In US Supreme Court case, woman says bonus policy led to medical emergency.
Lawyers warn of damage to the health care industry. By Richard Willing; USA TODAY (02/23/00)

WASHINGTON _ Cindy Herdrich was in agony, bent nearly in half by pain that her doctor thought was an infection.

A week would pass before the doctor ordered a test, and another week before her HMO could schedule it. By then, the source of her pain was clear. It wasn't from an infection, but an inflamed appendix that burst and needed emergency surgery.

The misdiagnosis was bad enough. But Herdrich then discovered her HMO paid bonuses to doctors who ordered fewer tests, raising the question of whether her doctor stinted on exams that might have caught her condition.

Nine years later; Herdrich's case is the first Supreme Court challenge to HMO policies that critics charge sacrifice patient care to reduce costs.

But HMO lawyers say the case, to be argued today threatens the financial underpinnings of a healthcare system that provides coverage for 160 million Americans.

"I was flabbergasted; I had no idea such a policy existed," says Herdrich, 42. Had she known of the bonus policy, Herdrich says, she wouldn’t have selected that HMO." Herdrich's case seeks to determine:

' Whether plans that award bonuses to doctors for not ordering tests force doctors to choose between health care and profits.

' Whether patients can sue their HMOs under federal law over their managed-care policies.

Currently federal law blocks most such suits. Herdrich and her lawyer are trying to carve out an exception to the law.

The Supreme Court case will be heard against a backdrop of escalating attacks on the managed care industry. Class-action suits have been filed against virtually all of the major HMOs, including Aetna, Humana, Cigna, Kaiser, Permanente and Pacifi-Care Health Systems. In Congress, a House-Senate committee is scheduled to consider a "patients' bill of rights" that would amend federal law to permit HMOs to be sued in state courts.

"This case may turn out to be a lot more important than the patients' bill of rights," says Gregg Bloche, a physician and a lawyer who teaches public health policy at Georgetown University Law Centre In Washington. "The public attention generated by this case is going to make people much more aware of these incentives. Then perhaps they will vote with their feet" Managed care seeks to contain employee health-care costs by capping payments to physicians, restricting choices of doctors and hospitals and letting administrators determine how much care patients should receive. In 1988, 7l% of patients with insurance were covered by traditional, fee-for-service plans, with a generally unrestricted choice of doctors and hospitals. Ten years later, only 14% were in such plans. The rest, an estimated 160 million Americans, are covered by managed-care plans.

Plans that include cost-cutting incentives such as bonuses are common, Georgetown's Bloche says. Herdrich’s lawyer, James Ginzkey of Bloomington, Ill., argues that the bonuses set up a conflict of interest.

"When doctors are paid more to do less, It’s not surprising when they do less," Ginzrey says.

Herdrich was a 33_year old legal secretary in Bloomington when she went to her HMO, Carle Clinic, complaining of pain in her lower right abdomen. At first, her doctor, Lori Pegram, believed Herdrich had a urinary tract infection, At a later appointment the doctor said Herdrich might have an ovarian cyst.

Herdrich was scheduled for an ultrasound eight days later, at a hospital 60 miles from her home. By then, her inflamed appendix had burst, and she was forced to undergo emergency surgery. Her recovery required a two-week hospital stay and bed rest at home.

Herdrich, who won $35,000 from her doctor in a state malpractice suit, says she is pursuing the federal case to press a point. "You have a right to know who your doctor's working for," she says