverberating In Health Industry
By LAURENCE DARMIENTO - Staff Reporter

It wasn't but a decade ago that a new concept called "managed care" entered the nation's vocabulary with a promise to provide for every health care need while holding the line on spiraling costs.

But it wasn't long before patients found out that the concept was ailing, brought to its knees by a string of horror stories about denial of treatment. Patients were finding out that managed care could be hazardous to your health.

As Congress debates the patient bill of rights, a complex mix of legislation providing greater recourse to care, perhaps no case better illustrates the issues involved than the one a decade ago against Health Net Inc. by Nelene Fox, a Temecula mother of three girls.

Fox, who was suffering from late-stage breast cancer, sought to have the insurer pay for a bone marrow transplant so she could be treated with extra high dose of chemotherapy in a last-gasp effort to stay alive.

The insurer balked at the $200,000 cost calling the procedure "investigational", forcing family and friends to raise their own funds to pay for the procedure at USC's Kenneth Norris Jr. Comprehensive Cancer Center.

But it came too late for Fox, who died in 1993 at the age of 40.

Less than a year later, in a lawsuit pursued by her husband and brother, who also served as the family's attorney, a Riverside County jury returned with a $89.3 million verdict against Health Net for its denial of treatment that stunned the industry and caught the country's attention.

Now, as the debate over patient rights reaches a peak following the Senate's passage of a bill that would extend that right to sue to all Americans (Fox was able to bring suit only through an exception in federal law), her attorney, husband, doctor and the judge who oversaw the case are standing behind an expanded right to sue.

HMO: Breast Cancer Case Sparked U.S. Debate.

The brother

Mark Hiepler was 32 years old when he learned that his sister could not get approval from Health Net for a bone marrow transplant after earlier surgery and chemotherapy had failed to halt her breast cancer.

At the time, he was an associate in an Oxnard Law firm and shopped the case around, but no other lawyers would touch it, so he took on the large health insurer himself.

"The case continues to either curse us or bless us to this very day." Says Hiepler, "It turns out the best form of (health care) reform was one major verdict that got a lot of coverage."

The verdict that came down from a conservative Riverside County jury has done nothing less than alter the course of his life. He has been profiled in major national magazines, appeared on prime time network shows including "60 minutes," and is sought after in the lecture circuit - even from insurer groups such as the American Association of Health Plans.

"People call me at home, on weekends and on vacation (on patient rights issues)," says Hiepler, who devotes a large part of both his paying and pro bono practice to managed care lawsuits.

Hiepler, who has since formed his own law firm with his wife Michelle, most recently testified before Congress on the patient bill of rights, which he maintains is necessary in order to ensure quality health care.

Current federal law, under the Employee Retirement Income Security Act (ERISA), limits claims against health insurers to federal court, while also preventing recovery for pain and suffering or punitive damages. Those who buy their own insurance or receive it from church groups or the government are exempted. Fox was insured through her husband, an English teacher at a Temecula public school.

Hiepler says that of the 236 denial of treatment cases he has handled since Fox, he has learned that the first question a managed care attorney asks is whether the client falls, like Fox, within the federal exception, opening the door to a state lawsuit with unlimited damages.

"All they want to know is if they cheat this person are they going to be held accountable," he says

He maintains that a 1999 package of laws signed by Gov. Gray Davis that expands the right to sue in California has not been tested. Once it is, insurers are likely to appeal it on the grounds that it violates ERISA.

"That's why this (proposed) federal law is so important," he said. "We are not hoping more people will sue, but just that the insurance companies realize they can make a profit without denying people the care they bargained for."

Hiepler says doors have opened to him that are closed to other trial lawyers, who insurers have successfully painted as money-hungry ambulance chasers. Because his sister was his client, people are willing to hear his story.

Thus while he testifies before the bright lights of a Senate committee room this year, he also was invited in the back door of several senators offices, who didn't want it known they were hearing out his arguments.

For its part, Health Net maintains that more recent evidence indicating that bone marrow transplants are not effective in lengthening the lives of late-stage breast cancer victims supports its original decision.

