Physicians and Patients Claim HMO Cost-cutting Incentives Violate ADA

By Ronald L. Scott

People with disabilities face a variety of barriers to obtaining health care, even under "fee-for-service" medicine, but the problems are sometimes exacerbated under managed care. Barriers may be physical, e.g., a provider’s office may not be accessible, or a provider may fail to furnish necessary auxiliary aids and services to enable communication. Economic barriers may be more subtle. For example, limits such as restrictions on hospital days or referrals adopted by an HMO or other managed care organization may have a greater impact on people with disabilities. Legal actions have been brought that challenged physical barriers and disparate impact situations.

More generally, some advocates for the disabled have long alleged discriminatory enrollment or recruitment by HMOs, arguing that HMOs have incentives to enroll healthy individuals rather than those that require more frequent and expensive care. The controversy has been compounded by contractual arrangements between HMOs and health care providers that arguably reward providers for withholding needed care—or punish providers that provide too much care, e.g., economic profiling or credentialing by health care plans.

In what may be a case of first impression, a U.S. district court in Texas recently held that disabled HMO enrollees stated claims under the Americans with Disabilities Act (ADA) and section 504 of the Rehabilitation Act. The plaintiffs base their claims on cost-cutting incentives contained in contractual arrangements between four HMOs and providers. The plaintiffs allege that these incentives encouraged providers to delay or deny needed medical care to disabled enrollees in an attempt to force such higher-cost patients to go elsewhere for medical treatment.

In Zamora-Quezada v. Healthtexas Medical Group of San Antonio, 1998 WL 89206 (W.D. Tex. 1998), two physicians and 13 patients allege that the defendant health care entities have created such financial incentives, resulting in discrimination against patients with disabilities. The plaintiffs are seeking injunctive relief under the ADA and compensatory and punitive damages under the Rehabilitation Act. The two physician-plaintiffs allege that their employment was terminated because they acted as advocates for their patients and gave care that infringed on the contractual arrangements. (Although not at issue in this case, Texas passed legislation in 1997 protecting physicians acting as advocates for their patients against discrimination or termination by HMOs, but the statute may be unenforceable. See Two Important Physician-Protection Provisions Struck Down by Court).

A former employee of one of the defendants testified that "during my employment at HealthTexas, …patients with chronic illnesses and disabilities were not treated as well as healthy patients…[they] had to wait two to three hours between the first waiting, the sub-waiting room, and the exam room." The HMOs and other defendants moved for dismissal or alternatively for summary judgment on the ADA and Rehabilitation Act claims, alleging (among other arguments) that they lacked the requisite degree of control over providers necessary for an ADA claim against them. The court rejected the motion, finding that genuine issues of material fact existed as to whether the plaintiffs were discriminated against because of their disabilities. The court cited the 7th Circuit case of Herdrich v. Pegram (see A New Weapon Against Managed Care Organizations: ERISA) for the proposition that evidence concerning the existence of incentives to withhold care combined with evidence of improper treatment will be sufficient to support a claim.

In the prologue to the order, the court characterized plaintiffs argument as "[p]laintiffs basically contend a modern version of the Golden Rule is being wrongfully applied by defendants: they who have the gold rule." The ADA may force all HMOs to adopt the original version of the Golden Rule.