But Hiepler maintains that his legal victory over Health Net had implications far beyond the specific treatments, proving to people that insurers were making medical decisions for financial considerations.

Since the Fox case several and other denial-of-treatment lawsuits, Health Net changed its procedures in the mid 90s regarding bone marrow transplant and other such controversial or expensive procedures.

The insurer has drawn up clear guidelines when it will pay for various expensive procedures. And when patients seeking treatment falls outside those guidelines the case is sent to an independent panel of medical experts with final decision-making authority, said David Olson, senior Vice President of investor relations.

"The Fox case was a very emotional story, but I think the appropriate role of a health plan is to ensure that our members are getting health care that is medically necessary," he says.

The doctor

If Hiepler's life was transformed by the Fox verdict, his sister's doctor, David Robinson, a family practitioner in Temecula, transformed his practice, refusing to have anything to do with managed care.

He said the case was one of the several that made him realize that the imperatives of managed care had transformed him from an advocate for his patients to an adversary. In order to maintain solvency because the fixed, or "capitated", monthly fees he received for each patient were so low, he had to take on more patients than he could handle.

"The HMO game is volume," he said. "You are constantly trying to not to have your patient come back and to instead keep them out of the office."

Now that he has cut his ties with managed care insurers while accepting those with traditional fee-for-service plans or who pay cash, his case load has fallen from 50 to 60 patients a day to 15 to 25. That's a manageable load the way he likes: giving each patient the time they deserve and making himself available after hours.

Robinson also has strong feelings about the patient bill of rights, maintaining that insurers must be held accountable just like doctors.

"If they want to sit back and make decisions on doctors orders, tests and practices, they also need to bear the responsibility and liability for that," he said. "As a Republican, I feel ashamed they are on the wrong side of this."

The judge

The Fox case resulted in the biggest verdict at the time ever against a managed care insurer. It also was the biggest ever handed down in Judge Richard Van Frank's courtroom in Riverside Superior Court.

Van Frank, who has since moved to a branch office in Banning, closer to his home as he edges toward retirement, still doesn't want to talk about his feelings on this case.

Nor will he talk specifics about the patient bill of rights. But there is one thing he is willing to be quoted on: his belief in the right to a jury trial and his opposition to laws like ERISA that limit that right.

He notes that opponents of legislation like the patient bill of rights like to talk about fee-crazy attorneys, or the inability of jurors to understand complex litigation and come to a level-headed decision.

"I find appalling that politicians would use the term "frivolous lawsuits" and "million-dollar damages" in the same sentence. Nobody pays out millions of dollars for damages for a lawsuit devoid of merit," he said. "What you are really talking about is taking away a personal freedom to bring lawsuits."

He finds the idea of not allowing patients to bring state lawsuits similar to Fox's especially galling considering that politicians expect jurors to decide whether criminal defendants should live or die in death penalty cases.

The husband

Fox's husband, Jim, who was left with three girls to raise, has since remarried. Directly following the verdict, he was deluged with media calls, but since then they have thankfully tailed off.

Nowadays, he still gets calls, but it's a handful of times a year and from friends or work associates who are having their own problems getting care from their HMOs and don't know where to turn. He refers them to Hiepler.

In order to avoid a lengthy appeal process after the verdict, he and Hiepler agreed to accept lower negotiated settlement from Health Net that they cannot disclose. But it was at least enough to pay for a modest new athletic complex at the small, private Christian school where his wife taught and his daughter attended.

Jim Fox, who continues to teach, has been watching the debate going on in Washington, and almost wishes the calls would start again, even though he was uncomfortable with all that attention at the time.

He said that during the midst of the trial Health Net came to the family to settle the case when it became clear they would lose in court, but he and Hiepler refused, hoping a big jury verdict would send a loud message.

He knows that at the time, the message was loud and clear. Now he just hopes that the case has not been forgotten over time as the politicians debate the complexities of patient rights in Washington.

"I would tell them, "We started this thing. Now, you have to pass this bill of rights," he said, the final evidence that his wife's death had a purpose.

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